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"BLOOMBERG TECH" IS LIVE FROM THE HEART OF SILICON VALLEY. ED: MICROSOFT SORES AS META-PLUMMETS WITH ZUCKERBERG'S AI THAT PITCH FALLS ON FLAT SPENDING. QUALCOMM EARNINGS WARNING OF COMPONENT SHORTAGES AND RISING COSTS. WE SPEAK TO THE CEO AND THEN IT IS ALL EYES ON APPLE AFTER THE CLOSING BELL TODAY IS TIM COOK GIVES HIS LAST EARNINGS REPORT AS CEO. LET'S GET STRAIGHT TO OUR TOP STORY. EARNINGS WE START WITH MICROSOFT. STOCKS UP AT MOST 15% ON TRACK FOR ITS BIGGEST JUMP SINCE OCTOBER OF 2008. WHAT DO WE NEED TO KNOW. >> THE PRINT GAVE US EVERYTHING WE WOULD WANT. HIGHEST CLOUD GROWTH IN YEARS. MODERATING SPENDING. THE BIG THEME HAS BEEN ALL THIS MONEY TO HYPERSCALERS THROWING OUT ARE THEY GOING TO SEE A RETURN? MICROSOFT SHOWED US THERE IS AT LEAST AN END IN SIGHT TO THIS CONSTANTLY RATCHETING UP LEVEL SPENDING. ED: LET'S KEEP IT GOING, GABRIELLA BORGES, SENIOR EQUITY RESEARCH ANALYST MAINTAINING A BUY RATING ON MICROSOFT RAISING ITS 12 MONTH PRICE TARGET TO 600 $40 FROM 610. IT SEEMS TO ME THE MAIN METRIC. WHAT DID WE LEARN ABOUT THE ROI THROUGH THE NUMBER? >> GOOD MORNING. IT IS INTERESTING BECAUSE FROM THE OUTSIDE IN WE CAN SEE COMPONENT PRICING MOVING HIGHER WITH MEMORY PRICING, BUT WE DON'T ALWAYS HAVE PERFECT VISIBILITY INTO THE OTHER SIDE OF THAT EQUATION WHICH IS MICROSOFT'S ABILITY TO MINE -- MONETIZE THE ROI ON THE OTHER END IN AS YOUR BUSINESS. THERE WERE A COUPLE OF INTERESTING DYNAMICS WHEREIN YOU TAKE SOMETHING LIKE GITHUB FOR EXAMPLE. THAT'S NOW PROVED TO BE ABLE TO BE MONETIZE IN A CONSUMPTION BASIS SUCH THAT CUSTOMERS GET VALUE OUT OF IT MICROSOFT GETS MORE MONETIZATION OUT OF IT. I THINK YOU ARE SEEING MORE BREADCRUMBS AROUND MICROSOFT'S ABILITY ON THE MONETIZATION SIDE AND PERHAPS IT'S NOT NEARLY AS OBVIOUS FOR -- ED: LOOKING BACK IT ALPHABET OVER THAN ON FINANCIAL METRICS THAT GOOGLE SHARED ABOUT A GEMINI AND HOW DID MICROSOFT DO THE SAME. SO COPILOT 30 MILLION AT THE END OF THE QUARTER UP FROM 20 MILLION AT THE MARCH QUARTER. IS THAT USEFUL INFORMATION TO YOU FOR HOW MICROSOFT'S OFFERING IN AI IS GETTING TRACTION? GABRIELA: ONE OF THE BEAR CASES ON THIS HAS BEEN THAT COPILOT IS NOT AS GOOD A PRODUCT AS IT COULD BE. AND AT THE SAME TIME WE HAVE SEEN SO MUCH ENERGY FROM MICROSOFT MAKING COPILOT THAT PRODUCT. FROM NOVEMBER THIS CONTEXT ON THE ORGANIZATION. AND THEN RECENTLY THE LEADING FRONTIER MODELS INTO THE ECOSYSTEM WHERE THEY CAN ALSO BENEFIT FROM MICROSOFT SECURITY LIABILITY. WE HAVE BEEN WAITING TO SEE SOME OF THE INDUSTRY GET BETTER ON COPILOT AND THEN TO SEE IT IN THE NUMBERS JUST SORT OF REINFORCES THAT POSITIVE FEEDBACK LOOP ON WE ARE STARTING TO MOVE IN THE RIGHT DIRECTION AND THEM WENT IS PICKING UP. ED: ONE OF THE THINGS I FOUND INTERESTING IN THIS COMMENTARY WAS THERE TALKING ABOUT THE REAL WORLD LET'S GET A SENSE OF THAT. >> ALSO BRINGING CAPACITY ONLINE FASTER THAN EVER OVER THE LAST FISCAL YEAR WE REDUCED TOTAL LIVE TIMES FOR NEW GPU'S AND OUR LARGEST REGIONS BY NEARLY 50%. NONE OF THE GIGAWATT THIS QUARTER AND REMAIN ON TRACK TO ROUGHLY DOUBLE HER OVERALL CAPACITY IN JUST TWO YEARS. ED: