Netflix Earnings & Chipmaker Rout Hits Stocks on AI Worries | The Close 7/16/2026

>> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE END OF THE MARKET DAY. THIS IS THE CLOSE. >> INVESTORS TURN DEFENSIVE AS SOME OF THE HOTTEST TRADES TURN OFFENSIVE. REPORTING LIVE FROM STUDIO TWO, I'M ROMAINE BOSTICK. KATIE: I'M KATIE GREIFELD. THE S&P 500 LOSS IS DEEPENING INTO THE CLOSE. THE INDEX AT A SESSION LOW DOWN BY ABOUT .60%. IT IS CHIPS COMING UNDER PRESSURE. THE PHILADELPHIA SEMICONDUCTOR INDEX NOW OFF BY NEARLY 5% HERE. A LOT OF QUESTION MARKS WHEN IT COMES TO THE AI TRADE. TAKE A LOOK AT THE BOND MARKET. YOU WILL NOT FIND A HEDGE TODAY. A BIT OF A SELLOFF UNDERWAY. THE 10-YEAR TREASURY YIELD HIGHER BY TWO BASIS POINTS. BRENT, STILL TRADING AT ELEVATED LEVELS RELATIVE TO THE PRIOR FEW WEEKS. FOLLOWING A LITTLE BIT TODAY, .80%. >> A BIG DEFENSIVE POSTURE TO THE TRADE AS WE HEAD INTO THE CLOSE. CONSUMER STAPLES AS THE SECTOR IS HEADING FOR THE BEST TWO DAY RUN IN MORE THAN A MONTH. NOW ERASED ALL OF ITS GAINS FROM THE PAST TWO MONTHS. IF YOU CAN BELIEVE IT. TSMC SALES OUTLOOK WAS GOOD, BUT WHEN MOST OF ITS CUSTOMERS ARE BURNING THROUGH CASH AND AN INCREASING BASE WITH SCANNED ROI, IT IS NO WONDER SOME INVESTORS ARE ROTATING A BIT OUT OF THE AI TRADE. >> I THINK YOU WANT TO BE THOUGHTFUL ABOUT THE POSITIONING YOU HAVE IN TERMS OF COMPANIES THAT LOOK DURABLE FOR THE LONG TERM IN CASE WE DO HIT ANY AIR POCKETS WITH THE AI TRADE, WHICH IS COMPANIES THAT ARE ORDERED -- UTTERLY DEPENDENT ON EVERYTHING AND AI WORKING PERFECTLY, WHICH IS WHAT A LOT OF THEM ARE PRICED FOR, NO BUMPS IN THE ROAD. ROMAIN: FOR NOW, IT HAS BEEN BENEFITING FINANCIAL AND HEALTH CARE STOCKS, WHICH BENEFITED THEMSELVES. STRONG EARNINGS FROM BIG BANKS, PLEASANT SURPRISES FROM ABBOTT LABS AND UNITED HEALTH, EACH RAISING THEIR OUTLOOKS. UNITEDHEALTH UP 60% SINCE THE END OF MARCH, THE SECOND-BEST PERFORMING NON-TECH STOCK IN THE S&P 500 OVER THAT STRETCH. NOW THE CAMERA IS GOING TO PENTA NETFLIX, ONE OF THE WORST PERFORMING STOCKS AND THAT STRETCH APPROACHING ITS BIGGEST DRAW DOWN FROM A PEAK SINCE THE 22 FALLOUT OVER THEIR UNEXPECTED DROP IN SUBSCRIBERS. THE FIRST DROP WE SAW IN A DECADE. THIS TIME AROUND, NO SUBSCRIBER METRICS THE COMPANY IS WILLING TO DISCLOSE, BUT THERE WILL BE A FOCUS ON WHAT IS REVEALED ABOUT PLATEAUING ENGAGEMENT TRENDS, A POTENTIAL CONTRACTION IN MARGINS, AND IF AND WHY NETFLIX WOULD BE SEEKING AN ACQUISITION. >> THE Y WILL BE INTERESTING TO GET INTO, NICE TO HAVE FROM NETFLIX, NOW THE STREET MAY BE THINKING IT IS A NEED TO HAVE. LET'S LOOK AT HOW THE STOCK HAS PERFORMED. LOOK AT THE VALUATION BEHIND ME. LAST TIME NETFLIX SHARES HIT A RECORD HIGH WAS LAST JUNE, JUNE OF 2025, THAT IS THE LAST TIME THIS CHART HAD GREEN ON IT. IT HAS BEEN A DOWNWARD CLIMB WHEN IT COMES TO VALUATION. FALLING BY ABOUT 42% FROM LAST JUNE. WE ARE HITTING ABOUT HISTORICAL LOWS OR SO, A PRETTY BIG DROP AFTER ITS MOST RECENT EARNINGS REPORT. INTERESTING TO SEE IF THEY CAN DELIVER SOMETHING THAT PUTS LIFE BACK INTO THE CHART. ROMAIN: THE EXPECTATIONS ON BLOOMBERG ESTIMATES ABOUT 14% REVENUE GROWTH, 10% WHEN IT COMES TO EBIT, AND A LOT OF QUESTIONS WHEN IT COMES TO WHAT IS TAKING PLACE IN THOSE NUMBERS. ALISHA REESE JOINS US, SENIOR VICE PRESIDENT OF EQUITY RESEARCH AT WEDBUSH SECURITIES. YOU HAVE BEEN RELATIVELY CONSTRUCTIVE ON NETFLIX, YOU HAVE A BUY RATING AND A HEALTHY PRICE TARGET. WHEN THE REPORT COMES OUT LATER THIS AFTERNOON, WHAT IS THE FIRST THING YOU WILL TRY TO LOOK FOR? >> USUALLY ALONG WITH THE REPORT, THE PUT THE DATA FILE ON ENGAGEMENT. I THINK PEOPLE WILL BE PAYING MORE ATTENTION TO THAT THAN THE EARNINGS. I THINK THE EXPECTATION ON EARNINGS IS RELATIVELY IN-LINE. THE GUIDE IS VERY IMPORTANT, SEEING THOSE MARGINS AND HOW THE ADVERTISING TEAR IS IMPACTING OVERALL RESULTS. BUT THE ENGAGEMENT, SEEING HOW THAT IS PLATEAUING, PEOPLE HAVE BEEN TALKING ABOUT THIS, THE STOCK SOLD OFF QUITE A BIT ON IT. THIS HAS BEEN HAPPENING FOR SOME TIME, NETFLIX HAS HAD TO INCREASE THE AMOUNT OF SPEND JUST TO KEEP ENGAGEMENT ROUGHLY IN LINE IN THE ENGAGEMENT PER USER HAS GONE DOWN OVER TIME. SOME OF IT WAS DUE TO MORE CRACKDOWN ON THE AD TIER. BUT YOU HAVE A SIGNIFICANT AMOUNT OF ADVERTISING REVENUE COMING ELSEWHERE, NETFLIX IS NOT REALLY GETTING A LOT OF ATTENTION FOR THAT. >> TALK ABOUT THAT. IN SOME OF THE PAST RESEARCH NOTES YOU HAVE TALKED ABOUT THE ADVERTISING BENEFIT. DO YOU THINK THEY WILL BE MORE ARTICULATE ABOUT HOW THAT IS AIDING THE BUSINESS, IF IT IS, AND MORE IMPORTANTLY, HOW FAR DO YOU THINK THEY CAN GO WITH THAT? AT LEAST IF YOU BELIEVE THE MASSES ON THE INTERNET, SOME FOLKS HAVE WRESTLED WITH ADVERTISING STRATEGIES AROUND THE MLB ALL-STAR GAME. >> THEY ARE BEING REALLY CAREFUL ON THE LARGE PART. YOU HAVE TO TAKE INTO CONSIDERATION PEOPLE ARE USING A LOT MORE YOUTUBE AND SOCIAL MEDIA DOING SHORTS AND STUFF. LOOKING FOR LESS EXPENSIVE CONTENT THAT THEY CAN PUT AGAINST THAT AND KEEP PEOPLE ENGAGED. THEY HAVE TO HAVE A WIDE VARIETY OF CONTENT. FOR THE AD TIER, THEY ARE ADVERTISING ACROSS ALL OF THEM, INCLUDING THE PREMIUM TIER, WITH THE LIVE SPORTS CONTENT LIKE THE MLB HOMERUN DERBY. THAT IS A PROFITABLE SITUATION FOR THEM. AND TO COUNTER THAT, THEY HAVE THE INDUSTRY LOW AD LOAD AND AN OPPORTUNITY TO INCREASE THAT. THEY DON'T TYPICALLY ADVERTISE MUCH ON THEIR HUGE SHOWS. THEY USE IT FOR SERIAL CONTENT THAT PEOPLE ARE MORE USED TO WATCHING ADVERTISING ON. THAT STRATEGY SHOULD WORK BETTER THAN IT IS NOW OVER TIME. IT IS KIND OF A LONGER-TERM STORY, I THINK THE REAL DEBATE IS IT IS NOT THE PRINT THAT WILL RESOLVE THAT ENGAGEMENT, BUT THE ADDED MARGIN TRAJECTORY WILL KEEP CHIPPING AWAY. >> LET'S TALK ABOUT THE BEAR CASE. WHEN IT COMES TO THE ADVERTISING RAMP THAT OUTWEIGHS IN YOUR VIEW, BUT IT HAS BEEN GETTING LOUDER WHEN IT COMES TO U.S. ENGAGEMENT IN PARTICULAR. CERTAINLY YOU CAN SEE THAT REFLECTED IN THE STOCK AND HOW SHARES HAVE PERFORMED THE LAST YEAR OR SO. I KNOW YOU HAVE AN OUTPERFORM RATING, BUT AT WHAT POINT WOULD IT GIVE YOU PAUSE, THE ENGAGEMENT ISSUE? >> ENGAGEMENT HAS BEEN BECOMING A CONCERN OVER TIME, BUT NOT SO MUCH AS IT WOULD IMPACT RESULTS AND EXPANDING REVENUE. NETFLIX HAS SEVERAL LEVERS, IN TERMS OF BEING ABLE TO GET THE MOST OUT OF THAT ENGAGEMENT. THEY CAN INCREASE THE LOAD, THEY'VE HAD LOW ADD LOAD ACROSS THE INDUSTRY. THEY HAVE A LOT OF ROOM TO EXPAND THAT AND EARN MORE ON THAT. TARGETING HAS BEEN FAIR AT BEST, THAT IS GETTING SIGNIFICANTLY FAIR OVER TIME. ADVERTISERS ARE NOT PEELING OFF, THERE IS DEMAND FOR NETFLIX ADVERTISING SPOTS STILL. EVEN WITH CPM'S PULLING OUT, YOU HAVE THE SPORTS AND OTHER ADVERTISING SPOTS THAT ARE GAINING IN CPM, INCREASINGLY MORE OF THOSE. HAVING MORE PRODUCTIVE ENGAGEMENT HOURS IS BECOMING MORE OF THE STORY. WHAT WOULD CONCERN US IS IF ENGAGEMENT FELL OFF OF A CLIFF, AND WE WOULD SEE THAT IN THE DATA. IF WE DON'T SEE THAT, IT DOES CHIP AWAY AT THAT CASE. KATIE: ALSO YOUR THOUGHTS ON SOMETHING YOU ARTICULATE IN YOUR NOTES, THIS IDEA OF THE SECOND SEASON SLUMP THAT THE U.S. KEEPS FALLING VICTIM TO COME OR DOES. YOU MAKE THE POINT THEY TEND TO MARKET THEIR SECOND SEASON'S LESS AGGRESSIVELY THAN THEY DO THEIR FIRST, WHEN THINKING ABOUT THIS ENGAGEMENT ISSUE THAT NETFLIX IS ENCOUNTERING, WHY DON'T THEY PULL THAT LEVER? WHY DON'T THEY PUT MORE MUSCLE BEHIND THE SECOND SEASONS OF THEIR POPULAR SHOWS? >> I THINK IN THE PAST THEY HAVEN'T THOUGHT THAT THEY HAD TO. BECAUSE IT IS BECOMING MORE OF A FOCAL POINT FOR INVESTORS, THEY WILL PROBABLY LISTEN AND DO MORE WORK AROUND THAT. IT IS AN EASY LEVER TO PULL. THEY CERTAINLY HAVE THAT AT THEIR DISPOSAL AND THEY WILL. WHAT THEY ALSO ARE DOING IS ADVERTISING, MARKETING A LOT OF THEIR ALTERNATIVE CONTENT LIKE GAMES OR PODCASTS, AND NOW THEY WILL HAVE SOME LIFESTYLE CHANNELS. MIGHT HAVE MORE LIFE TV ON HERE. SO MANY DIFFERENT THINGS THAT PEOPLE CAN USE THAT WON'T USE UP THEIR TIME ON THIS SERVICE. I THINK THAT WILL BE THE FINAL, WHAT WILL GIVE THE FINAL SAY. >> ALWAYS A PLEASURE, A RECEP -- ALISHA REESE OVER AT WEDBUSH SECURITIES AS WE COUNT YOU DOWN TO THE EARNINGS FROM NETFLIX. EXPECTATIONS FOR 14% REVENUE GROWTH TO ABOUT $12.6 BILLION, 10% GROWTH WHEN IT COMES TO GAP EARNINGS. FULL COVERAGE AS SOON AS WE GET TO THE BELLS. WE WILL HEAR FROM ROSS GERBER, AND A BIG BOWL ON NETFLIX. WE WILL HEAR FROM THE FORMER NETFLIX EMO AS WELL AS TELEVISION PRODUCER EVAN SHAPIRO. ALL OF THAT AND MORE COMING UP IN A BIT ON THE CLOSE, RIGHT HERE ON BLOOMBERG. >> AI JITTERS PUTTING A CHIP ON THE MARKET'S SHOULDERS AS A SEMI-STOCKS SELL OFF IN A BIG WAY. OUR NEXT GUEST SAYS THE AI INVESTMENT OPPORTUNITY DOES NOT LIE IN A SINGLE LAYER, BUT ACROSS INFRASTRUCTURE, SOFTWARE, PHYSICAL TECH, AND THE COSTS REMAIN A KEY CONSIDERATION. JOINING US IS THE DEPUTY CIO OF THE SOLUTIONS AND MULTI-ASSET GROUP OVER AT MORGAN STANLEY INVESTMENT MANAGEMENT. GREAT TO SEE YOU. LET'S TALK A LITTLE BIT ABOUT THAT. IT FEELS LIKE AI IS BASICALLY EATING UP EVERYTHING, IT IS HARD TO MAKE AN INVESTMENT THAT DOESN'T HAVE SOME SORT OF TRACE BACK TO AI IF YOU MAP IT OUT. I WONDER AT THIS POINT, DO YOU THINK IT IS POSSIBLE TO BE ABLE TO PUT AI ASIDE WHEN YOU ARE EVALUATING DIFFERENT OPPORTUNITIES? >> NOT REALLY, YOU CANNOT PUT ASIDE THE INTERNET