IF YOU BELIEVE THE DEMAND STORY THEY ARE MOVING QUICK TO GET THE COMPUTER ON THE SUPPLY SIDE. THEY ALSO ACCOUNTING CHANGE WHICH ALTERED THE CAPEX FIGURE. HOW DID YOU ALTER YOUR MODEL IN RESPONSE TO THAT? GABRIELA: THE MECHANICS ON THE DEPRECIATION SCHEDULE IS PRETTY STRAIGHTFORWARD. YOU CAN RUN THAT THROUGH THE MODEL. I THINK THE INDUSTRY DYNAMIC I WOULD OVERLAY ON TOP OF THIS IS A LOT OF IT IS SHIFTING CENTER OF GRAVITY WHERE YOU ARE HEARING MORE DISCUSSION AROUND NUANCE FROM THE TYPES OF ALGORITHMS WHETHER THAT'S OPEN-SOURCE, FRONTIER MODELS. IN THE INTERESTING THING ABOUT THIS IS ON THE ONE HAND YOU HAVE THE CAPEX BUT ON THE OTHER HAND WHAT ARE YOU DOING FROM A SOFTWARE PLATFORM STANDPOINT TO GET MAXIMUM VALUE OUT OF MONETIZING CAPEX. I THINK THAT'S WHERE THE INDUSTRY CONVERSATION HAS STARTED TO CHANGE OVER THE LAST THREE MONTHS. ED: IF WE BUT MICROSOFT, ALPHABET, AMAZON AND A FEW OTHERS IN THEIR SIDE-BY-SIDE PURELY ON STOCK PERFORMANCE YEAR-TO-DATE, MICROSOFT WOULD NOT BE NUMBER ONE. WHERE DOES MICROSOFT STAND IN THE AI RACE IN TERMS OF LEADERSHIP OF PRODUCTS, THE PLATFORM OFFERING YOU'VE JUST OUTLINED. GABRIELA: THERE IS WHERE THEY STAND ON AN ABSOLUTE BASIS AND WHERE DOES THE MARKET THINK THEY STAND ON A RELATIVE BASIS. ONE OF THE WAYS WE BEEN TALKING ABOUT MICROSOFT RELATIVE TO ITS COMPETITION IS THIS IDEA OF DISCOVERING VALUE. MICROSOFT HAS BEEN IN THIS PENALTY BOX FOR NUMBER OF QUARTERS WHERE IN ANY GIVEN QUARTER YOU CAN SAY GOOGLE IS AHEAD WITH GEMINI OR ITS INTERNAL STRATEGY. THE BEAUTY OF WHAT WE THINK IS GOING TO HAPPEN OVER THE NEXT 12 MONTHS IS IT'S NOT AS BAD AS THINK -- PEOPLE THINK IT IS. IT'S A PRETTY SIGNIFICANT IMPROVEMENT BEHIND THE SCENES. I WOULD FOCUS ON THE CONCEPT OF DISCOVERY VALUE. THERE IS A LOT WITH MICROSOFT AS WE LEARN MORE ABOUT THE PROGRESS THEY ARE MAKING ON THEIR AI STRATEGY. >> I WOULD LOVE TO HAVE TECHNOLOGY CONVERSATION WITH YOU. I GREW UP ON MICROSOFT LEARN TO USE A COMPUTER THROUGH WINDOWS, 360 FIVE MORE RECENTLY AND THEN LAST WEEK I TURNED ON MY SMART TV AND IT WAS SAYING YOU HAVE COPILOT IN STALLED HERE AND I WAS THINKING WHAT, I HAVE NO IDEA HOW TO MAKE USE OF COPILOT ON MY SMART TV. REFLECTING IF IT'S WITHIN GOLDMAN OR EUROPE, AND HOW DO YOU SEE THE UTILITY OF COPILOT AND MICROSOFT'S AI OFFERING AN INDIVIDUAL LEVEL. GABRIELA: WE ARE IN THIS PERIODS OF DISCOVERY WHERE BY NECESSITY YOU HAVE TO THROW A LOT OF SPAGHETTI AT THE WALL IN ORDER TO FIND GOOD PRODUCT MARKET FIT IN ORDER TO INNOVATE AND ONE OF THE QUESTIONS WE SPENT TIME ON WITH OUR COMPANIES IS TELL US ABOUT THE PACE OF INNOVATION. WHAT ARE THE COOL THINGS YOU ARE DOING IN HOUSE. TELL US WHAT YOUR ENGINEERING CULTURE. SO AS A CONSUMER, IT YOU TRY A LOT OF DIFFERENT THINGS. SOME OF IT ISN'T GOING TO BE QUITE RIGHT. BUT WE WILL GET TO WHERE WE CAN SEE THE TYPES OF FLAVORS OF COPILOT AND THE TYPES OF USE CASES MATURING AND YOU'LL BE ABLE TO GET GOOD UTILITY OUT OF THAT. I HAVE NO DOUBT WE WILL BE IN A POSITION SIX MONTHS FROM NOW EVEN AS WE REFLECT BACK ON EARNINGS SPREADS FOR GOLDMAN SACHS THE PROGRESS WE'VE MADE BEING ABLE TO SEE HOW THESE TOOLS CAN ACTUALLY HELP IN OUR DAY-TO-DAY THERE WILL BE A LOT MORE PROGRESS AND I THINK WE ARE STILL FIGURING OUT WHERE THIS TECHNOLOGY CAN TAKE US FURTHER. ED: A BIG EARNINGS MOVE IN THE STOCK UP ON TRACK FOR ITS BEST DAY IN MARCH OF 2020. ON TRACK FOR ITS BIGGEST JUMP SINCE OCTOBER OF 2008 WHICH SAYS QUITE A LOT. BACK ON THE SHOW THANK YOU VERY MUCH. MEDA IS DOWN ON TRACK FOR ITS BIGGEST DROP SINCE OCTOBER. IT'S DISAPPOINTING FORECAST INCREASING PRESSURE ON MARK ZUCKERBERG TO PROVE THAT THE AI THAT IS AND WILL BE FRUITFUL LET'S LISTEN TO THEM. >> OUR INVESTMENTS IN AI ARE ACCELERATING EVERY MAJOR PART OF OUR CORE BUSINESS. THEY ARE PROVING THE EXPERIENCE FOR PEOPLE IN OUR APPS DRIVING BETTER PERFORMANCE FOR ADVERTISERS AND HELPING TEAMS BUILD NEW EXPERIENCES AND SHIP FASTER. SECOND WE ARE DEVELOPING NEW PERSONAL AGENTS THAT WILL BE THE FOUNDATION FOR OUR NEXT WAVE OF PRODUCTS AND REVENUE LINES IN THE MONTHS AND YEARS AHEAD. ED: RILEY GRIFFIN LEADS OUR COVERAGE OF MEDA. WHAT DO WE NEED TO KNOW IN THIS EARNINGS PRE-EARNINGS CALL. RILEY: THE TWO NUMBERS ARE 28% AND 55%. 28% IS AN INCREASE IN REVENUE YEAR-OVER-YEAR. IT BRINGS US TO 60 BILLION FOR THE QUARTER. BUT, EXPENSES. 55% INCREASE THERE. A COUPLE OF ONE-TIME CHARGES. HERE IS THE THING, THE FUNDING FROM THE CORE BUSINESS TO FILL THIS AI RACE IS NOT GOING TO BE ENOUGH AND INVESTORS WANT TO KNOW WHEN WILL WE SEE THAT RETURN ON ITS INVESTMENT. AND WHAT REVENUE LINES ARE ACTUALLY THE FUTURE. WE'VE TALKED ABOUT CLOUD BUSINESS HERE. DIDN'T PROVIDE A LOT OF CLARITY THERE. WE DID NOT GET NAMES, DEALS, FINANCING, TIMELINES. ED: THANK YOU VERY MUCH AND WE WILL STAY JOINING US. WOLF RESEARCH MANAGING DIRECTOR OF GLOBAL INTERNET. I'M TO PICK UP ON WHAT RILEY WAS TALKING ABOUT. ESSENTIALLY SAID WE CAN JUST RENT OUT GP USE BUT THE BEST VALUE ON THE INFRASTRUCTURES TO BUILD A PLAY OR ON TOP OF IT. TO ME THAT SOUNDED LITTLE BIT LIKE THE U.S. BEDROCK. IT SOUNDED A LITTLE BIT LIKE API FOR ENTERPRISE. WHAT WAS YOUR INTERPRETATION? >> ON THAT PARTICULAR COMMENT MY INTERPRETATION WAS THE VALUE IS CERTAINLY IN INTELLIGENCE AND THAT'S WHAT PEOPLE ARE FOCUSED ON. BUT OVER TIME AS THEY MAKE THE MODEL AVAILABLE WHAT IS BUILD ON TOP OF THAT MODEL IS GOING TO BE INCREDIBLY IMPORTANT. SO THEY WILL HAVE TO FLEX THEIR MUSCLE BECAUSE THEY DON'T HAVE COMPETENCY IN THE LARGER ENTERPRISE SIDE OF IT WHICH HE WAS VERY UPFRONT ABOUT. AND QUITE CANDIDLY INVESTORS ARE SKEPTICAL ABOUT. AND THEN, OF THE OTHER SIDE OF IT WAS ALSO WITH THAT THEY HAVE A HUGE S&P BASE AGAINST WHICH WHO THEY CAN LEVERAGE WITH THIS MODEL. BUT THEY WANT TO MAKE THIS MODEL AVAILABLE. THEY WANT TO BE VERTICALLY INTEGRATED AND THEY WANT TO OFFER VALUE TO LARGER ENTERPRISES WHICH THEY NEED TO BUILD THEIR MUSCLE AS WELL AS S&P OVER TIME. ED: THEY KEPT THE CEILING FOR THE YEAR BUT RAISE THE LOW END OF THE RATES TO ONE 30. NOTHING FOR NEXT YEAR. HOW MUCH IS THAT A FACTOR IN THIS MARKET? >> FOR THIS YEAR NOT AS MUCH. IT WAS JUST A NARROWING OF THE GUIDANCE BECAUSE GREATER VISIBILITY. NEXT YEAR'S NUMBERS NOW PEOPLE ARE ANYWHERE FROM 230 TO 260 BILLION DOLLARS WHICH IS A VERY LARGE NUMBER AGAINST THEIR OPERATING CASH FLOW WHICH WILL