TODAY, IT IS ALL-ENCOMPASSING IN DIFFERENT SECTORS. TO YOUR POINT, AI IS A CROSS ASSET, CROSS SECTOR CAPITAL OPPORTUNITY. THE LAYERS ARE JUST INCREASING. THE INFRASTRUCTURE LAYER, OR YOU HAVE DIFFERENT SUPPLY BOTTLENECKS, AND THAT IS SHIFTING EVERY FEW MONTHS, YOU SEE THE NEW BOTTLENECK EMERGING. YOU HAVE SOFTWARE, WHO IS REALLY GOING TO CAPTURE THE AGENT ECONOMY? THE COMPANIES THAT HAVE THE DATA, THE DOMAIN EXPERTISE, THE DISTRIBUTION, AND THE MARKET IS KIND OF PAINTING THAT SECTOR WITH THE SAME NEGATIVE BRUSH. THERE ARE OPPORTUNITIES. AND WHO IS CAPTURING THE PHYSICAL ECONOMY? THERE'S A SUPPLY CHAIN THAT COMES WITH THAT. ULTIMATELY, INDUSTRY, WHO IS GOING TO USE AND HARNESS THE AI CAPABILITIES TO CREATE I THINK IT'S ALL ENCOMPASSING. I'D SAY THERE ARE SOME RELATED AREAS, SAY ENERGY OR MAYBE FINANCIALS, WHICH ARE MORE GEOPOLITICAL AND MORE OLD ECONOMY DRIVEN FROM A MARKET PERSPECTIVE. BUT I'D SAY THAT ACROSS DIFFERENT STATS, AYOTTE INDUSTRIAL, THERE IS A LOT OF AI THERE. KATIE: IT'S INTERESTING, AS YOU SATES AND ALL-ENCOMPASSING SORT OF THEME AND THERE'S MANY DIFFERENT INTER-POINTS INTO THIS THEME. I WONDER WHERE YOU ARE SEEING THE BIGGEST OPPORTUNITY SETS WHEN YOU DO EVALUATE THAT DIFFERENT CROSS ACTION. >> WE STILL DO CONTINUE TO LIKE THE MEMORY SECTOR WHICH IS LIKE THE REAL FOUNDATION OF THE TOKEN ECONOMY THAT IS EMERGING. YES, THOSE STOCKS HAVE RUN UP A LOT. THERE IS SOME CONSOLIDATION POSITIONING THAT'S REALLY HIGH, BUT FROM A FUNDAMENTAL BASIS, FOR THE NEXT SIX-EIGHT QUARTERS WE SEE A LOT OF VISIBILITY IN TERMS OF THE SUPPLY BOTTLENECKS AND THE DEMAND COMING WITH ALL THE CAPEX THAT IS OUT THERE. I THINK SOFTWARE IS REALLY BEATEN DOWN, SO OPPORTUNITIES THERE. ROMAINE: I'M CURIOUS ON THE CAPEX SIDE. A LOT OF THE CAPEX IS BASICALLY MORE PROMISING TO SPIN. EVERY TIME YOU GET THESE JITTERS IN THE MARKET, IT'S ALWAYS ABOUT THE IDEA AS TO WHETHER PEOPLE MIGHT PULL BACK ON THAT OR MAYBE DEFER IT, NOT NECESSARILY GET RID OF IT. >> AS YOU GET INTO, YOU HAD THE PURSE PHASE OF REACTIVE AI WHERE YOU ASK A QUESTION AND GOT AN ANSWER. YOU'RE GETTING GENERATIVE AI, WHICH MEANS A THOUSAND TIMES MORE TOKENS AND COMPUTE. AND THEN ARTIFICIAL INTELLIGENCE, WHICH NEEDS A MILLION TIMES MORE COMPUTE. SO I THINK THE TRACK HERE IS UPWARDS, MONETIZATION IS HAPPENING. WE'VE SEEN THAT IN THE HYPERSCALER NUMBERS AND THE EARNINGS. WE ARE STILL FIGURING OUT ON THE SOFTWARE SIDE WHO WILL CAPTURE THAT AGENTIC WORKFLOW TRANSITION. ROMAINE: WHO DO YOU THINK MIGHT CAPTURE THAT? WILL IT BE THE BIGGER INCUMBENTS? I'VE HEARD A LOT OF DISCUSSION ABOUT WHY WOULD YOU COUNT ON MICROSOFT BECAUSE IT'S BEEN PURSUING CYCLES. BUT THEN THERE ARE OTHER COUNTRIES THAT HAVEN'T BEEN TESTED BY VARIOUS SHIPS IN BUSINESS CYCLES. OR IS THAT THE WRONG WAY TO LOOK AT IT? >> TWO THINGS ARE GOING OFF THAT'S GOING ON WITH SOFTWARE. YOU'VE SEEN THE USAGE, BUT THERE IS CONFUSION ON INITIAL ADOPTION , THE TOKENS ARE COSTING A LOT AS WELL. SO THE MARKETS THAT ARE TRYING TO UNDERSTAND WHAT IS IT THAT THE REVENUE PROPOSITION OF THE SOFTWARE COMPANIES. EARLIER YOU COULD CHARGE PER USER IN AN ENTERPRISE, AND NOW ONE USER WILL HAVE TO BE AN AGENT. SO WHAT DOES THAT REVENUE WANT TO LOOK FOR THE SOFTWARE COMPANIES IS THE NEXT QUESTION. BUT I DO THINK IN CYBERSECURITY AND INDUSTRIAL SOFTWARE, AND HEALTH CARE SOFTWARE, THERE ARE SOME GOOD COMPANIES THAT HAVE THE DATA DOMAIN DISTRIBUTION AND CAN ULTIMATELY BE THE WINNER. SO MARKETS ARE ACTUALLY PUNISHING THEM AND IT'S A GOOD TIME TO BE LOOKING AT SOME OF THOSE. ROMAINE: WE HAVE TO LEAVE IT THERE. WE WILL TALK A LITTLE BIT MORE ABOUT AI, THE REPORT WE GOT OVERNIGHT AT OF TSMC AND WHY THERE ARE STILL SOME FEARS OUT THERE. THAT CONVERSATION COMING UP AFTER THE BREAK, RIGHT HERE ON BLOOMBERG. ROMAINE: LET'S GET RIGHT YOUR TOP CALLS, BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. OF FIRST, WELLS FARGO, MOVING TO EQUAL WEIGHT FOR THE FIRST TIME IN ALMOST THREE YEARS. LOOKING AT HOLLYWOOD SLATE OF FILMS COMING UP AND SAYING IT'S NOT GOING TO BE ENOUGH TO LIFT THE BOX OFFICE AND THE THIRD QUARTER. THOSE STOCKS DOWN ON THE QUARTER. AND A SELL RATING ON LULULEMON, CITING LIMITED VISIBILITY INTO A POTENTIAL COVERT. NEVERTHELESS THIS SHARES ARE UP FOR SECOND DAY. AND OVER BALANCE RISK REWARD PROGRAM AFTER A RUN-UP IN THE STOCK THIS YEAR. ANALYST SAYING THE STOCK IS TRADING LESS ON FUNDAMENTALS AND MORE ON SHORT COVERING AND A ROTATION OUT OF AI STOCKS. THOSE ARE SOME OF OUR TOP CALLS. THIS TALK ABOUT THE ROTATION IN AI STOCKS. THERE ARE SOME JITTERS OUT THERE AFTER WE HEARD FROM ASML AND TSMC OVER THE LAST 48 HOURS. THE OUTLOOK IS EVEN BETTER. STACY JOINS US TO TALK MORE ABOUT THIS, MANAGING DIRECTOR AND SENIOR ANALYST OVER AT BERNSTEIN. WHAT'S GOING ON, IS IT THE IDEA WE'VE HAD A HUGE RUN AND HIGH EXPECTATION SO WE ARE JUST BOUND TO BE DISAPPOINTED? >> THAT'S PART OF IT. IT WASN'T THAT LONG AGO THAT THE STOCKS INDEX WAS UP 140% OR 100 50% YEAR-OVER-YEAR. IS NOW UP ONLY 67% YEAR TO DATE. IT'S WHERE IT WAS TRADING A MONTH AND A HALF TO TWO MONTHS AGO. THINGS DID RUN UP TREMENDOUSLY, WE ARE STARTING TO SEE IT COME THROUGH. YOU MENTION RESULTS THROUGH TSMC, THE RESULTS WERE VERY SOLID. THEY ARE SO STRONG, MAYBE IT'S GETTING HARDER AND HARDER TO SHOW YOU WHERE THE OF CYCLIC VACATIONS WERE. I WASN'T EXACTLY SURPRISED TO SEE THIS BEHAVIOR, BUT YOU COULD ARGUE MAYBE IT'S HEALTHY. I WOULD SAY IF WE HAD GOTTEN TO THIS POINT A LITTLE MORE DIRECTLY RATHER THAN UP-AND-DOWN PEOPLE WOULD FEEL FINE WITH IT. BUT JUST GIVEN THE MAGNITUDE OF THE RUN THAT WE DID SEE, ESPECIALLY OVER THE LAST MONTH OR TWO, I'M NOT ENTIRELY SURPRISED TO SEE IT. ROMAINE: LET'S SEPARATE THE SHORT-TERM FROM THE LONG-TERM. SANDISK COULD BE HEADING BACK TO ITS WORST WEEK SINCE LAST APRIL. THEY ARE MAKING IT CLEAR, AND OUR LAST GUEST HAD THE IDEA THAT THERE IS A BROADENING OUT INTO OTHER POCKETS, WHETHER IT'S THE RELENTLESS -- WILL FOCUS ON GP USE. PEOPLE ARE MORE FOCUSED ON THE BENEFITS OF THOSE FOLKS WHO WERE MAKING AND SELLING THOSE PP USE. WHERE DO YOU SEE THAT LONG-TERM TRADE TO THE UPSIDE? >> WE'VE HAD THIS ROLLING TRADE OVER THE LAST 6-12 MONTHS. THE PEOPLE WHO LAID THE BOTTLENECKS, IT STARTED WITH THE GP USE A YEAR AGO AND THEN WENT TO MEMORY AND THEN IT WENT TO SEE ME CAP AND THEN OPTICAL AND NETWORKING AND POWER SETTINGS AND CPUS. AND THEN EVEN INTO THE DISCRETE'S MORE RECENTLY. AI HAS GOTTEN SO BIG THAT IT IS DRAGGING EVERYTHING ALONG WITH IT, ONE AT A TIME THESE BOTTLENECKS HAVE BEEN GOING. IT'S FUNNY BECAUSE ONE OF THE BIGGEST QUESTIONS I'VE BEEN GETTING IS, NVIDIA, BROADCOM, THE GUYS THAT SELL THE COMPUTE AND THE FOUNDATION OF ALL THIS, THEY HAVE KIND OF LEFT. WHAT IS GOING TO GET THOSE WORKING AS INVESTORS ARE PLAYING THE BOTTLENECKS? WHEN THINGS ARE ROLLING OVER, THEY HAVE RELATIVELY OUTPERFORMED, SOME OF THE MEMORY STOCKS ARE DOWN CONSIDERABLY OFF THE PEAK. NVIDIA IS DOWN A LITTLE BUT NOT NEARLY AS MUCH OFF THE PEAK VERSUS SOME OF THESE OTHER ONES. KATIE: I WANT TO GET YOUR PERSPECTIVE ON WHAT'S HAPPENING OUTSIDE THE U.S. SPECIFICALLY. YOU THINK ABOUT TAIWAN, SOUTH KOREA OR PROMINENTLY. DO YOU THINK SOME OF THE VOLATILITY WE ARE SEEING THEIR HAS ANY BEARING ON WHAT IS HAPPENING IN THE U.S. CHIP INDUSTRY? OR IS IT IDIOSYNCRATIC AT THIS POINT? >> YOU HAVE TO LOOK AT THE INDUSTRY FROM THE STOCKS. YOU MENTION KOREA, THAT HAS BEEN INVOLVED WILL. YOU HAVE TO REMEMBER YOU HAVE SAMSUNG AND HYNEK'S THAT BASICALLY MAKE UP 60%, GIVE OR TAKE, OF THE KOREAN MARKET. YOU GOT A LOT OF RETAIL INVESTORS THERE AS WELL WHO HAVE BEEN LEVERED UP INTO BORROWING MONEY TO INVEST IN THESE STOCKS. IT CAUSES A LOT OF PAIN WHEN THINGS ROLL OVER. SO I THINK THAT IS HAD SOME SORT OF IMPACT ON THINGS. IF NOTHING ELSE IT'S JUST DRIVEN VOLATILITY HIGHER. WE HAD A TREMENDOUS AMOUNT OF CONCENTRATION AND SOME OF THE OTHER MARKETS. YOU DON'T QUITE HAVE THAT IN THE U.S., FORTUNATELY. BUT THESE GENERAL TRENDS, I'M LOOKING AT MY CHART HERE DAY TODAY AND ALL THE STOCKS, 6%, 7% OR MORE A DAY IS STARTING TO FEEL NORMAL, WHICH WORRIES ME A LITTLE BIT. KATIE: CERTAINLY. WE HAD THOSE ENORMOUS SWINGS PERHAPS BECOMING NORMALIZED, AS YOU SAY. WE HOPE TO HAVE MORE TIME WITH YOU AGAIN SOON, MANAGING DIRECTOR AND SENIOR ANALYST OF U.S. SEMICONDUCTORS AND SEMICONDUCTOR CAPITAL EQUIPMENT OVER AT BERNSTEIN. COMING UP, ONE OF THE WORLD’'S LARGEST PRIVATELY HELD REAL ESTATE INVESTORS AND MANAGERS SAYS THERE IS STILL OPPORTUNITY, DESPITE SUPPLY STRUGGLES. DAVID STEINBOCK IS A MANAGING PARTNER AT HEINZ. HE JOINS US NEXT. IT THIS IS CLOSE ON BLOOMBERG. ROMAINE: FOUR: 30 P.M., THIS IS THE COUNTDOWN TO THE CLOSE, I'M ROMAINE BOSTICK. KATIE: I'M KATIE GREIFELD. LET'S TALK A LITTLE BIT ABOUT REAL ESTATE. THE WORLD NEEDS MORE THAN IT CAN BUILD, THAT IS THE LATEST MESSAGE OUT OF HEINZ. ONE OF THE WORLD'S LARGEST PRIVATELY HELD REAL ESTATE INVESTORS AND MANAGERS. THE METEOR OUTLOOK SHOWS A SOFTER LEASING ENVIRONMENT IN U.S. AND PART -- APARTMENT, INDUSTRIAL, AND REAL ESTATE. BUT SELECTIVE OPPORTUNITIES REMAIN DESPITE SUPPLY CONSTRAINTS. JOINING US IS DAVID STEINBOCK, --DAVID STEINBACH, GREAT TO SEE YOU. SQUARE THAT CIRCLE FOR ME. WE HAVE BEEN TALKING ABOUT SUPPLY CONSTRAINTS ACROSS THE REAL ESTATE LANDSCAPE ON THIS SHOW FOR MONTHS AT THIS POINT. YOU WOULD THINK