BE OUR GHIBLI CLOSER TO 200 BILLION. SO THE CONCERN HERE IS THERE IS LIKELY GOING TO BE A NEED FOR A CAPITAL RAISE PERHAPS A 50 TO $100 MILLION CAPITAL RAISE OR MORE PARTNERSHIPS BOTH OF WHICH ARE A CLOUD OVER THE STOCK. ED: THERE HAS BEEN DISCUSSION ABOUT GOING TO THE EQUITY MARKETS, FREE CASH FLOW THE LOWEST LEVEL SINCE 2020 TWO. DOES THAT WORRY YOU? >> ABSOLUTELY. THE BENEFIT THAT META AND OTHER HYPERSCALERS HAVE IS THEY HAVE LARGE OPERATING CASH FLOW. FUNDAMENTALS OF THE BUSINESS IN GENERAL BECAUSE IT IS AN ADVERTISING BUSINESS HIGHER MARGIN THEY CAN GENERATE $200 MILLION IN CASH FLOW SO WITHOUT ANY CAPITAL RAISE NEEDED AT LEAST THEY CAN SPEND THAT AMOUNT OF MONEY FOR A LITTLE WHILE. THERE IS DEMAND CONSTRAINED ENVIRONMENT. AND THEN SHOW THE UPSWING IN FREE CASH FLOW AND EVERYTHING NORMALIZES. I GUESS INVESTORS ARE LOSING PATIENCE BECAUSE THEY DON'T HAVE MUCH TO SHOW FOR IT ESPECIALLY AGAINST DECELERATING ADVERTISING REVENUE AS WE LOOK AT THE BACK HALF OF THIS YEAR. ED: BACK TO TALKING ABOUT MEDA THROUGH THE FINANCIAL METRICS LENS. DID YOU LEARN ANYTHING ABOUT HOW AI IS MAKING IMPROVEMENTS ON THE OUTSIDE ABOUT MEDA AI THROUGH SMART GLASSES. ANYTHING THAT SHOWS THEIR PLAN FOR AI IS GETTING TRACTION IN THE WORLD. SHWETA: THE PLACE WHERE THEY GET CAUGHT CREDIT IN THE ADVERTISING BUSINESS IS IT IS STILL GROWING FOR A BUSINESS THIS SIZE THAT'S GOING TO BE AS BIG WITH THEIR SEARCH REVENUE IS VERY REMARKABLE. AND THEY ARE GROWING IN THE MID TO HIGH 20% RANGE. SO THAT IN ITSELF IS A VERY STRONG GROWTH RATE. THAT MAY NOT BE ENOUGH AGAINST THE AMOUNT OF SPEND THEY ARE DOING. SO WHY IS THAT WITH THE OVERALL MARKET GROWING AT 11 TO 12% AND THEY ARE GROWING MORE THAN DOUBLE. THAT'S BECAUSE OF THE AI INTEGRATIONS THAT'S MAKING THE RECOMMENDATIONS A LOT BETTER. SO THEY DO THINK OF IT IN CREDIT IT'S JUST THEY'RE SPENDING MORE THAN WHAT THEY CAN AFFORD TO SPEND RIGHT NOW. ED: EXPENSES 55 PERCENT, OPERATING MARGINS CONTRACTED YEAR-OVER-YEAR PAID WHAT THEY WOULD SAY IS WE ARE NOT FOR THE $3.6 BILLION IN TWO DIFFERENT ONE-TIME CHARGES THEN YOU WOULD'VE SEEN OPERATING INCOME RISE. DO YOU BUY THAT? SHWETA: I DO. THOSE WERE ONE TIME-ISH. THE HONEST PUSHBACK I HAVE IS THEY ARE NOT IN THE CLEAR WITH THE REGULATORY RISK. THAT THEY FACE FROM U.S. STATES ATTORNEY GENERALS OR EU. I'M NOT SURE HOW ONE TIME-ISH THAT IS IF THE RISK IS ONGOING. MY HOPE IS THEY CAN BRING IT TO A SETTLEMENT. THEY MAKE A LARGE ONE TIME PAYMENT AND THEN THERE IN THE CLEAR. TO THE DEGREE IS A ONE OFF. IT DOES MAKE SENSE BECAUSE THEIR OPERATING BUSINESS IS STILL GROWING AND THEY EXPECT THAT TO GROW ON A FULL YEAR BASIS. THE CHALLENGE IS THE DEPRECIATION SPEND IS 30 TO $40 BILLION WHICH IS RISING FAIRLY RAPIDLY. THAT IS SOMETHING THEY WILL HAVE TO ADDRESS. ED: THANK YOU. WE ARE STICKING WITH EARNINGS LOOKING AT ARM. THIS IS WHAT SHARES LOOK LIKE UP 6% OF THE BACK OF STRONG DATA CENTER ROYALTIES AND CPU DEMAND. THIS IS BLOOMBERG TECH. ED: SAMSUNG POSTED A 250-FOLD SURGE IN CHIP PROFITS IN THE JUNE QUARTER THAT THE MEMORY CRUNCH SHOWED NO SIGNS OF EASING. IN FACT, RISING MEMORY PRICES ARE CREATING A CHALLENGING ENVIRONMENT FOR