THAT WHEN YOU HAVE THE CONSTRAINED SUPPLY THAT IT WOULD LEAD TO A BROAD REBOUND WHEN IT COMES TO LEASING. YOU SAY THAT IS NOT NECESSARILY THE CASE. >> INTERESTING DYNAMICS HAPPENING IN THE MARKET. I BELIEVE WE ARE IN AN ERA OF SUPPLY SHOCKS, AND WE HAVE SEEN THAT THE LAST FEW YEARS IN DIFFERENT WAYS. I THINK THAT WILL CONTINUE. THERE'S A LOT OF REASONS FOR THAT. DIFFERENT NATIONS TRYING TO BUILD THEIR OWN NATIONALS YOUTH AND RESILIENCY IN DIFFERENT SECTORS, THAT IS CREASING -- CREATING SCARCITY ACROSS THE DOMAINS. ALSO WHAT IS HAPPENING IS THERE IS A DEVELOPMENT SPREAD THAT IS NOT THERE. INVESTORS ARE LOOKING FOR PREMIUM TO JUSTIFY NEW DEVELOPMENTS. IN THE MARKET NEEDS NEW DEVELOPMENT, THOUGH THE SPREAD IS NOT THERE TO JUSTIFY IT, WHICH MEANS IT IS NOT HAPPENING. THAT PROBLEM WILL COMPOUND. IT WILL DRIVE RENT GROWTH NEAR TERM, A GOOD TIME TO BE A BUYER OF REAL ESTATE. LONGER-TERM IT WILL BE DRAFTED FOR MORE OF A GOLDEN OPPORTUNITY. KATIE: TALK ABOUT WHERE YOU ARE FINDING THOSE SELECTIVE OPPORTUNITIES. WHEN YOU TAKE A LOOK AT THE OPPORTUNITY SET AS IT EXISTS RIGHT NOW. >> LOOKING ACROSS THE WORLD, WE ARE ACTIVE IN ABOUT 30 COUNTRIES, EUROPE, ASIA, THE U.S., INTO THE AMERICAS. WE SEEM DIFFERENT DOMAINS OF DEMAND PICKUP. BEEN TALKING ABOUT TODAY, AI IS BUILT ON REAL ASSETS, REAL ASSETS WILL BE NEEDED TO SUPPORT THIS SURGE IN SPENDING THAT WILL CONTINUE DESPITE WHAT MIGHT BE HAPPENING ON WALL STREET WITH DIFFERENT AI CHIPMAKERS. THERE IS PENT-UP DEMAND THAT WILL CONTINUE. WE ARE SEEING OTHER SECTORS CONTINUING TO DRIVE INTEREST. LOCAL LOGISTICS, A LOT OF DEMAND. RETAIL IS A SECTOR WE HAVE BEEN TRACKING, MAKING VERY SELECTIVE BUYS. THAT IS INTERESTING GLOBALLY. LIVING HAS BEEN A CATEGORY THAT INVESTORS CONTINUE TO BE INTERESTED IN. FIRST IN, FIRST OUT OF THE CYCLE. OUT OF OFFICES WHERE INVESTORS WERE FOCUSED ON CREDIT, THAT IS DRAFTING INTO EQUITY. >> WITH REGARDS TO LEASING TRENDS, MORE IMPORTANTLY, RENT COLLECTION TRENDS FROM AN INVESTOR PERSPECTIVE, WHICH ONE OF THOSE AREAS IS PROVIDING MORE OF AN ATTRACTIVE OPPORTUNITY? >> SOME OF THE DYNAMIC GOES BACK INTO SUPPLY. WE ARE ACTIVE IN SOME OF THE BEST SPACE AVAILABLE. WE'VE NOT HAD ANY ISSUES WITH COLLECTIONS. THAT IS CERTAINLY SOMETHING DURABLE THROUGH THE MARKET. SOME HAS TO DO WITH WHERE WE PLAY AND THE DIFFERENT SECTORS, WE HAVE NOT HAD A LOT OF ISSUES. IT IS MORE ABOUT A DEARTH OF SUPPLY AND THE FACT EVEN IF YOU GET THE SPACE BACK, YOU ARE ABLE TO FEEL GOOD. >> I'M INTERESTED ON THE AI SIDE, THERE HAS BEEN SOME TALK ABOUT, PARTICULARLY WITH DATA CENTERS, THE WAY THEY ARE BEING BUILT ALMOST AS SINGLE USE, THE IDEA THAT FOR SOME REASON ON A DATA CENTER IS NOT NEEDED, OR THE CAPACITY, THE DEMAND DOES NOT NECESSARILY MATCH UP TO THE CAPACITY THAT THERE REALLY IS NOTHING ELSE YOU CAN DO WITH IT THAT WOULD BE COST EFFECTIVE. IS IT TRUE OR MISCHARACTERIZATION? >> I THINK THE DATA SECTOR IS STILL EARLY INNINGS ON A LOT OF EVOLUTION THAT WILL HAPPEN. THE ELECTRIFICATION OF THE ECONOMY. AS ELECTRICITY CAME INTO THE SYSTEM, NOT ONLY PRODUCTIVITY, BUT CHANGED IN THE WAY IT WAS DELIVERED. I THINK WE WILL BEGIN TO SEE INTELLIGENCE TO BE MORE SOMETHING THAT IS BOUGHT ON A PER KILOWATT BASIS. THAT WILL EVOLVE HOW DIFFERENT USERS ARE BUYING IT. ALL OF THAT IS AHEAD OF US. I THINK THE CURVE IS QUITE DEEP AND LONG. WHEN YOU ARE MAKING DECISIONS, THERE IS STILL A LOT OF ROOM FOR FUTURE GROWTH TO BUILD INTO WHAT MIGHT BE OBSOLESCENCE IN THE NEAR TERM. KATIE: WHEN IT COMES TO AI AND THE BUILDUP WE ARE SEEING, THERE A COMPARISON TO BE MADE TO THE FIBER BUILDOUT OF DECADES PAST, THE CONCERN IS WE COULD BE WITNESSING WHAT WILL PROVE TO BE A MASSIVE OVERBUILD. I WONDER YOUR THOUGHTS ON THAT? >> I DISAGREE, I THINK AS WE HAVE SEEN WITH SO MANY OTHER SECTORS WHEN THINGS COME INTO THIS ECONOMY THAT ARE PRODUCTIVITY BOOSTERS, THERE IS MORE CONSUMPTION OF THAT THING. WHILE THERE MIGHT BE SOME STARTS IN THE MICRO, YOU CANNOT IGNORE THE MACRO, THAT IS THE THING SUPPORTING THIS. THESE ARE BETS 5, 10, 15 YEARS IN NATURE IN TERMS OF WHAT YOU ARE BUILDING. I THINK THE USE CASE IS SO DEEP ALONG, I'M NOT WORRIED ABOUT IT. ROMAINE: WHEN YOU TALK ABOUT THE LONG-TERM NATURE OF WHAT YOU DO AND WHAT YOUR PEERS DO, THAT MAKES FORECASTING A LOT HARDER BECAUSE IT IS EASY TO LOOK AROUND THE CORNER AND SAY WHERE IS THE ECONOMY GOING TO BE IN A YEAR, FIVE YEARS, 10 YEARS, HOW DO YOU INSULATE YOURSELF FROM THE UNKNOWNS? >> THAT IS PART OF INVESTING IN REAL ASSETS MORE BROADLY. SUPPLY AND DEMAND CONSTRAINTS, YOU GET INTO HOW DIFFICULT IT IS TO BUILD, EVEN LIKE DATA CENTERS, GETTING MORE DIFFICULT TO BUILD. NOT ONLY POWER WHICH WE HAVE BEEN TALKING ABOUT FOR YEARS, BUT INCREASINGLY COMMUNITIES. THOSE ARE THE INCREASING RESTRAINTS. ROMAINE: I THINK THE GOVERNOR SAID SHE WAS GOING TO DO A MORATORIUM ON DATA CENTERS IN NEW YORK CITY. >> THESE ARE NORMAL IN MY WORLD. CERTAINLY OUR ORGANIZATION, THIS IS WHAT WE DO. WE NAVIGATE THESE COMPLEXITIES. WHEN YOU BUILD ANYTHING IN ANY MAJOR CITY AROUND THE WORLD, THERE IS ALWAYS -- ROMAINE: DOESN'T IT FEEL DIFFERENT? THERE IS SO MUCH BACKLASH TO THIS, WHETHER IT IS JUSTIFIED OR NOT, AND WE ARE IN AN ELECTION YEAR, SO THAT WE WANT TO TIP THEIR HAT TO IT. NOT JUST NEW YORK, ONE SIDE OR THE OTHER ON THE AISLE, IT IS ACROSS THE BOARD. >> I THINK IT IS NEW FOR THE SECTOR, NOT THE INDUSTRY. IT IS NEW FOR THE SECTOR, AND THEY ARE USED TO BUILDING DATA CENTERS OUT, AND I THINK THIS IS SOMETHING THAT WILL CONTINUE. ROMAINE: DAVID, GREAT TO HAVE YOU. COUNTING DOWN TO THE CLOSING BELLS ON THIS THURSDAY AFTERNOON. WHEN WE COME BACK, A LOOK AT SHARES OF ELI LILLY. GETTING PSYCHEDELIC. OUR STOCK OF THE HOUR UP NEXT ON THE CLOSE ON BLOOMBERG. ROMAINE: WELCOME BACK AS WE COUNT YOU DOWN TO THE CLOSING BELL. THE NASDAQ 100 NEAR SESSION LOWS, DRAGGED DOWN BY A LOT OF BIG CHIP NAMES THAT HAD A BIG DIP LOWER TODAY, ONE OF THE BRIGHT SPOTS OUT THERE IS THE PHARMACEUTICAL SECTOR, UP FOR A SECOND STRAIGHT DAY. THAT INCLUDES A MODEST BUMP ON THE DAY BY ELI LILLY, UP ABOUT 1% AFTER THEY AGREED TO BUY A PSYCHEDELIC DRUG MAKER. BLOOMBERG HAD REPORTED A DEAL WAS IN THE WORKS, WE GOT THE CONFIRMATION, NO NEED TO PAT OURSELVES ON THE BACK. NORAH MULINDA JOINS US TO TALK MORE ABOUT THIS MOVE. I THOUGHT WEIGHT LOSS DRUGS WERE ALL THE RAGE. WE HAVE MOVED ON TO PSYCHEDELICS? >> IT SEEMS LIKE WE ARE MOVING ON. WE KNOW THE OBESITY SPACE HAS BEEN WERE A LOT OF INVESTORS TEND TO THINK ABOUT ELI LILLY, A LOT OF PEOPLE ATTACH IT TO THAT. ROMAINE: I'M A LITTLE BIT LATE ON THAT. I'M LOOKING AT THE PSYCHEDELICS. EXPLAIN IT TO ME. >> IT IS TIME TO MOVE ON. WE HAVE ALREADY BEEN PRETTY MUCH INTERESTED IN NEUROSCIENCE DEVELOPMENT. WHEN WE THINK OF THE PSYCHEDELIC SPACE, IT WAS ON THE FRINGES. PEOPLE WERE NERVOUS ABOUT WHETHER OR NOT WE SHOULD BE DELVING INTO THIS SPACE. NOW WE ARE SEEING MORE RESEARCH. THAT IS A BIT MORE COMPELLING, COMPANIES LIKE ELI LILLY JUMPING IN ON THE BANDWAGON. IF WE LOOK AT THE SPECIFIC DRUG WE ARE TALKING ABOUT, THIS ESSENTIALLY, EASY TO ROLL OFF OF THE TONGUE. IT IS A NASAL SPRAY ESSENTIALLY FOR TREATMENT RESISTANT DEPRESSION, THAT IS WHAT IT IS DESIGNED FOR. J&J, THEY ALREADY HAVE A DRUG ON THE MARKET. PSYCHEDELIC ADJACENT. A SLOW TO KIND OF PICK UP. BUT IT HAS BECOME A BLOCKBUSTER DRUG FOR THE COMPANY. BEGGING THE QUESTION WHETHER OR NOT OTHER COMPANIES CAN HOP ON THE BANDWAGON AND DO A NEXT-GENERATION VERSION OF WHAT J&J IS DOING. KATIE: IT IS FASCINATING HOW PSYCHEDELICS BECOME MORE ACCEPTABLE TO THE POINT WHERE WE HAVE THESE GIANT PHARMA COMPANIES PURSUING THESE DEALS. ELI LILLY ALSO INTERESTING BECAUSE THEY HAVE BEEN INQUISITIVE WHEN IT COMES TO THE PIPELINE. IT IS NOT JUST THIS COMPANY THEY ARE BUYING TODAY THAT IS RISING, IT IS LIFTING ALL BOATS, THE IDEA THAT WE CAN SEE MORE OF THIS TYPE OF M&A COME THROUGH. >> THAT IS WHAT YOU SEE THE RALLY BROAD-BASED, NOT JUST LOOKING AT ELI LILLY OR THAI BECKLEY, IT IS ALSO THE PEERS, STARTING TO WONDER IF IT VALIDATES THE IDEA OF THE PSYCHEDELIC DRUG MARKET MORE BROADLY. BLOOMBERG INTELLIGENCE RAN SOME DATA, THEY GOT AN ESTIMATE THE MARKET FOR PSYCHEDELIC DRUGS COULD REACH IN THE NEXT SIX YEARS. THAT IS WHAT ELI LILLY AND OTHER PEERS ARE BETTING ON. >> IT IS NOT NECESSARILY A QUESTION, BUT YOU SEE ELI LILLY SHARES ARE NOT NECESSARILY DECLINING, HIGHER BY ABOUT 1.3 PERCENT. $3.8 BILLION ON SOMETHING LIKE THIS WHEN YOUR VALUATION IS $1 TRILLION IS KIND OF A SPLASH IN THE BUCKET. ROMAINE: PEOPLE HAVE BEEN BANGING THE DRUG ON THIS, WE HAVE HEARD A LOT WHEN IT COMES TO MARIJUANA, THC, JUST THE RECREATIONAL USES WE WANT TO ASSOCIATE WITH THC OR PSYCHEDELICS LIKE LSD, KATIE: WE WILL SEE BECAUSE WE KNOW WHEN IT COMES TO MARIJUANA, INVESTING ALONG THAT HAS BROKEN A LOT OF PARTS. ROMAINE: ARE YOU INTO THAT? KATIE: WE CAN TALK AFTER 5:00 P.M. ROMAINE: THAT IS WHEN WE DO IT. [LAUGHTER] KATIE: MEANWHILE, WE ARE COUNTING DOWN TO THE CLOSING BELLS. KIND OF AN UGLY DAY ON WALL STREET. WHEN YOU THINK OF WHAT IS GOING ON IN CHIP LAND. ROMAINE: IT IS NOT REALLY BROAD-BASED. KATIE: WE WILL BRING DOWN -- WRITE DOWN SOME OF THE ACTION NEXT. AHEAD OF THE U.S. EQUITY STRATEGY. OVER AT BARCLAYS. THIS IS THE CLOSE ON BLOOMBERG. ♪ ROMAINE: COME BACK. KATIE: ABOUT 10 MINUTES UNTIL WE GET TO THE CLOSE. TRADING AT SESSION LOWS WHEN IT COMES TO THE S&P 500 AND THE NASDAQ 100 AS WELL. IT HAS BEEN A TOUGH DAY FOR THE CHIP TRADE. YOU CAN SEE THERE WITH THE PHILADELPHIA SEMICONDUCTOR INDEX, DOWN ABOUT 5%. WE KNOW MICRON, NVIDIA, BROADCOM , THE LIST GOES ON, CERTAINLY TRADING HEAVY TODAY. ROMAINE: AMAZON JUST TOOK A BIG MOVE DOWN. NO REAL NEWS BUT SOMETHING TO KEEP AN EYE ON HERE AS WE CONTINUE TO SEE VOLATILITY. WE ARE COUNTING DOWN TO THE CLOSE. I WANT TO THINK -- TALK ABOUT EXPECTATIONS FOR THE YEAR. I WANT TO PULL BACK JUST A BIT. IF YOU BREAK IT DOWN SECTOR BY SECTOR AND STOCK BUY STOCK, IT IS A MULTITUDE OF DIFFERENT STORIES. WHERE YOU LOOKING RIGHT NOW. >> A MODEST UPSIDE. THE DIFFERENCE BETWEEN WHEN WE WERE A LOT MORE BULLISH. AT THE PEAK OF THE MIDDLE EAST CRISIS. THE MACRO ENVIRONMENT HAS BECOME LESS FRIENDLY. THAT IS REFLECTED IN A NEW FED CHAIR. NOT SURPRISINGLY, THE PICKUP IN THE MIDDLE EAST CRISIS ONCE AGAIN LEADS TO THIS. THIS ALL MEANS THAT THIS IS COMING ON TOP OF A FUNDAMENTAL LEVEL. EARNINGS WILL BE REALLY STRONG. THERE'S CONFIDENCE. ON QUESTIONS ABOUT WHAT MULTIPLES YOU PAY. IT IS IN DANGER TERRITORY ALREADY. ROMAINE: I AM CURIOUS ABOUT THAT. WE ACTUALLY JUST PUT OUT OUR COMPILATION OF WALL STREET TARGETS. YOU RAISE TO YOUR TARGET. I AM MORE INTRIGUED OF THE TARGET FOR THE EARNINGS. WE GO BACK TO THE BEGINNING OF THIS YEAR. PEOPLE ARE MORE MUTED IN TERMS OF EXPECTATIONS. PEOPLE SEEM TO BE PRETTY BULLISH. >> I THINK BECAUSE THAT IS LINKED TO THE AI NARRATIVE. WHILE THE NARRATIVE HAS SHIFTED. THAT LEVEL OF SPENDING. IT CONTINUES TO GO UP. IT HAS GONE UP EVEN FURTHER AFTER EARNINGS. THIS IS SUPPORTING A BROAD-BASED SET. A LIST OF TECHNOLOGIES. THAT IS WHERE THE EARNINGS STRENGTH IS COMING FROM. THE VISIBILITY IS THERE. YOU KNOW THOSE TRILLIONS ARE GOING SOMEWHERE. CUT YOUR EXPOSURE TO THE HYPERSCALERS. THE TIMELINE OF SPENDING. WHEN WILL WE HAVE LINE OF SIGHT? QUESTIONING THE RETURN ON THAT. AND ALL OF THE UNCERTAINTIES. THERE IS VISIBILITY BECAUSE SPENDING HAS THE CAPACITY. KATIE: IT IS A LITTLE BIT FUNNY BECAUSE YOU THINK OF THE FREE CASH FLOW DRAWDOWN WHEN IT COMES TO A LOT OF THOSE HYPERSCALERS. DO YOU THINK WE WILL START TO SEE ANY SIGNS THAT IT IS DIRECTLY BENEFITING THE FOLKS WHO ARE SPENDING ALL THAT MONEY? YOU ARE NOT SEEING THAT NECESSARILY IN THE STOCK PERFORMANCE. >> THE REASON IS SIMPLE. THEY POSTED 30% GROWTH. THAT INCLUDES MOST OF THE HYPERSCALERS. WHAT HAS CHANGED IS GIVEN THE SCALE OF THE SPENDING, THERE ARE MART -- MULTIPLES. WE STARTED WITH BIG TECH MULTIPLES AT 28 TIMES EARNINGS. ACTUALLY I LIKE THE COMBINATION. THE FACT THAT MULTIPLES ARE REFLECTING THE RISK OF CONTINUED SPENDING. THIS IS A CAPITAL-INTENSIVE BUSINESS. WE WANT TO SEE WHERE THE AI NARRATIVE SETTLES. THAT WILL TAKE A FEW MORE YEARS. WITH MARGINS AND SUCH. THESE COMPANIES ARE POSTING EXCELLENT EARNINGS. THE ONLY QUESTION TO YOUR POINT IS IT COULD COME DOWN. WE EXPECT IN THE NEXT FEW YEARS, STARTING THIS YEAR, PEOPLE WILL BE SPENDING 90% OF THEIR OPERATING CASH FLOWS. THAT IS THE REASON WHY. THEY WANT CREDIT MARKETS TO RAISE MORE CAPITAL. WE NEED EXCITEMENT. AND SOME SHORT-TERM DIGESTION ISSUES. KATIE: WE CERTAINLY SEE THAT WHEN IT COMES TO THESE PRIMARY CREDIT MARKETS. WE HAVE JUST OVER A MINUTE LEFT WITH YOU. I WANT TO TAKE A HARD PIVOT HERE BECAUSE IN THE COMMERCIAL BREAK HE TOLD US IT WAS TIME TO START PAYING ATTENTION TO THE MIDTERM ELECTIONS. TELL US WHY. >> HISTORICALLY IF YOU LOOK AT THE MIDTERM ELECTIONS, EQUITY MARKETS WILL UNDERPERFORM COMPARED TO NOT IN ELECTION YEARS. WHAT WE HAVE FOUND EMPIRICALLY OVER THE LAST ELECTION CYCLES IS THE WORST MONTHS ARE AUGUST AND SEPTEMBER. NOT ONLY DO WE HAVE HIGHER MACRO, BUT WE HAVE THE MIDTERMS. THE KEY DATA IT IS ONCE IT COMES OUT OF THE MIDTERM ELECTIONS, EQUITY MARKETS ARE VALUED. THEY RALLY. THAT IS INTIMATELY CONNECTED TO THE FACT THAT IT TENDS TO BE THE LOWEST IN YEAR THREE. THAT IS WHAT YOU CAN EXPECT. YOU WILL SEE A DECLINE IN TARIFF RISKS ALREADY DOWN. NATIONAL SECURITY RISKS. THE SECTOR THE BENEFITS THE MOST IS TECHNOLOGY. INTERESTINGLY, THE SECRETARY AT THE MAELSTROM OF THIS CURRENT UNCERTAINTY IS LIKELY TO BE THE BIGGEST BENEFICIARY COMING OUT OF THE MIDTERM ELECTIONS. ROMAINE: MAYBE TECHNOLOGY SAVES US ONCE AGAIN AS IT CONTINUES TO DO TIME AFTER TIME. GREAT TO HAVE YOU HERE. AS WE COUNT YOU DOWN TO THE CLOSING BELL. SESSION LOWS FOR THE MAJOR INDICES. EVERYBODY KEEPING AN EYE ON NETFLIX. KATIE: JUST A FEW MORE MINUTES TO WAIT AND A LOT OF EYEBALLS ON NETFLIX BECAUSE YOU THINK ABOUT HOW THE STOCK HAS PERFORMED. DOWN 45% FROM ITS ALL-TIME HIGH WHICH WAS REACHED BACK IN JUNE OF 2025. REALLY ONE OF THE WORST PERFORMANCE OF THE LAST 12 MONTHS. WE WILL SEE IF THEY CAN RIGHT THE SHIP. THEY HAVE A LITTLE BIT OF A TORTURED HISTORY WHEN IT COMES TO EARNINGS. ROMAINE: IT WILL BE AN INTERESTING EARNINGS DAY. THE REAL STORY WILL BE WHAT IS IN BETWEEN THE LINES OF THOSE NUMBERS. OUR COVERAGE OF THOSE EARNINGS STARTS RIGHT NOW. >> THE CLOSING BELL, BLOOMBERG COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: RIGHT NOW WE ARE A COUPLE OF MINUTES AWAY CAN THE END OF THE TRAINING DATE. WE ARE TAKING YOU THROUGH TO THE CLOSING BELL. IT IS A GLOBAL SIMULCAST. WELCOME TO OUR AUDIENCES ACROSS ALL OF OUR PLATFORMS. OUR PARTNERSHIP WITH YOUTUBE. -- AND ON NETFLIX, WHICH REPORTS EARNINGS IN A MATTER OF MINUTES. >> ABSOLUTELY. WE ARE DEFINITELY FOCUSED ON IT. THE STOCK DOWN 22% YEAR TO DATE. AFTER HITTING THE HIGH OF 416. THAT IS THE LAST TIME IT REPORTED EARNINGS AND THERE WAS DISAPPOINTMENT IN TERMS OF THE PROFIT OUTLOOKS. WE ARE DEFINITELY HOMING IN ON THAT ONE. IT IS INTERESTING IN THE LAST FEW MINUTES OF TRADING YOU HAVE SEEN BUYERS COMING IN PUSHING ON THE MAJOR AVERAGES OFF OF THEIR LOWS OF THE SESSION. >> ALWAYS KEEPING AN EYE IN OIL PRICES, ESPECIALLY AS WE SEE THINGS FLARING UP IN IRAN AND THE STRAIT OF HORMUZ AS THE U.S. CONTINUES ITS BARRAGE ON IRAN. OIL PRICES NOT CHANGED SIGNIFICANTLY, BRENT AT 84 .30, WTI $79 A BARREL. KATIE: QUIET WHEN IT COMES TO THE CLASSIC PICTURE. IT REALLY FELT LIKE IT WAS ALL ABOUT CHIPS TODAY. I KNOW IT IS OPTIMISTIC TO SAY WE PUSHED OFF OF THE SESSION LOWS, BUT A PRETTY UGLY DAY AND A LOT OF THAT GOES BACK TO THE CHIPS. ROMAINE: PRETTY SIGNIFICANT DROPS IN NAMES LIKE NVIDIA, SANDISK DOWN MORE THAN 10%. ALPHABET DOWN BY ABOUT 4.5%. WE SAW A BIG SPIKE IN SHARES OF AMAZON, BUT NO REAL MOVE. RED ACROSS THE SCREEN FOR MOST OF THE MAJOR INDICES, THE DOW GOING TO GO LOWER BY ABOUT .20%. THE S&P LOWER BY ABOUT .5%. NASDAQ COMPOSITE AND NASDAQ 100 DOWN ROUGHLY 1.5% OR SO. THE RUSSELL 2000 WILL FINISH FLAT ON THE DAY BUT IN THE RED. >> YOU HAVE MORE NAMES IN THE S&P 500, THE MAJORITY ARE HIGHER DESPITE THE OVERALL INDEX. >> IN THE SAME STORY WHEN YOU LOOK AT THE SECTOR, REALLY SHOWING YOU CAN HAVE IT BROADLY BEYOND TECH AND YOU MIGHT NOT SEE IT AT THE BENCHMARK LEVEL BECAUSE YOU HAVE INFORMATION TECHNOLOGY DOWN BY ABOUT 1.8%. THAT IS WEIGHING DOWN THE REST OF THE INDEX. WE DID HAVE HEALTH CARE AS A SECTOR HIGHER BY ABOUT 2.2 PERCENT. CONSUMERS WERE YOUR BIG WINNER, 2.9% HIGHER. NOT GOING TO BE ABLE TO OFFSET THE BIG DRAG THAT YOU SAW FROM TECH AND COMMUNICATION SERVICES. TIM: WE SAW 30 COMPONENTS WERE LOWER. EKED OUT EVER SO SLIGHT GAMES, BROADCOM, MICRON, MARV L AND NVIDIA. ROMAINE: NETFLIX SHARES CROSSING THE WIRE RIGHT NOW. THE SECOND QUARTER REVENUE, MODEST NEWS, $12.56 BILLION, IT LOOKS LIKE FOR FULL CASH FLOW FOR THE MOST RECENT QUARTER, $1.53 BILLION, THAT IS A BIG MISS, THE STREET WAS LOOKING FOR $2.72 BILLION, BEAT BY 80 CENTS. HERE IS YOUR FORECAST FOR THE CURRENT QUARTER. CPS OF $.82 A SHARE. IT WAS FOR $.84 A SHARE. WITH REGARDS TO REVENUE FOR THE CURRENT QUARTER, 12.8 6 BILLION DOLLARS, THE STREET WAS LOOKING FOR 13 BILLION DOLLARS. SOME OF THE OTHER NUMBERS, BUT IT LOOKS LIKE A MISS FOR THE SECOND QUARTER AND A GUIDE LOWER FOR THE THIRD. >> THERE WAS A MISS LAST TIME AROUND, AND WE SAW THE STOCKS FELL OFF. THE STORY ALREADY ON THE BLOOMBERG REMINDING EVERYONE NETFLIX, THE CONSECUTIVE CORNER, A SECOND CONSECUTIVE QUARTER SALES GROWTH PROJECTED REVENUE OF $12.9 BILLION EARNINGS, A POINT OUT THE SHARES DECLINED MORE THAN 40% OVER THE LAST YEAR DUE TO CONCERNS ABOUT ITS FUTURE, DESPITE HAVING MORE SUBSCRIBERS AND VIEWERSHIP THAN ANY OTHER PAID STREAMING SERVICE. HE REMINDS US, INVESTING IN NEW KINDS OF PROGRAM, LIVE SPORTS, VIDEO PODCASTS, LEVERAGING GENERATIVE AI TO DELIVER HIGHER QUALITY OUTPUT MORE QUICKLY AND AT A LOWER COST. INVESTORS MAY BE BUYING SOME OF THIS BECAUSE THE STOCK IS UP ABOUT 1.6%. PULLING BACK SINCE IT REPORTED EARNINGS BACK IN APRIL. TIM: LOOKING AT INVESTOR LETTER, REPEATING WHAT CAROL SAID. THINKING ABOUT THE PODCAST CREATORS LIKE DANNY GO AND -- CLOUD TV GAMES, THE COMPANY SAID IT MENTIONED IDEA LEVERAGING AI, BUT BEN AFFLECK'S COMPANY, NOW THE COMPANY SAYS IT IS LEVERAGING AI TO PROVIDE A MORE INTERACTIVE EXPERIENCE -- ALSO TO MAKE THOSE MORE RELEVANT FOR PEOPLE WHO DON'T PAY FOR THE SERVICE WITHOUT ADS, A QUALITY OF THE SERVICE ITSELF, A DYNAMIC AND COMPETITIVE AND THEY ARE STAYING AHEAD BY EXECUTING AGAINST DIFFERENT VALUE LEVERAGING IN TECH AND IMPROVING MONETIZATION. >> WHEN IT COMES TO MONETIZATION, LET'S TALK ABOUT THE ADS BUSINESS COMING UP IN THE