SAMSUNG’S OWN MOBILE DEVICE OPERATIONS, SOUTH KOREA’S LARGEST COMPANY SAYS IT EXPECTS THE MEMORY SHORTAGES TO WORSEN NEXT YEAR. THE COMMENTS ECHO THOSE MADE BY RIVAL SK HYNIX, AS A.I. GROWTH FUELS DEMAND. STICKING WITH CHIPS, SHARES OF ARM, THIS IS WHAT THEY LOOK LIKE. THE COMPANY REPORTING SLOWING SMARTPHONE ROYALTIES OFFSET IN PART BY DATA CENTER AND C.P.U. DEMAND. STOCKS UP 6%, OFF SESSION HIGHS. LET’S DISCUSS WITH THE HEAD OF TECHNOLOGY HARDWARE AND SEMICONDUCTOR RESEARCH AT ROTHSCHILD & CO. I FIND ARM SO INTERESTING, BECAUSE THEY WILL TELL YOU, WELL, IF UNITS ARE DOING THIS, ROYALTIES ARE DOING THIS. THEY HAVE A VERY DIFFERENT BUSINESS FOR THE FABULOUS CHIP MAKE THERE’S WE’LL TALK ABOUT LATER IN THE PROGRAM. LET’S START WITH YOUR SORT OF MAIN REACTION TO THE PRINT. >> YEAH, THANKS FOR HAVING ME. AT THE END OF THE DAY, OPTICALLY AN IN-LINE PRINT, NOTHING TO GET TOO EXCITED ABOUT, AND ALSO A GUIDANCE THAT, FRANKLY, IS PRETTY PEDESTRIAN. I THINK AS WE LOOK AT THE EARNINGS SEASON TO DATE, EVEN COMPANIES THAT HAVE DELIVERED STELLAR EARNINGS AND REALLY REMARKABLE E.P.S. REVISIONS FOR CONSENSUS, ESTIMATES HAVE REALLY STRUGGLED TO MAKE POSITIVE SHARE PRICE MOVES IN THE FOLLOWING DAYS AND WEEKS. SO THIS WAS FRANKLY PRETTY PEDESTRIAN. I THINK WHEN WE OPENED IT UP AND LOOKED INTO THE DETAIL, THE THINGS THAT REALLY STRUCK US WERE SOME OF THE THEMES THAT HAVE KIND OF BEEN A CHALLENGE FOR THE INVESTMENT THESIS OVER THE LAST COUPLE OF YEARS. THE FIRST ONE, AS YOU POINT OUT, IS ROYALTY GROWTH. THIS IS STILL A COMPANY THAT IS STILL OVERINDEXED TO MOBILE HAND SETS. YOU REFERENCED SAMSUNG THERE. THE MEMORY COSTS INFLATION HARMING THEIR SALES. THAT’S REALLY GOING TO BE A TOPIC IN THE BACK HALF OF THE YEAR. IT’S ALREADY HARMING THEIR ROYALTY REVENUES. IT’S WORSE THAN THEY EXPECTED. THEY THOUGHT IT WAS GOING TO STAY AT THE BOTTOM END OF THE MARKET. THAT’S ACTUALLY STARTING TO DRIFT UP, AFFECTING MID AND HIGH-END PHONES. THAT’S GOING TO BE A TOPIC TONIGHT WITH APPLE AS WELL. AND SO THERE’S SOME LICENSING REVENUE OFFSET TO HELP KIND OF PATCH THE QUARTER AND IS HOLDING THE FISCAL 2027 ESTIMATES I THINK FOR CONSENSUS BROADLY UNCHANGED. BUT IT WASN’T REALLY ANYTHING TO GET EXCITED ABOUT IN THE PRINT, WHETHER IT’S ROYALTIES OR THE A.G.I. C.P.U. OUTLOOK. ED: WELL, THE THING THAT THEY WANTED US TO GET EXCITED ABOUT IS THE DATA CENTER. YOU KNOW, C.P.U. IS A STORY TO MANY AT THE MOMENT. THERE’S MOMENTUM THERE. ABOUT ARM SHOW REAL PENETRATION, REAL MOMENTUM IN THE SEGMENT? >> SO THE ONE-WORD ANSWER IS PROBABLY YES. THE CHALLENGE FOR INVESTORS IS THAT IT’S HIDDEN. IT’S HIDDEN INSIDE THEIR ROYALTY REVENUE DISCLOSURES, WHICH ARE GENERALLY PRETTY OPAQUE. THE DATA CENTER PART OF THAT BUSINESS IS ACTUALLY STILL, EVEN THOUGH IT’S DOUBLING YEAR-ON-YEAR, STILL RELATIVELY SMALL. SO IT STRUGGLES TO MOVE THE NEEDLE, AND THAT’S REALLY THE PROBLEM IN A WORLD WHERE WE’RE TALKING ABOUT HUNDREDS OF BILLIONS OF DOLLARS OF SPEND. IF YOU’RE EARNING 50 CENTS OR A DOLLAR PER CALL, AND MAYBE YOU’RE EARNING SOMEWHERE $180 A CHIP, IT’S REALLY HARD TO GENERATE MEANINGFUL REVENUE THAT’S REALLY GOING TO MOVE THE DIAL. ED: YOU KNOW THE