STATEMENT AS WELL. BUILDING OUT OUR ADS BUSINESS AS THEY CONTINUE TO BE A TOP PRIORITY. ON TRACK TO DELIVER APPROXIMATELY $3 BILLION IN REVENUE IN 2026. WE WERE HAVING THIS CONVERSATION WITH ALICIA REESE EARLIER IN THE SHOW, THERE'S BEEN A LOT OF CONCERNS AROUND ENGAGEMENT. THEIR VIEW IS BASICALLY THEY RAMP UP, OUTWEIGHING THAT DEBATE. WE KNOW THAT IS TOP OF MIND FOR INVESTORS AND HAS WEIGHED ON THE STOCK. ROMAINE: WHAT WE WATCHED IN THE FIRST HALF OF 2026, THE SAME ANNUAL REPORT ANNOUNCING IT WILL BE ANNUAL, WHICH IS KIND OF INTERESTING. GIVING LESS VISIBILITY INTO SOME OF THESE THINGS, PULLING SUBSCRIBER NUMBERS AND GOING ON AN ANNUAL BASIS ON THAT. ON THE REPORT THAT CAME OUT, THE COMPANY SAID AUDIENCES WITH 97 BILLION HOURS OF IN THE FIRST HALF, THE HIGHEST FEW HOURS TO DATE FOR ANY HALF. YOU CAN PRETTY MUCH GUESS WHAT SOME OF THE MOST-WATCHED NAMES WERE ON THAT. LEADING SOME OF THOSE NAMES. CAROL: BRIDGET 10. WHEN WE SAW GROWTH AROUND THE WORLD, U.S. AND CANADA REVENUE UP 10% YEAR-OVER-YEAR. THAT ESTIMATE DID COME IN A LITTLE LIGHT. TALK ABOUT EUROPE, MIDDLE EAST, AND AFRICA, UP 14% YEAR OVER YEAR. SPOT ON AT ABOUT 4.0 THREE DOLLARS. LATIN AMERICA REVENUE UP YEAR-OVER-YEAR. A LITTLE HIGHER THAN THE STREET FORECAST IN A PACK REVENUE. THAT GROWTH WAS UP 60% YEAR-OVER-YEAR AND THAT CAME IN A LITTLE BIT LIGHT. AROUND THE WORLD MAYBE NOT HITTING THOSE NUMBERS WHEN IT COMES TO REVENUES. >> YOU MENTIONED THE CHANGE IN DISCLOSURES, THE COMPANY SAYING IT IS IN THE LETTER -- EVOLVING OUR VIEW HOURS DISCLOSURE. THEY WILL REPORT THESE INDUSTRY LEADING TITLE BY TITLE AND TOTALVIEW HOURS, INCLUDING WITH THE TOP 10 LISTS IN MORE THAN 90 COUNTRIES, SEPARATING THE PUBLICATION REPORTS FROM THE EARNING RESULTS TO KEEP THE PRIMARY FINANCIAL METRICS, WHICH THEY ARGUE IS REVENUE AND OPERATING PROFIT. A FEW YEARS AGO WITH YOU WOULD HAVE SAID WHAT ARE THE PRIMARY METRICS, IT WOULD HAVE BEEN TOTAL NUMBER OF USERS. THEY DON'T REPORT THAT ANYMORE. ROMAINE: BUT FINANCIALS ARE HUNG UP. THEY ALSO WANTED MUCH MORE OF A FOCUS ON CASH FLOW AND THOSE NUMBERS BASED ON WHAT BLOOMBERG IS REPORTING, MISSED PRETTY BIG. IT RAISES A LOT OF QUESTIONS THAT AS YOU PULL BACK VISIBILITY FROM WHAT PEOPLE ARE WATCHING HOW THEY ARE WATCHING IT, NOW THEY ARE SAYING THE FINANCIAL NUMBERS ARE WHAT WE SHOULD BE POINTING TO, WHAT AM I LOOKING AT THAT IS POSITIVE? -- THAT DISCLOSURE IS SORT OF THE TRAJECTORY THAT NETFLIX HAS BEEN GOING DOWN, THE DECISION TO STOP BREAKING DOWN SUBSCRIBER NUMBERS WHEN IT COMES TO THE WATCH REPORT GOING TO BE ANNUALLY VERSUS YEAR. I CAN SEE MORE COMPANIES ARE COMING FROM FOCUSED ON THE NUMBERS THEMSELVES, BUT THOSE START TO DIP AS WELL, YOU ARE SEEING THAT AFTER HOURS RIGHT NOW. CAROL: ALL YOU HAVE TO DO IS PUT IT INTO AN AI MODEL. >> SOME OF THE REPORTING, THAT FEEDS INTO THE NUMBERS. TALK ABOUT ANALYSTS, THEY ARE CONCERNED ABOUT NOT HAVING THE VISIBILITY BEING ABLE TO TRACK THIS. MAYBE BAD BUSINESS BECOMES MORE OF A DOMINANT BUSINESS, BUT HOW YOU ASSESS THAT, AND WHAT PEOPLE ARE WATCHING, WHY THEY ARE WATCHING, HOW THEY ARE ENGAGING IS A BIG QUESTION HOW THEY WILL PAY FOR CONTENT, A BIG PUSH INTO LIVE EVENTS THAT ARE AS COSTLY, IN SOME CASES, MORE COSTLY THAN SOME OF THE SCRIPTED PROGRAMMING THEY HAVE. >> WE TALK ABOUT THE COST OF SPORTS COVERAGE, A LOT OF BIDDING AND EXPENSIVE. -- MORE EXPENSIVE, I SHOULD SAY. GOING BACK TO FREE CASH FLOW, I WANT TO GO TO THE NUMBER YOU WERE HIGHLIGHTING, 33% YEAR-OVER-YEAR. THE ESTIMATE WAS FOR 2.72 BILLION DOLLARS -- ROMAINE: WHAT WAS THE MOST WATCH THE MOVIE IN THE FIRST HALF? "WAR MACHINE." K POP DEMON HUNTERS WAS NUMBER FOUR. THE YOU TALK ABOUT THE ACTUAL SHOWS, THE NON-MOVIES, BRIDGET AND WAS NUMBER TWO, STRANGER THINGS WAS AT FOUR. THEN IT DROPS OFF AFTER THAT. TIM: I HAVE NOT SEEN ONE OF THOSE TITLES. HOUTHIS HAVE YOU SEEN -- ROMAINE: HAVE YOU SEEN MS. RACHEL? TIM: I KNOW WHO SHE IS -- THERE IS PLENTY TO DO WITHOUT SCREENS -- ROMAINE: NO TV, NO JUNK FOOD -- CAROL: HE IS VERY CAREFUL WHAT GOES IN THOSE KIDS. THE ONE THING I'M CURIOUS WILL COME UP ON THE EARNINGS CALL, IN APRIL THAT THEY AUTHORIZED ADDITIONAL 25 BILLION DOLLARS BUYBACK. WE WILL LOOK FOR SOME STUFF ON THAT. AND WE KNOW YOU ARE WATCHING BRIDGET 10, ROMAINE, YOU CAN SHARE THAT WITH ALL OF US. ROMAINE: IS IT LIKE DOWNTON ABBEY? CAROL: MUCH BETTER. OUR CROSS-PLATFORM COVERAGE, RADIO, TV, YOUTUBE, BLOOMBERG. THE CLOSING BELL. GOOD TO HAVE KATIE BACK ON THE CLOSE ON TV. TIM AND I BACK ON BLOOMBERG BUSINESSWEEK DAILY, WE WILL SEE YOU TOMORROW. ROMAINE: OUR COVERAGE CONTINUES OF NETFLIX EARNINGS. SHARES DOWN ABOUT 6%. THE NUMBERS ARE IN, THERE IS REVENUE GROWTH, THOSE NUMBERS MISSING JUST EVER SO SLIGHTLY. THE GUIDANCE FOR THE THIRD QUARTER, FOURTH QUARTER WE ARE IN, A TAD LIGHT. OUR U.S. MEDIA ANALYST OVER AT BLOOMBERG INTELLIGENCE, NO DOUBT COMING TO THIS REPORT -- YOU SAID THERE WAS GOING TO BE FOCUS ON PLATEAUING ENGAGEMENT, CONTENT CREATION, A MARGIN GUIDANCE, AND M&A OVERHANG. I KNOW WE ONLY LEARNED SO MUCH FROM THE ACTUAL REPORT THEY PUT OUT, BUT WHAT DID WE LEARN, AND ARE YOU FEELING ANY BETTER ABOUT NETFLIX NOW THAN WHAT YOU WERE A FEW MINUTES AGO? >> NOT REALLY. WE WERE KIND OF LOOKING FOR SOME KIND OF GUIDANCE, EITHER THE REVENUE NUMBERS OR THE OPERATING MARGIN. THEY DID NOT DO EITHER OF THAT. THE IMPORTANT NUMBER WAS THE THIRD QUARTER GUIDANCE, WHICH CAME IN BELOW CONSENSUS. THE CONSENSUS WAS EXPECTED JUST A TOUCH ABOVE 13%. NOT A LOT TO GET EXCITED ABOUT, REALLY KIND OF FEEDS INTO THE BEARISH ARGUMENT ABOUT THE THINGS YOU HIGHLIGHTED, ESPECIALLY PLATEAUING ENGAGEMENT. KATIE: LET'S TALK ABOUT PLATEAUING AND ENGAGEMENT. THE AMOUNT OF TIME PEOPLE SPEND ON NETFLIX GREW 2% IN THE FIRST HALF OF 2026. THE COMPANY HIGHLIGHTING THEY HAD A COMPETITION FROM THE WORLD CUP, THE WINTER OLYMPICS AMONG OTHER THINGS, THAT 2% FIGURE. HOW DO YOU FEEL ABOUT THAT? >> THIS IS PARTLY BECAUSE OF THE LARGE NUMBERS, KIND OF TO BE EXPECTED. WE HAVE BEEN USED TO SEEING IN THE PAST, ENGAGEMENT GROWTH GROWING IN THE MID TEENS. WHEN YOU SEE THE DRAMATIC SLOW DOWN TO THE LOW SINGLE DIGITS, IT DOES SPOOK INVESTORS. THEN YOU LOOK AT THE WORLD CUP NUMBERS, THAT IS DEFINITELY GOING TO HAVE A DEMONSTRATE WILL IMPACT ON THE GUIDANCE. WE DID SEE THE GUIDANCE COME IN A LOT LOWER. AND THERE IS THAT NIELSEN REPORT THAT POINTS TO NETFLIX ENGAGEMENT AND SHARES OF TV VIEWING. THE LOWEST ABOUT 10 TO 11 MONTHS. FAR LOWER THAN THE 9% THEY SAW AT THE END OF 2025, 7 .8%. YOUTUBE COULD CONSISTENTLY GROW. THIS IS WHERE A LOT OF THE FEAR IS COMING IN, AND TODAY'S REPORT DOES NOTHING TO THAT. ROMAINE: I'M CURIOUS, WE TALK ABOUT THE COMPETITION WITH YOUTUBE, THEY ARTICULATED THAT ON THEIR CONFERENCE INTERVIEW SEVERAL TIMES. IT IS A DIFFERENT FORMAT, AT LEAST THE TYPE OF VIDEOS YOU GET ON YOUTUBE ARE DIFFERENT THAN THE CONTENT YOU GET ON NETFLIX. NOT NECESSARILY A 1:1. DO YOU HAVE A SENSE WHETHER OTHER EXECUTIVES WOULD TRY TO PUSH MORE INTO THE TYPE OF CONTENT THAT YOU SEE ON YOUTUBE, OR SORT OF TURN THINGS AROUND WITH THE MORE TRADITIONAL BIG MOVIES, BIG SERIES SHOWS THAT THEY ARE USED TO PUTTING OUT? >> ABSOLUTELY, THEY ARE GOING TO PUT MORE OF THE TRADITIONAL CONTENT OUT. THE SHOWS, THE MOVIE, WHAT THEY ARE GOING AFTER WITH THAT PURCHASE. THEY ARE ALSO REALIZING THEY HAVE TO GET SHORT FORM CONTENT, AND AT THE END OF THE DAY, EVERYBODY ONLY HAS 24 HOURS. IT IS ABOUT HOW MUCH TIME YOU WILL BE ABLE TO SPEND ON THE NETFLIX PLATFORM. THEY HAVE TO KIND OF COME UP WITH A BETTER STRATEGY FOR CONTENT DIVERSIFICATION. THEY ARE DOING THAT. WE ARE GOING TO SEE THEM DEBUT SOME SHORT FORM CONTENT, GETTING CONTENT FROM DIFFERENT PUBLISHING SOURCES, BUZZFEED, PEOPLE, VARIETY. THAT IS THEM TAKING ON YOUTUBE IN A VERY SMALL WAY, BUT GOING AFTER THE CONTENT. AT THE END OF THE DAY, THEY ARE COMPETING AGAINST ALL OF THESE SOCIAL MEDIA PLATFORMS. NOT JUST BIG STREAMERS LIKE DISNEY OR AMAZON, PRIME VIDEO. IF THEY DO HAVE TO ARTICULATE BETTER STRATEGIC. >> YOU THINK ABOUT MEDA, ANNOUNCING IT IS ALSO EXPLORING NEW FORMATS, INSTAGRAM FOR TV IS A PLATFORM THAT THEY ARE LOOKING AT. INSTAGRAM HAS HAD SUCCESS WHEN IT COMES TO REELS. ADD IT ALL TOGETHER, THINK ABOUT THE COMPETITION THEY SEE FROM THE SHORT FORM SIDE, DO YOU HAVE THE CONFIDENCE THAT THEY NEED TO DO SOMETHING, BUT DO YOU HAVE THE CONFIDENCE THEY WILL BE ABLE TO GAIN SOME TRACTION IN THAT SPACE? IT IS PRETTY SATURATED AT THAT POINT, IT SEEMS EVERYONE IS TRYING TO ENGINEER THEIR OWN STRATEGY. >> IN THE NEAR TERM, THEY WILL SEE A LOT OF NOISE AND VOLATILITY. AT THE END OF THE DAY, THEY SPEAK ABOUT THIS IN THEIR INVESTOR LETTER ABOUT THE AI RELATED SAVINGS. IT COMES DOWN TO HOW THEY CAN HARNESS AND HARVEST THOSE SAVINGS INTO MORE DIFFERENTIATED CONTENT. A LITTLE BIT OF THAT FOR SHORT-TERM DEBT SHORT FORM CONTENT, BUT GOING AFTER THE CONTENT THAT WILL HELP THEM MONETIZE BETTER, WHICH IS ADVERTISING. GETTING MORE INTO LIVE AND SPORTS, DIPPING THEIR TOES A LITTLE BIT, BUT IT IS NOT ENOUGH. THERE CONTENT BUDGET IS $20 BILLION, THEY SPEND ABOUT LESS THAN 4% OF THAT ON SPORTS CONTENT. THEY REALLY NEED TO BEEF IT UP DRAMATICALLY. LOOK AT DISNEY, SPENDS ABOUT 40% OF ITS BUDGET ON SPORTS RIGHTS. THEY ABSOLUTELY HAVE TO DO SOMETHING TO MOVE THE NEEDLE. SHE IS A U.S. MEDIA ANALYST AT