BIG WATCH BEYOND TIM COOK’S FAREWELL CALL. >> RIGHT, IT’S GOING TO BE SUPER INTERESTING. ONE OF THE PECULIARS OF THE LAST QUARTER HAS BEEN THE PRICE RISES AND COSTS INFLATION HAS ACTUALLY HELPED APPLE’S RELATIVE PERFORMANCE. THEY’LL ACTUALLY HAD A REALLY GOOD JUNE QUARTER. ALL EYES ON WHAT THEY DID INTO THE SEPTEMBER QUARTER, STEPPING TO FOLDABLES, HOW DO THEY REFRESH THE APPLE INTELLIGENCE, AS YOU SAY, TIM COOK’S FAREWELL QUARTER, AND THE MAIDEN QUARTER GUIDANCE, WHICH JOHN TURN US IS GOING TO REPORT -- JOHN TERNUS IS GOING TO BE REPORTING ON IN OCTOBER. THE MOMENTUM IS GOOD RELATIVE TO THEIR PEER GROUP, BUT THAT DOESN’T CHANGE THE FACT THAT RISING INFLATION MAKES FOR A PRETTY TRICKY TRADING ENVIRONMENT FOR EVERYONE. ED: AS A CLEAR REMINDER, TIM COOK IS NOT GOING FAR. HE BECOMES EXECUTIVE CHAIR SEPTEMBER 1. BUT IT IS HIS FINAL EARNINGS AS C.E.O. THE HEAD OF TECHNOLOGY AND SEMICONDUCTOR RESEARCH AUTOROUTES CHILD, THANK YOU. WE’RE GOING TO KEEP THE CONVERSATION ON CHIPS GOING WITH THE C.E.O. OF QUALCOMM, LATER IN THE HOUR. AND COMING UP, SPACEX’S STARSHIP BUSINESS MAY FACE A MAJOR ROAD BLOCK, ACCORDING TO FORMER NASA RESEARCHERS AND EXPERTS. THAT STORY IS NEXT. >> IT’S TIME FOR "TALKING TECH." FIRST UP, BLUE OWL’S DATA CENTER FIRM IS SEEKING A $5.9 BILLION LOAN TO FUND ITS LATEST PROJECT IN MELBOURNE, ACCORDING TO SOURCES. THIS COULD BE ONE OF THE LARGEST SUCH FINANCING IN THE SECTOR IN AUSTRALIA. PLUS, THREE FORMER NASA RESEARCHERS AND EXPERTS SAY THE HEAT SHIELD THAT PROTECTS SPACEX’S STARSHIP VEHICLE MAY BE A MAJOR ROAD BLOCK TO DESIGNING A RAPIDLY REUSABLE ROCKET. THE PROTECTIVE TILE SUFFERED A SIGNIFICANT DAMAGE DURING A RECENT TEST FLIGHT, WHICH COULD LEAD TO LENGTHY DOWN TIME BETWEEN FLIGHTS AND CURB ELON MUSK’S AMBITIONS FOR RAPID REUSABILITY. AND DISNEY’S NEW C.E.O. HAS INSTRUCTED HIS LEADERSHIP TEAM TO THINK OF DISNEY+ AS A FRONT DOOR FOR THE COMPANY’S WORLDWIDE STANCE. IT PLANS TO ADD NEW FEATURES TO BETTER COMPETE WITH NETFLIX AND YOUTUBE. IT’S ALSO BRINGING HULU AND ESPN CONTENT ON TO THE PLATFORM, WHILE INVESTING IN LOCAL PROGRAMMING IN INTERNATIONAL MARKETS. ED? ED: THANK YOU, YAHAIRA. COMING UP, WE TALK ABOUT THE SATELLITE STARTUP LATEST FUNDING ROUND AND A BIG VALUATION, $6.8 BILLION. WE’LL HEAD TO PRIVATE MARKETS AND ON TO SPACE. THIS IS WHAT PUBLIC MARKETS LOOK LIKE IN THE TECH SPACE. NASDAQ 100 IS HIGHER, 2.6%. THE SOX IS UP ALMOST 8%. BUT REMEMBER, IT’S COME UP FIVE STRAIGHT DAYS OF LOSSES TOTALING 16% DROP. SO SOME OF THAT IS EARNINGS, SURE, BUT A LOT IS UNDOING THE DECLINE OVER AN EXTENDED PERIOD THAT WE’VE SEEN. THERE’S SO MUCH MORE TO COME, RIGHT? THERE IS THE EARNINGS STORY THAT’S GONE. MICROSOFT IS UP 14%. RIGHT NOW, PRETTY MUCH THE BEST GAIN SINCE 2020. AT ONE POINT, META IS DOWN SIGNIFICANTLY, THE MOST SINCE OCTOBER. APPLE AND AMAZON ARE UP NEXT, TWO VERY DIFFERENT A.I. STORIES, BUT A.I. ALL THE SAME. BEAUTIFUL PICTURES FROM THE BAY AREA, SAN FRANCISCO. THIS IS "BLOOMBERG TECH." ED: WELCOME BACK TO "BLOOMBERG TECH." THE AI BIAS IS BACK, THE NASDAQ 100 UP ABOUT 3%. THE SEMICONDUCTOR INDEX, THE CHIP INDEX, IS UP A LOT. 7.4%. BUT IT HAD BEEN DOWN THE