BLOOMBERG INTELLIGENCE. LET'S KEEP THE CONVERSATION GOING ON THE NETFLIX EARNINGS. IT IS GREAT TO HAVE YOU WITH US. HEADING INTO THESE RESULTS, YOU MADE THE POINT THAT THE MARKET NEEDS SOME CLARITY OF DIRECTION. NETFLIX IS STILL THE KING HERE. BUT THE MARKET LOOKING FOR DIRECTION ON WHAT COMES NEXT. WE KNOW NETFLIX IS GETTING INTO LIVE SPORTS. DO YOU THINK THEY ARE DOING ENOUGH? >> YES AND NO. THEY HAVE CERTAINLY MADE A LOT OF PROGRESS WITH LIVE SPORTS. WITH SOME POSITIVE AND NEGATIVE RESULTS. I DON'T THINK IT MAKES SENSE FOR THEM TO SPEND TENS OF BILLIONS OF DOLLARS BUYING SPORTS RIGHTS. ESPN HAS ALREADY DONE THAT. I LIKE THEIR APPROACH TO SPORTS BECAUSE THEY ARE TRYING TO MEASURE THE COST TO THE RETURN BUT THEY ARE GETTING RANDOM SPORTS ON NETFLIX. WE WILL BE GETTING MORE NFL GAMES IN THE FUTURE. I DO NOT SEE THAT AS THE END ALL OR BE ALL OF THEM BECAUSE IT COSTS US MUCH FOR SPORTS RIGHTS. KATIE: WHAT DO YOU THINK THAT END-ALL BE-ALL IS? YOU DO ON NETFLIX AND YOUR FUND BUT WHAT DO YOU THINK THEY SHOULD BE REALLY FOCUSING ON AT THIS POINT AS YOU HAVE THE SWIRLING CONCERNS AROUND ENGAGEMENT AND INCREASING COMPETITION? ROSS: AS YOU SAW WITH THE ATTEMPTS TO BUY WARNER BROTHERS AND THIS WHOLE THING OF CONSOLIDATING STREAMERS, THIS STREAMER BUSINESS HAS REACHED ITS MAX. WE HAVE ENOUGH STREAMERS. WE HAVE PLENTY OF CONTENT. THERE IS A LOT OF COMPETITION. FOR THESE VIEWING HOURS. THERE IS A LOT OF CHOICE. PEOPLE WILL FOLLOW THE WORLD CUP OR THE OLYMPICS. THEY WILL WATCH WHAT THEY WANT TO WATCH. RIGHT NOW HBO HAS A REALLY GOOD LINE AT. THAT MIGHT CHANGE. IT KINDA GOES BACK AND FORTH. THEY REALLY MADE A COMMITMENT TO VIDEO GAMES AND LIVE ENTERTAINMENT. I THINK IT MAKES THE MOST SENSE FOR THEM TO CONTINUE WITH THOSE PATHS. VIDEO GAMES ARE GREAT. LIVE ENTERTAINMENT IS WHERE THEY HAVE NOT BEEN WHICH I THINK IS A HUGE MISSED OPPORTUNITY. GETTING THESE MOVIES INTO THE AND PUTTING THE SHOWS IN THEATERS AND GENERATING REVENUE FROM THE THEATERS. BY ESTIMATION THAT NETFLIX COULD MAKE BILLIONS OF DOLLARS IN MOVIE THEATERS IF THEY THREW SOME THESE MOVIES OUT THERE. NOBODY CARES IF THEY HAVE TO WAIT A FEW WEEKS TO GET THEM TO BE ON THE STREAMER. I THINK THAT IS A BIG DEAL. I THINK IT HELPS WITH THE ANTICIPATION FOR THOSE TITLES. ONCE HE GETS OUT OF THEATERS. IT IS LIVE ENTERTAINMENT. AND SPORTS AND VIDEOGAME. ROMAINE: THIS GETS TO SOME OF THE LEADERSHIP QUESTIONS. IT SEEMS LIKE THEY HAVE BEEN RETICENT TO GO WITH THAT IDEA. THERE WAS A LOT OF TALK ABOUT KPOP DEMON HUNTERS AND HOW QUICKLY THEY PULLED IT FROM THEATERS. A BIG PART OF THAT EXPERIENCE. IT SEEMS LIKE THEY MISSED THE MARK. SOMETIMES YOU HAVE TO READ THE ROOM AND REALIZED YOU HAVE SOMETHING. JUST RUN WITH IT. I DON'T KNOW WHAT THEIR INTERNAL METRICS ARE WHEN IT COMES TO WHAT WE NEED TO GET ON THE STREAMING PLATFORM FIRST RELATIVE TO THE THEATERS. DO YOU HAVE CONFIDENCE THAT THE MANAGEMENT HAS THE ABILITY TO PITTED WHEN THEY DO TAP INTO SOMETHING THAT CLEARLY HAS GRABS EVERYONE'S ATTENTION? WE ARE IN AN ATTENTION ECONOMY. ROSS: THIS IS WHY I WAS BUYING STOCK RECENTLY IN THE LOW 70'S. I THINK TED SARANDOS IS THE GENIUS OF HOLLYWOOD RIGHT NOW. THEY HAVE THE BEST MANAGEMENT AROUND. I'M SURE THEY GOT WHAT THEY NEED TO BE DOING. IT IS A DIFFICULT TIME TO BE MAKING THESE MOVES. AFTER GOING THROUGH THIS BATTLE FOR WARNER BROS., WHICH I WAS GLAD THAT THEY LOST. THEY HAVE THE CAPITAL. THEY CAN DO THINGS. THEY ARE VERY MEASURED AND STRATEGIC. BUT WHEN YOU LOOK AT THE STOCK DOWN HERE AT $70, YOU ARE PAYING LESS THAN 20 TIMES FORWARD FOR NETFLIX. IT IS NOT GOING ANYWHERE. I HAVE TO REITERATE THIS, WE WILL BE WATCHING NETFLIX, OUR KIDS WILL BE WATCHING NETFLIX, FOUR INVESTORS THIS IS A GREAT OPPORTUNITY. THEY ALWAYS SEEM TO FIGURE THIS OUT. WE VALUE THE COMPANY SUBSTANTIALLY HIGHER THAN THE CURRENT PRICE TODAY. THESE ARE VERY DURABLE, GOOD EARNINGS REPORTS. THEY ARE VERY SHAREHOLDER FRIENDLY. ROMAINE: I DON'T WANT TO DISPUTE THAT NOW DON'T WANT TO BE GLIB AND YOU ARE ON LAST QUARTER. HE SAID DON'T COUNT IT OUT. IT IS STILL DOWN. IT IS DOWN IN THE AFTER HOURS TRADING. THE BUYBACK PROVIDED A LITTLE BIT OF A SLIP BUT NOT MUCH. GOING FORWARD, SHE IS VALUING UP AGAINST WARNER BROS. AND OTHERS. IS THAT THE RIGHT WAY TO EVALUATE? I KNOW IT IS HARD TO GET VISIBILITY IN YOUTUBE. IS THAT WHERE WE NEED TO START LOOKING AT THE VALUATION COMPARISONS? ROSS: VALUATION SHOULD BE RELEVANT TO YOUR TRACK RECORD AS A COMPANY. WHAT INDUSTRY YOU'RE IN MATTERS. WHEN YOU LOOK AT REVENUE AND EARNINGS GROWTH, THERE IS NONE. THAT IS A COMPLETELY DIFFERENT STORY FROM NETFLIX WHICH IS CONSISTENT EARNINGS GROWTH FOR A VERY LONG TIME. I HAVE HELD THIS STOCK FOR A VERY LONG TIME. LET'S BE REAL. IT WAS NOT A BAD EARNINGS REPORT BY ANY MEANS. THE FACT THAT THEY ARE NOT BLOWING IT OUT RIGHT NOW, I GET IT. I DO THINK THEY NEED TO ARTICULATE WHERE THEY WILL REALLY GROW. THEY SAID THEY WOULD GROW THEIR BUSINESS SUBSTANTIALLY OVER THE NEXT FIVE YEARS. SO WHAT IS THE STRATEGY? I THINK THAT IS WHAT THEY NEED TO ARTICULATE MORE CLEARLY. FROM AN INVESTMENT PERSPECTIVE WHETHER THE STOCK IS THE SAME PRICE AS IT WAS YEARS AGO, I AM A BUYER OF THE SECURITIES. IF YOU ARE AN INVESTOR, THIS IS A GREAT OPPORTUNITY WHEN THERE IS UNCERTAINTY. PEOPLE ARE EARNING -- PAYING RIDICULOUS MULTIPLES FOR ALL KINDS OF STOCKS. WE OWN BRAND-NAME COMPANIES THAT DO NOT GO AWAY. WE ADDED GOOGLE LATE. MAYBE WE WILL LOOK AT NETFLIX NOW. ROMAINE: WE ALWAYS APPRECIATE IT. WE KEEP THE CONVERSATION GOING HERE. PARTICULARLY ABOUT SOME OF THE BROADER GLOBAL TRENDS. SHE WAS PREVIOUSLY THE CMO OVER AT NETFLIX. GREAT TO HAVE YOU BACK. HAVE THE -- STATE CAPTURED EVERYBODY. NETFLIX KIND OF DROPPED THE BALL. MAKING SURE THAT IT STUCK. IF THEY FIND THEMSELVES IN THE ZEITGEIST. >> THANK YOU FOR HAVING ME. IT IS ALWAYS GREAT TO BE HERE. THEY WOULD BE BILLIONAIRES. SOME OF THE CONVERSATION YOU ARE HAVING BEFORE, IT WAS A DIFFICULT THING TO DO. WE CAN SIT HERE AND PARTICIPATE. THE BIGGER CHALLENGES TO MOVE THIS MIGHTY SHIP. THIS BIG COMPANY. GUESSING WHERE THE MARKET WILL GO. AND MEETING THEM WHERE THEY ARE. NOT BECAUSE YOU ARE BAD. BUT BECAUSE THE CULTURE HAS MOVED. ROMAINE: WHEN IT COMES TO STREAMING, WHAT HAS CHANGED A LOT? NETFLIX DOES NOT SEE THE OTHER STREAMING SERVICES AS ITS COMPETITION. IT IS YOUTUBE AND VIDEO GAMES AND EVERYTHING THAT COMPETES WITH ATTENTION. AS SOMEBODY BELIEVE AS A TEENAGER IN THE HOUSEHOLD, I CAN GUARANTEE THAT. I AM WONDERING WHERE THAT ATTENTION IS GOING RIGHT NOW. IS THERE A NEED TO BE ABLE TO HARNESS THAT UNDER ONE UMBRELLA? OR SHOULD BE DISPARATE OVER THE DIFFERENT STREAMING SERVICES? >> THAT IS A GREAT QUESTION. I HAVE A TEENAGER IN THE HOUSE AS WELL. WE HAVE KNOWN FOR A LONG TIME THAT AUDIENCES ARE MULTI SCREEN. YOU ARE ON YOUR PHONE. MAYBE YOU HAVE A LAPTOP AT 22. OR YOUR IPAD. CONSUMERS AND AUDIENCES ARE DOING MULTIPLE THINGS AT ONE TIME. THEY CAN REALIZE THEY LOVE THAT FASHION. THEY CAN BE WATCHING A SHOW ABOUT HISTORICAL FICTION SO THEY ARE OVER HERE SEARCHING GOOGLE TO FIND OUT THE REAL STORY. THERE ARE SO MANY WAYS TO GET THE STUDENT -- AUDIENCE. I THINK IT IS ALWAYS BEST WHEN YOU HAVE THE ATTENTION OF AN AUDIENCE TO MAKE SURE YOU ARE IN MULTIPLE SPACES. MAYBE EVEN SOCIAL MEDIA. KEEPING UP WITH PROGRAMMING TO MAKE SURE YOU ARE CAPTURING THE ATTENTION OF THAT AUDIENCE. FOR ENHANCING THAT EXPERIENCE. IN THE WORLD THAT YOU'VE CREATED. KATIE: IF YOU HAVE BEEN ON TIKTOK RECENTLY YOU HAVE A THING THAT HOVERS OVER IT AND SAYS FIND SIMILAR ITEMS. I WOULD LOVE YOUR PERSPECTIVE ON HOW IMPORTANT IT IS TO NAIL THE TONE. EVEN IF YOU HAVE A SHORT-TERM VIDEO STRATEGY, THE AUTHENTICITY MIGHT FALL FLAT. THERE IS NO SAYING THAT THAT WILL GAIN TRACTION IN A MEANINGFUL WAY. BOZOMA: WE CANNOT HAVE THE COMPLETE KNOWLEDGE OR UNDERSTANDING OF WHAT ANY CONSUMER WILL DO. YOU HAVE TO REMAIN IN YOUR UNIVERSE. EVEN IF YOU HAVE SOMETHING THAT HOVERS OVER YOUR CONTENT. YOU MAKE SURE THAT THEY COME BACK. IS THERE A WAY TO ENTICE AUDIENCES TO DO THAT? THE AUDIENCE'S ATTENTION IS GOING TO BE ALL OVER THE PLACE. TO THE POINT THAT WAS MADE BEFORE ABOUT NETFLIX COMPETING WITH NOT JUST OTHER STREAMERS BUT WITH EVERY OTHER PIECE OF ENTERTAINMENT IN THE WORLD. YOU ARE TRYING TO CAPTURE AUDIENCES. KATIE: REALLY GREAT TO GET SOME TIME WITH YOU. THE FORMER CHIEF MARKETING OFFICER OVER AT NETFLIX. TAKE A LOOK AT NETFLIX AFTER HOURS RIGHT NOW. DOWN ABOUT 8%. IT WILL BE INTERESTING TO SEE IF THINGS CAN TURN AROUND AND IT COMES TO THE CALL. MAYBE WE WILL GET SOME DETAILS ABOUT THE BUYBACK OR SOMETHING ALONG THOSE LINES. ROMAINE: DISK IS DEEPER THAN A BUYBACK. THE NUMBERS ARE NOT AWFUL. BUT THE IDEA THAT YOU TALK ABOUT WHAT IS THE GROWTH STORY? WHAT IS THE LONG-TERM GROWTH? KATIE: WHAT DOES THIS ENGAGEMENT CONCERNS THAT INVESTORS HAVE ARTICULATED AND WHEN TO THOSE REALLY START TO IMPACT THE ADVERTISING RAMP-UP THAT HAS BEEN THE RALLYING CRY FOR THOSE WHO ARE STILL BULLISH ON THIS STOCK? WE WILL CONTINUE TO STICK WITH THESE NETFLIX RESULTS AND TALK WITH OUR GUEST WHO JOINS US NEXT AFTER THE BREAK. THIS IS THE CLOSE ON BLOOMBERG. KATIE: SHARES OF NETFLIX DOWN ABOUT 8% AFTER-HOURS. THOSE RESULTS COMING AFTER A RECENT DATA SHOWS THAT THE STREAMER IS STRUGGLING TO KEEP VIEWERS AROUND FOR MORE THAN ONE SEASON. A TEAM NOTING