LAST FOUR OR FIVE DAYS PRIOR TO TODAY. MAYBE THERE WAS A BIT OF EVENING OUT. MICROSOFT AND ITS EARNINGS ARE A BIG FACTOR. MICROSOFT IS UP 40%. HAD BEEN HIGHER AND SET FOR ITS BIGGEST JUMP SINCE 2008. THERE ARE MORE EARNINGS TO COME. LET'S TALK ABOUT IT WITH OUR BLOOMBERG EQUITIES REPORTER. THERE IS A LOT GOING ON IN THIS MORNING'S MARKET, EARNINGS ARE A FACTOR, BUT THE RECENT DOWNWARD PRESSURE ON TECHNOLOGY STOCKS, CLEARLY THAT IS AT PLAY ALSO. >> EXACTLY, I WOULD SAY THAT IT'S VERY MUCH THE CASE RIGHT NOW. A COUPLE PEOPLE DESCRIBING THIS AS AN ELASTIC BAND MARKET AND WHEN YOU GET A SNAPBACK IT CAN BE EXTREMELY VOLATILE GOING BACK ON THE OTHER SIDE. THAT SAID, THERE WERE A LOT OF POSITIVES IN MICROSOFT'S RESULTS LAST NIGHT, VERY STRONG CLOUD GROWTH AND ADOPTION OF COPILOT. HAD SOME POSITIVE COMMENTS ON CAPEX WHICH I REALLY THINK THREADED THE NEEDLE BECAUSE THEY CONTINUE TO SPEND IN THE CHIP SPACE. EVENTUALLY WE ARE GOING TO SEE THIS POSITIVE FOR THE CHIP SPACE -- AND POSITIVE FOR MICROSOFT JUSTIFYING ITS OWN STRATEGY. ED: THEN THERE IS TONIGHT WERE AMAZON WILL TALK ABOUT ALL OF THOSE THINGS AND YOU HAVE BEEN THINKING ABOUT APPLE AND HOW THAT FITS INTO THE MARKET AND WHAT WE WILL GET AFTER THE BELL. VERY CURIOUS ABOUT WHAT AMAZON HAS TO SAY ABOUT CAPEX. THERE WAS A LOT OF OPTIMISM THAT ALL THIS SPENDING IS GOING TO PAY OFF AS THEY TALK ABOUT USING AI IN WAREHOUSES AND FOR LOGISTICS AND THINGS LIKE THAT. A VERY CLEAR WAY OF SAYING -- SEEING HOW ALL THIS CAN TRANSLATE TO EFFICIENCY AND IMPROVED PROFITS. AND AWS REMAINS THE LEADER IN CLOUD, SO PEOPLE ARE EXPECTING A GOOD READ, ANOTHER IN THE VEIN OF MICROSOFT AS OPPOSED TO META WHICH HAD A DISAPPOINTING REVENUE FORECAST WHICH MADE IT HARD TO JUSTIFY SPENDING. IT CONTINUES TO SPEND A LOT AND THAT IS WHY YOU SEE THAT STOCK FALL BACK TODAY. ED: I BORROWED YOUR LINED UP ON "SURVEILLANCE," AND SAYING WE ARE CALLING APPLE THE AI SAFETY TRADE AND THAT IS HOW MARKETS TREATED IT. RYAN: IF WE LOOK AT A LOT OF THE MAJOR THEMES IN THE MARKET THIS YEAR AS IT PERTAINS TO TECH, APPLE IS SEPARATE FROM ALL OF THEM. IF YOU ARE CONCERNED ABOUT THE LEVEL OF AI SPENDING, APPLE IS NOT DOING THAT AI SPENDING. IF YOU ARE CONCERNED ABOUT AI DISRUPTING SOFTWARE, APPLE DOESN'T FALL INTO THAT CATEGORY EITHER. THERE ARE SOME CONCERNS PEOPLE HAVE, THE IMPACT OF HIGHER MEMORY PRICES. APPLE IS SO DOMINANT IN THE HARDWARE SPACE THAT IT IS PROBABLY BETTER ABLE TO WHETHER SOME OF THIS THEN SOME OF THE PEERS IN THE HARDWARE SPACE THAT ARE GEARED TOWARD LOWER INCOME CONSUMERS. THEN WE HAVE THE VULNERABLE IPHONE LATER THIS YEAR WHICH IS EXPECTED -- FOLDABLE IPHONE LATER THIS YEAR WHICH IS EXPECTED TO PASS ON COSTS TO CONSUMERS WITHOUT BEING THE STICKER SHOCK WE SEE ELSEWHERE. ED: LET'S SWITCH OVER TO PRIVATE MARKETS WHERE INTEREST IN BACKING SPACE FIRMS PARTICULARLY FOLLOWING THE SPACEX IPO REMAINS VERY HIGH. THE LATEST EXAMPLE, K2 SPACE CLOSE TO 500 MILLION DOLLARS SERIES OF FUNDING. IT BUILDS SATELLITES AND THE VALUATION IS ALSO VERY BIG, ALMOST $7 BILLION. THE COO JOINS US FOR MORE. LET'S START WITH WHAT IS A BIG BACKING OF YOUR COMPANY. ICONIQ IS IN THERE, KLEINER