PART OF THIS IS STRUCTURAL. SAYING, QUOTE, THE LONG GAP BETWEEN SEASONS WORKS AGAINST A BINGE AND FORGET CONSUMPTION PATTERN THAT REWARDS NOVELTY OVER CONTINUITY. MICHAEL PATRICK IS MANAGING DIRECT OF EQUITY RESEARCH AT WEBB BUSH. HE JOINS US NOW. GREAT OF YOU WITH US -- GREAT TO HAVE YOU WITH US. LET’S TALK ABOUT THAT, THE SECOND SEASON SLUMP. THIS IDEA THAT NETFLIX IS HAVING TROUBLE KEEPING VIEWERS TO STICK AROUND FOR THE SECOND SEASON, WHICH FEEDS INTO THOSE ENGAGEMENT CONCERNS. I WONDER YEUB WHAT YOU MAKE OF --, YOU KNOW, WHAT YOU MAKE OF IT, WHAT LEVERS BASICALLY NET DPLIKS CAN PULL HERE -- NETFLIX CAN PULL HERE. >> I THINK NETFLIX IS DOING EVERYTHING THEY CAN TO PROVIDE ENOUGH CONTENT TO KEEP US ENGAGED AND I THINK PART OF IS IT WE’RE DRINKING FROM A FIRE HOSE AS CONSUMERS. IT’S REALLY HARD TO FIND THINGS AND THE SHOWS HAVE TO BE REALLY GOOD TO BRING YOU BACK. AND I THINK THAT THE SHEER VOLUME, THE SHEER QUANTITY OF WHAT THEY OFFER MAKES IT EASY TO SWITCH. AND I’LL TELL YOU AN ANECDOTE. I FREQUENTLY FIND SHOWS THAT I STARTED WATCHING A YEAR OR TWO OR THREE AGO AND FORGOT. I JUST FORGOT. BECAUSE I GOT OVERWHELMED BY OTHER OPPORTUNITIES TO SEE OTHER THINGS. SO I’M NOT AS WORRIED ABOUT THAT AS I AM ABOUT THE DECLINE IN ENGAGEMENT. AS YOU SAID, MY COLLEAGUES POINTED OUT THAT PART OF THIS IS ATTRIBUTABLE TO THE NUMBER OF VIEWERS PER HOUSEHOLD AND THE WAY THEY CRACK DOWN ON PASSWORD SHARING. SO THE ONE METRIC IN THIS EARNINGS LETTER THAT REALLY JUMPED OUT AT ME WAS WE’RE APPROACHING A BILLION CUSTOMERS. NOW, WE KNOW THE NUMBER OF SUBSCRIBERS IS IN THE 300 MILLION RANGE, 330 OR 350 MILLION OR SOMETHING, BUT THEY’RE APPROACHING A BILLION WHICH MEANS THAT THERE ARE THREE PEOPLE PER HOUSEHOLD THAT ARE ACTUALLY VIEWING THE CONTENT. AND OF COURSE AS YOU START COUNTING MORE USERS, THE ACTUAL NUMBER OF HOURS PER USER ENGAGEMENT IS GOING TO DROP. THAT’S WHAT WE’RE SEEING AND I DO NOT THINK IT IS A FATAL FLAW. I THINK IT’S JUST A CONSEQUENCE OF THEM ACTUALLY BEING IN THE HOUSEHOLDS OF ONE OUT OF EIGHT PEOPLE ON THE PLANET. THAT’S PRETTY IMPRESSIVE. AND I THINK YOU SHOULD REALLY PAY ATTENTION TO THAT METRIC BECAUSE I THINK THAT BILLION IS GOING TO GROW TO TWO BILLION IN THE NEXT DECADE. SO THERE’S PLENTY OF OPPORTUNITY FOR THESE GUYS TO MAKE A LOT MORE MONEY. KATIE: ONE OF THE CONCERNS OUT THERE IS THAT, YOU KNOW, THE RISE OF SORT OF SHORT FORM VIDEO, THE RISE OF YOUTUBE IS GOING TO DERAIL THAT PATH FROM ONE BILLION TO TWO BILLION. THERE WAS SOME INTERESTING DATA OUT FROM NEILSON BASICALLY SHOWING THAT IN APRIL NETFLIX’S SHARE OF TV VIEWING TIME REPRESENTED 7.8% OF ALL TV VIEWING. THEY FOUND THAT WHEN IT COMES TO YOUTUBE’S AUDIENCE SHARE IN APRIL, THAT ROSE TO 13.4%. SO HOW ARE YOU SORT OF FACTORING THAT IN WHEN YOU MACK OUT THE FUTURE TRAJECTORY FOURNETTE FLICKS? >> FIRST OF ALL, I’LL SAY THAT I THINK NEILSEN IS FULL OF CRAP. I THINK THAT THEY HAVE THE METRICS THEY HAVE AND THEY CAN’T EXTRAPOLATE GLOBALLY. I WILL SAY I DON’T THINK FRET NIX IS -- NETFLIX IS VIOLATING SECURITIES LAWS SO WE KNOW THAT NEARLY A BILLION PEOPLE, LET’S CALL THAT 970 MILLION, VIEWED 97 BILLION HOURS IN THE FIRST SIX MONTHS OF THE YEAR. THEY JUST PUT THAT NUMBER OUT. WE SAW IT. SO THAT’S 100 HOURS PER VIEWER FOR SIX MONTHS. THAT’S A LOT. AND IF YOU WANT TO TELL ME THAT THAT’S ONLY 6% OF TOTAL VIEWING TIME, I CALL B.S. ON THAT. SORRY, THE NUMBER’S JUST WRONG. WE DON’T WATCH 600 HOURS OF TELEVISION A MONTH, WHATEVER IT IS. IT COMES OUT TO BE SOME CRAZY -- EVERY SIX MONTHS, SORRY. WE DON’T WATCH THAT MUCH TV AND WATCHING 100 HOURS OF NETFLIX, DID I THE MATH WRONG, 1600 HOURS EVERY SIX MONTHS, THAT’S JUST CRAZY. SO I REALLY THINK LOOK AT THE NETFLIX NUMBERS AND YOU SAY, WOW, THESE PEOPLE ARE SUPER ENGAGED AND THEY’RE GENERATING, YOU KNOW, CALL IT $25 PER VIEWER IN SPEND, SO THEY’RE SPENDING 25 CENTS AN HOUR FOR THEIR CONTENT? THAT IS CHEAP. THAT’S NOT GOING AWAY. NOBODY LOOKS AT THAT AS TOO EXPENSIVE FOR 100 HOURS OF CONTENT CONSUMED. SO I ABSOLUTELY THINK NETFLIX HAS THE RIGHT FORMULA. THEY ARE IN A POSITION NOW TO LEVERAGE THEIR CONTENT AND START TO REALLY DRIVE PROFIT GROWTH. SO I AGREE WITH ROSS GERBER FOR THE FIRST TIME IN ABOUT A DECADE, HE’S RIGHT. THESE GUYS HAVE JUST BEGUN THEIR EARNINGS GROWTH AND IT’S AN EARNINGS GROWTH STORY, NOT A STAGNANT EARNING STORY AT ALL. ROMAINE: I’M CURIOUS ABOUT THE DIFFERENT TIERS THAT THEY’VE RELEASED AND THERE’S BEEN A LOT OF SPECULATION AS TO, AS THEY PUSH DEEPER INTO ADVERTISING, WHETHER THEY WOULD ACTUALLY RE-EMBRACE A FREE TIER THAT IS A LOT MOURAD-HEAVY THAN THE -- MORE AD-HEAVY THAN THE REST OF THE TIERS AS WELL. WOULD THAT ENCOURAGE YOU AND CREATE MORE OPTIMISM FOR YOU OR DO YOU NOT THINK THAT’S IN SNES >> YOU KNOW, -- NECESSARY? >> YOU KNOW, IT’S A GREAT QUESTION AND I DON’T KNOW -- I DON’T KNOW WHAT NETFLIX IS GOING TO DO. THERE IS A REAL TRADEOFF BETWEEN DRIVING ENGAGEMENT AND DRIVING MONETIZATION. IF YOU CAN MAKE UP THAT $7 OR $8 A MONTH THAT YOU’RE CHARGING TO THE AD-SUPPORTED TIER WITH MOURADS, THEN ABSOLUTELY -- WITH MORE ADS, THEN ABSOLUTELY. THERE ARE CUSTOMERS WHO AREN’T GOING TO PAY THE $8 AND WHO WILL ABSOLUTELY WATCH AN AD-SUPPORTED TIER. IF YOU CAN DRIVE THAT BILLION USERS UP TO THREE BILLION OR FOUR BILLION AND THE INCREMENTAL TWO BILLION ARE GENERATING $3 OR $4 OR $5 A MONTH IN AD REVENUE, IT’S WORTH IT. I CAN’T MAKE THAT CALL. BUT DIRECTIONALLY I THINK THAT THAT’S RIGHT. SO IS THERE AN ANSWER WHERE YOU CUT THE AD-SUPPORTED TIER PRICE TO $5? AND INCREASE THE AD LOAD TO EIGHT MINUTES AN HOUR AND SEE WHAT HAPPENS? YEAH, THEY’LL TEST THAT AND THEY HAVE TEST MARKETS WHERE THEY CAN TEST THAT. I THINK YOU’RE RIGHT DIRECTIONALLY, THAT THAT IS THE SOLUTION. BUT I CANNOT TELL YOU THEY’RE GOING TO DO IT ANY TIME SOON. ROMAINE: WITH REGARDS TO LONGER TERM GROWTH AND MORE IMPORTANTLY CONTENT, THEY MAKE NO REAL MENTION OF WARNER BROS., DISCOVERY IN THE PRESS RELEASE OTHER THAN FOR THE TERMINATION FEE. I’M SURE THIS WILL COME UP THE NEXT FEW DAYS AND WEEKS AS ANALYSTS HAVE A CHANCE TO HAVE FACE TIME. WAS WALKING AWAY FROM WARNER BROS. THE RIGHT THING TO DO AND DO YOU THINK THAT NETFLIX SHOULD CONSIDER M & A IN THE FUTURE? >> WALKING AWAY WAS ABSOLUTELY THE RIGHT THING TO DO. THERE’S AN OLD SAYING, YOU KNOW, WHY BUY THE COW IF YOU GET THE MILK FOR FREE. YOU DON’T NEED TO PAY FOR THIS CONTENT, YOU CAN RENT IT. AND IF YOU ACTUALLY LOOK AT WARNER BROS. AND PARAMOUNT, THEY HAVE WAY MORE CONTENT THAN THEY CAN EXPLOIT. AND SO, YOU KNOW, CAN NETFLIX LICENSE THIS STUFF? ABSOLUTELY. CAN THEY LICENSE IT FIRST WINDOW EX CLUESIVE? NO SO THE ACQUISITION WAS GOING TO GIVE THEM FIRST WINDOW EXCLUSIVE ONLY, BUT CAN THEY LICENSE THE CONTENT AND MAKE A GREEN LANTERN TELEVISION SHOW? SURE, THEY CAN. OR JIMMY OLSON OR CRYPTO THE DOG SERIES, SURE, THEY CAN. ROMAINE: THAT’S AN INTERESTING CHOICE, GREEN LANTERN, MICHAEL. NOT TO BE GLIB. THAT’S AN INTERESTING CHOICE. >> WELL, WHATEVER. [LAUGHTER] YOU SAY THAT BUT -- ROMAINE: I’M JUST JOKING WITH YOU. >> WHEN GUARDIANS OF THE GALAXY CAME OUT I SHOCKED. I AM NOTORIOUS FOR DOWNGRADING MARVEL A MONTH BEFORE THEY SOLD TO DISNEY BECAUSE I SAID NOBODY HAD HEARD OF IRON MAN OR THOR AND I DEFIED INVESTORS TO DESCRIBE IRONMAN’S OUTFIT WHICH OF COURSE IS GOLD AND RED BECAUSE WE ALL KNEW THAT, DIDN’T WE? NOBODY KNEW. THOSE WERE OBSCURE CHARACTERS AT THE TIME. AND GUARDIANS HAS WORKED. I THINK CRYPTO THE DOG WOULD WORK. SO I SAID GREEN LANTERN BECAUSE I THINK THEY MADE A MOVIE OUT OF THAT. I MIXED GREEN HORNET. I GET THEM MIXED UP. KATIE: FAIR ENOUGH. WHAT DO YOU MAKE OF SOME OF THE POTENTIAL ACQUISITION TARGETS THAT HAVE BEEN FLOATED FOR POTENTIAL NETFLIX M&A? YOU SAID YOU’RE HAPPY THEY WALKED AWAY FROM WARNER BROS. A LOT OF FOLKS WOULD AGREE WITH YOU ON THAT. THERE’S BEEN REPORTING, THOUGH, THAT THEY’VE PURSUED ROKU, APPARENTLY THEY’VE EXPRESS INTERESTED OR EXPRESSED INTEREST IN LIONSGATE. THERE’S SOME ANALYSTS SAYING THAT PERHAPS IF COMCAST DOES ACTUALLY SPIN OFF NBC UNIVERSAL, MAYBE THAT’S SOMETHING THAT NETFLIX SHOULD TARGET. WHAT DO YOU THINK? >> I THINK LIVE BROADCAST IS A DIFFICULT BUSINESS. AND COMCAST IS GETTING OUT OF IT BECAUSE IT’S JUST NOT A PROFITABLE BUSINESS. I DON’T THINK NETFLIX NEEDS THE HEADACHE OF OWNING NBC. UNIVERSAL, DIFFERENT. LIONSGATE DIFFERENT, BECAUSE THEY HAVE LIBRARIES. BUT LIONS GATE’S LIBRARY IS PROBABLY BIGGER THAN ANYBODY’S. AMAZON PROVED THAT BUYING MGM, $$8 BILLION, THAT WAS A SMART ACQUISITION, BECAUSE IT WAS CHEAP. I COULD SEE NETFLIX BUYING LIONSGATE. I COULD SEE THEM BUYING UNIVERSAL. I HOPE THEY DON’T GET MORE INTO LIVE BROADCAST. I DO NOT THINK LIVE BROADCAST IS THE SOLUTION. NONE OF US THINK OF NETFLIX FOR LIVE BROADCAST. IF THEY WANT TO DRIVE REVENUE, THEY SHOULD THINK OF THEMSELVES AS A PLATFORM FOR THE CONSUMPTION OF FILMED ENTERTAINMENT. WHY CAN’T I RENT A V.O.D. MOVIE ON NETFLIX? I CAN’T. WHY NOT? I CAN ON AMAZON. SO WHAT THEY NEED TO DO IS THEY NEED TO STOP THINKING THE WAY THEY THINK, AND START THINKING OF WAYS TO MINE THAT NEARLY BILLION-USER BASE AND SELL THEM STUFF THAT THEY WANT TO PAY FOR. THEY ARE DOING THAT WITH GAMES. THEY’RE GOING TO GET IT RIGHT WITH GAMES. THEY HIRED A BRILLIANT GUY TO RUN IT. HE TOLD ME THIS, HIS JOB IS NOT TO MAKE MONEY. IT’S TO DRIVE ENGAGEMENT. HE’S GOT A BILLION PEOPLE TO SELL GAMES TO. HE’S GOING TO DO THAT. AND SO I ACTUALLY THINK THEY’RE DOING THE RIGHT THICK, BUT THEY’RE NO -- THING, BUT THEY’RE NOT DOING ENOUGH OF IT. AGAIN, IF THEY WOULD BECOME A PLATFORM, START PUTTING FREE TO PLAY GAMES ON THERE, START PUTTING COMMERCIAL BROADCAST, YOU KNOW, CONTENT ON THERE, HAVE A FREE AD-SUPPORTED TIER THAT IS NOT NETFLIX CONTENT, THAT’S JUST THIRD-PARTY RERUNS. RUN "I LOVE L LUCY" AND "THE TWILIGHT ZONE." BOTH OF THEM OWNED BY PARAMOUNT. SO YOU COULD ACTUALLY LICENSE STUFF LIKE THAT REALLY CHEAPLY. ROMAINE: I LOVE LUCY AND THE TWILIGHT ZONE. I LOVE YOU. WE GOT TO LEAVE IT THERE. >> I LOVE YOU TOO, ROMAINE. ROMAINE: MICHAEL PACHTER. WE’RE GOING TO CONTINUE THIS CONVERSATION IN A BIT WITH EVAN SCHAPIRO. WE’LL TALK MORE. WOULD I LOVE LUCY AND THE TWILIGHT ZONE -- I DON’T KNOW. KATIE: I DON’T KNOW. ROMAINE: FOR PEOPLE OF A CERTAIN AGE. I’M A TWILIGHT ZONE GUY. KATIE: I DON’T KNOW IF THAT WOULD QUITE RESONATE WITH ME. ROMAINE: WITH A CERTAIN GENERATION. KATIE: I’M HAPPY FOR YOU AND FOR MICHAEL. ROMAINE: WHAT ABOUT THE GREEN LANTERN? WERE YOU A BIG FAN? KATIE: I CAN’T SAY THAT I WAS. ROMAINE: THAT IS D.C. BY THE WAY. KATIE: I’M TAKING NOTES ON ALL OF THIS. ROMAINE: I CAN TELL YOU’RE VERY INTERESTED. KATIE: I AM SUPER ENGAGED. ROMAINE: OTHER STOCKS MOVING BESIDES NETFLIX. KATIE: LET’S TALK ABOUT SOME OF THEM. THERE IS A WORLD OUTSIDE OF FRET FLICKS. ALCOA, FOR INSTANCE, CUTTING ITS FULL-YEAR ALUMINUM PRODUCTION FORECAST. THERE WAS A CYCLONE THAT HIT THEIR AUSTRALIAN REFINERY. YOU CAN SEE THAT’S WEIGHING ON SHARES. INTUITIVE SURGICAL HOLDING THEIR OUTLOOK FOR CERTAIN PROCEDURE GROWTHS. THAT’S TRANSLATING INTO AN 11% DROP IN SHARES. AND COCA-COLA COMING OUT WITH NEWS THAT ITS FAIR LIFE UNIT WAS HIT BY A RANSOM WARE ATTACK, THAT’S HITTING SHARES MILDLY AFTER HOURS. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ♪ ROMAINE: ALL RIGHT. TAKING A LOOK AT SHARES OF NETFLIX IN THE AFTER-HOURS TRADE. DOWN MORE THAN 7% AS WE WAIT TO HEAR DIRECTLY FROM THE COMPANY ABOUT THE LONGER TERM GROWTH STORY THERE. THE NUMBERS FOR THE MOST RECENT QUARTER, RELATIVELY IN LINE WITH ESTIMATES, WITH SOME MODEST MISSES HERE AND THERE. THE THIRD QUARTER OUTLOOK MISSING BY JUST A FEW PENNIES ON THE E.P.S. SIDE AND A FEW BUCKS HERE OR THERE WHEN IT COMES TO REVENUE. BUT THERE ARE A LOT OF QUESTIONS HERE ABOUT NETFLIX’S EXPLORATION OF THE NEXT LEG OF GROWTH. IS IT THROUGH LIVE TV AND STREAMING BUNDLES TO BOOST ENGAGEMENT? LET’S BRING IN EVAN, THE FORMER HEAD OF NBC UNIVERSAL STREAMING SERVICE, FORMER PRESIDENT OVER AT IFCTV AND THE SUN DANCE CHANNEL AND CURRENTLY A WONDERFUL TO HAVE YOU ON THE PROGRAM, WE'VE BEEN CHARTING THE CHANGES IN BROADCAST MEDIA. YOU MADE A PRESS HE AND CALL LAST YEAR IN 2025 ABOUT NETFLIX HAVING WON OTHER STREAMING WARS, SOMETHING I DON'T THINK ANYONE DOUBTS, BUT HAVE THE STREAMING WARS OF ALTON TO SOMETHING ELSE WHERE NETFLIX MIGHT HAVE TO BE MORE DEPENDENT ON LIVE PROGRAMMING AND OTHER FORMS OF ENGAGEMENT? EVAN: THE POINT I WAS MAKING IS THE STREAMING WARS WERE OVER AND NETFLIX FACED A NEW CHALLENGE, FRANKLY FROM YOUTUBE. THE STREAMING WARS WERE ABOUT SUBSCRIPTIONS AND WE ARE NOW IN A NEW FREE TV ECONOMY. YOU WERE TALKING TO MICHAEL ABOUT THE SHARE OF TELEVISION VIEWING IN THE UNITED STATES AND NETFLIX HAS BEEN FLAT FOR TWO YEARS. THEIR ENGAGEMENT HAS BEEN FLAT OR DOWN THE LAST COUPLE OF YEARS. MEANWHILE YOUTUBE HAS GROWN THEIR SHARE AND FREE PLATFORMS LIKE ROKU HAVE OVERTAKEN NETFLIX ON TV. THAT PART OF THE STREAMING ECONOMY IS OVER AND WE ARE IN A NEW ERA WHERE NETFLIX HAS TO PIVOT. WHAT'S HAPPENED IS BASICALLY BECOME TV, BASICALLY A DIGITAL VERSION OF CBS. ROMAINE: I'M CURIOUS ABOUT THEM DOING SIMILAR TO WHAT YOU HAVE WITH AMAZON PRIME, EVEN SOME OF THE OTHER PLATFORMS LIKE ROKU AND ELSEWHERE WHERE YOU HAVE MULTIPLE CHANNELS YOU CAN CHOOSE FROM RATHER THAN ONE PREPARED -- PROPRIETARY CHANNEL, WOULD THAT HELP? EVAN: THEY ARE DOING SOMETHING SIMILAR IN FRANCE. THEY MADE A MAJOR DEAL IN FRANCE TO PUT THE ENTIRE FEED OF THE CHANNEL ON NETFLIX. THEY ARE LOSING THE DAILY TOUCH POINT ATTENTION. I ISSUED A REPORT CALLED THE CROSS GREEN -- CROSS SCREEN INDEX, AND YOU CAN SEE IT IN MANY COUNTRIES AND PARTICULARLY IN THE U.S., FOR CONSUMERS UNDER 55, NETFLIX IS LOSING THE DAILY ATTENTION WAR TO TIKTOK, NOT JUST YOUTUBE. THEY ARE GETTING INTO AGGREGATION IN OTHER TERRITORIES, AND I THINK THE FRANCE EXAMPLE I THINK WILL TURN INTO A WORLDWIDE STRATEGY. IT'S INTERESTING BECAUSE THEY'RE JUST AGGREGATING SOMEONE ELSE'S PLATFORM. KATIE: YOU MAKE THE POINT IT'S NOT JUST YOUTUBE, IT IS TIKTOK. WHAT DOES NETFLIX DO? YOU MAKE THE POINT THEY ARE FOLLOWING -- FALLING INTO THE TRAP OF TRADITIONAL TV. HOW DO YOU TURN THAT AROUND? IT'S NOT LIKE THEY CAN GO OUT AND BUY A TIKTOK FOR EXAMPLE. EVAN: NO BUT THEY DID JUST LAUNCH A VERTICAL FEED AND I THINK THAT'S STEP ONE FOR WHERE THEY WILL ULTIMATELY GO, WHICH IS VERTICALIZING THEIR LIBRARY, AND TRYING TO GET ATTENTION. MOST VIDEO IS CONSUMED ON A PHONE, NOT A TV SET. UPWARDS OF 60% OF TOTAL ATTENTION FOR VIDEO HAPPENS ON THE TELEPHONE, NOT THE TV SCREEN. WHEN YOU THINK ABOUT WHERE YOU WATCH THE MAJORITY OF VIDEO, IT'S NOT NECESSARILY IN THE LIVING ROOM, IT'S ON THE BUS, IN THE WAITING ROOM, ON THE TOILET. THEY ARE LOSING THAT ATTENTION WAR MORE AND MORE EVERYDAY. TIKTOK IS WINNING THAT ATTENTION WAR. THEY ARE LOSING THE FREE TELEVISION WAR TO YOUTUBE AND TIKTOK. IMAGINE TAKING ALL OF THEIR TRUE CRIME AND TURNING IT INTO SERIALIZED VERTICAL TV. KATIE: I WOULD BE A FAN OF THAT, I WATCH A LOT OF TRUE CRIME. EVAN: MORE THAN GREEN LANTERN? KATIE: ICU WERE WATCHING OUR PREVIOUS SEGMENT. IT LOOKS LIKE YOU WERE NOT NECESSARILY IMPRESSED, THE ANALYST CALL HAS STARTED BUT IN THEIR STATEMENT, THEY TALKED ABOUT HOW BUILDING OUT THE ADS BUSINESS IS A TOP PRIORITY AND THEY ARE ON TRACK FOR APPROXIMATELY $3 BILLION IN AD REVENUE IN 2026. YOU THINK ABOUT THE FUNDAMENTALS OF THE COMPANY, WHAT DO YOU MAKE OF THAT FIGURE? EVAN: HULU WILL DO MORE THIS YEAR THAN NETFLIX IN ADVERTISING AND HULU HAS A FRACTION OF THE SUBSCRIBERS AND THEY ARE ONLY IN AMERICA. THAT'S A REALLY BAD NUMBER FOR THEM. THEY ARE TERRIBLE AT AD SALES. THEY GOT INTO IT BY ACCIDENT BECAUSE IT WAS ANNOUNCED ON AN EARNINGS CALL WITHOUT TELLING ANYBODY ELSE AND THEY HAVE FAILED TO TRANSITION INTO AN AD BUSINESS SINCE THEN. THE MAIN REASON IS THE CULTURE INSIDE NETFLIX HEATS ADVERTISING. THEY REALLY DON'T LIKE IT. THE PRODUCT IS NOT GOOD AND THEY ARE NOT EMBRACING IT THE WAY THEY NEED TO GROW THEIR REVENUE. WHEN YOU LOOK AT THE NUMBERS IT'S IMPORTANT TO ZOOM OUT. LOOKING AT THE FIRST HALF OF 2026 AND NET INCOME AND YOU TAKE OUT THE TERMINATION FEE THEY GOT FROM WARNER BROS. DISCOVERY, THEY ONLY GREW THAT REVENUE 6% IN THE FIRST HALF OF 2026 AND THAT'S WHY THEIR STOCK IS FALLING. ROMAINE: I'M CURIOUS IN THE CONVERSATION WITH -- THE COMPARISON WITH HULU, I FEEL LIKE THE CONTENT IS VERY DIFFERENT. HULU IS MORE LIKE TRADITIONAL TV, ALMOST TAILOR-MADE FOR ADS, AND IN NETFLIX THE ADS DON'T FEEL AS NATURAL. AND THERE WERE A LOT OF JOKES MADE ABOUT THE ADS IN THE HOMERUN DERBY. DO YOU THINK THE CONTENT IS CONDUCIVE TO MORE AD PLACEMENT ON NETFLIX? EVAN: ABSOLUTELY, THE VAST MAJORITY OF USE COMES FROM THE LIBRARY, NOT ORIGINALS. GILMORE GIRLS, SUITS, THEY WERE ORIGINALLY ON COMMERCIALLY SUPPORTED TELEVISION. THEY DO A TERRIBLE JOB OF SELLING THE INVENTORY ON THEIR PLATFORM BECAUSE THEY DON'T REALLY UNDERSTAND THE AD BUSINESS VERY WELL. THEY'VE BEEN THROUGH HOW MANY HEADS OF AD SALES SINCE THEY STARTED? THEY ARE CHANGING THEIR AD STACK AGAIN. IT'S NOT A GOOD PRODUCT AND THEY ARE NOT GOOD AT SELLING IT EITHER. THEY DON'T DO A LOT OF BRANDED CONTENT. YOU LOOK AT THE HOMERUN DERBY INTO THE NFL, THEY ARE INCREASING THEIR SPEND ON LIVE CONTENT, LICENSED CONTENT, SPORTS -- THESE THINGS ARE GETTING WERE EXPENSIVE QUARTER AFTER QUARTER, WHICH IS WHY THEIR NET INCOME IS PLATEAUING. THEY CAN BUY ALL OF THE LIVE SPORTS THEY CAN BUT AS SEINFELD WOULD SAY, CAN YOU HOLD ONTO THE ADVERTISING? IT'S A HARD BUSINESS TO COMPETE IN AND THEY ARE NOT VERY GOOD AT IT. THEY TALKED ABOUT $3 BILLION IN REVENUE BUT IT'S NOT MATERIAL ENOUGH FOR THEM TO REPORT IT AS AN EARNINGS CATEGORY. IF IT'S NOT MATERIAL, IS NOT IMPORTANT AND THAT'S A REAL PROBLEM. KATIE: REALLY ENJOYED THIS CONVERSATION AND WE HOPE TO HAVE YOU BACK SOON. FORMER HEAD NBC UNIVERSAL'S STREAMING SERVICE. ROMAINE: I HAVE TO FIND OUT WHERE HE GOT THAT SHIRT ALTHOUGH I DON'T LIKE OUR BOSSES WOULD LET US WEAR THAT ON AIR. WE HAVE ADS TO SHOW, WE WILL BE BACK IN A MOMENT. THIS IS BLOOMBERG. ROMAINE: NETFLIX EARNINGS INTERVIEW UNDERWAY RIGHT NOW, THEY REPORTED 13% REVENUE GROWTH AND VIEWERSHIP UP ABOUT 2%. KATIE: ABSOLUTELY, FOR THE FIRST HALF. NETFLIX IS SAYING THEY ARE MAKING STRONG PROGRESS AGAINST THEIR GOALS AND IN THEIR VIEW THEY'VE REACHED LESS THAN 50% OF THEIR POTENTIAL MARKET AND THEY ACCOUNT FOR JUST 5% OF TV VIEWING GLOBALLY. ROMAINE: THAT RAISES THE QUESTION OF HOW THEY GET THERE. MICHAEL PACKER SAYS HE AGREES WITH ROSS GERBER FOR THE FIRST TIME IN A WHILE. KATIE: BUT NOT SEEING HARMONY IN SHARES AFTER HOURS, STILL DOWN ABOUT 8%. ROMAINE: WE WILL BE BACK TOMORROW RIGHT HERE ON THE CLOSE. ♪