PERKINS, CAPITAL G, THOSE ARE TOP-TIER INVESTORS. WHAT IS THAT THEY THINK THEY SEE IN K2? >> SPACE IS BECOMING AN INFRASTRUCTURE PLAY. YOU ARE SEEING APPLICATIONS LIKE COMMUNICATIONS AND COMPUTE GOING FROM GROUND TO AIR AND SPACE. WE STARTED K2 TO BUILD THE HIGHEST POWER SATELLITES THAT HAVE EVER BEEN LAUNCHED END-INVESTORS SAW THAT WHAT WE HAD BUILT IS SOMETHING DIFFERENT. AND THAT IS FROM THE TECHNICAL PERSPECTIVE AND SOLID REVENUE TO BUILD OFF OF SO WE ARE REALLY EXCITED TO ANNOUNCE THIS, IT'S A BIG ROUND FOR US AND WE ARE EXCITED TO BRING A BUNCH OF THOSE NAMES ON. ED: K2 CAN DO QUITE A LOT WITH 500 MILLION DOLLARS BECAUSE THE WHOLE POINT OF THE DESIGN IS TO PRODUCE VERY FAST AT LOW COST, LOW COST BEING $15 MILLION PER SATELLITE. IS THAT THE PLAY TO GET FUNDING TO MOVE QUICK? KARAN: EXACTLY. THE CAPABILITY WE ARE DELIVERING HISTORICALLY WAS DONE BY A $1 BILLION SATELLITE MADE BY ONE OF THE PRIMES THAT COST $1 BILLION AND TOOK 7-10 YEARS TO PRODUCE. OUR PLAY WAS TAKING DOWN ALL OF THESE HARD ENGINEERING CHALLENGES, FIGURE OUT HOW TO DO THAT IN AN INDUSTRIAL WAY, TURN IT FROM SOMETHING THAT USED TO BE A SCIENCE PROJECT TO SOMETHING MASS PRODUCIBLE. IF WE DO THAT, WEEKENDS -- WE CAN CHANGE I WE ROLL OUT INFRASTRUCTURE LAYERS IN PLACE. ED: IF YOU ARE THE DOMAIN EXPERT IN VERY BIG SATELLITES WITH HIGH POWER REQUIREMENT, DOES SPACEX OR SOMEONE ELSE GIVE YOU A CALL AND SAY, LOOK AT OUR DESIGN FOR ORBITAL DATA CENTER, HELP US? KARAN: YOU KNOW, I THINK PEOPLE SAW THE 20 KILOWATTS SATELLITE FLYING IN ORBIT TODAY AND THEY STARTED TO HEAR ABOUT THE PLANS FOR THE HUNDRED KILOWATTS SATELLITE. WE WILL SAVE IT FOR ANOTHER DAY. IT IS ONE OF THE HIGHEST POWER SATELLITES THAT EVER EXISTED. ALMOST EVERYBODY ELSE HAS BEEN REACHING OUT TO US. GOING HIGH POWER ALLOWS ME TO PUT UP A LOT OF COMPUTE, IT FUNDAMENTALLY CHANGES THE ECONOMICS AND SCALABILITY OF COMPUTE. WE ARE EXCITED TO BE IN THE MIDDLE OF THAT AND WE WILL BE WORKING WITH THE NUMBER OF DIFFERENT PLAYERS AS WE ROLL OUT THAT CAPABILITY. ED: IT HAS BEEN NEARLY FOUR MONTHS SINCE YOU DEPLOYED YOUR FIRST SATELLITE. WHAT HAS BEEN THE LEARNING SINCE THEN? KARAN: WE ARE UNDER 20 DAYS IN AND IT HAS BEEN AMAZING. THE ENTIRE TECH STACK WAS ALL BRAND-NEW, 85% OF THE SATELLITE WAS BUILT IN-HOUSE. WE HAD TO DESIGN IT BECAUSE THE SUBSYSTEMS DID NOT EXIST WITH THIS CAPABILITY SO THIS WAS A MAJOR DE-RISKING MOMENT FOR THE COMPANY. WE HAVE COLLECTED A TREMENDOUS AMOUNT OF DATA ON THE PERFORMANCE OF THE PLATFORM ACROSS DIFFERENT POWER SITUATIONS WITH THE DUMP -- WITH A BUNCH OF DIFFERENT PAYLOADS. ALL OF THAT HAS BEEN PUT INTO OUR BLOCK 2 DESIGN WHICH WILL BE ROLLED OUT NEXT YEAR ACROSS TWO LAUNCHES AS WE SCALE OUT THE COMPANY. ED: YOU HAVE SOME CONTRACTUAL OBLIGATIONS TO THE GOVERNMENT AROUND GOLDEN DOME FOR EXAMPLE. WHAT IS THE PRESSURE OF THAT TO MEET DEADLINES, TO BE ABLE TO PULL IT OFF? KARAN: AT THIS POINT WE HAVE SOLD ABOUT $1 BILLION IN CONTRACTS. WE CROSS THAT MARK A COUPLE OF MONTHS AGO AND A LOT OF IT WAS ON THE BACK OF THE SUCCESSFUL FIRST MISSION. WE HAVE NATIONAL SECURITY CUSTOMERS WHO ARE INCREDIBLY EXCITED ABOUT THIS CAPABILITY AND WHAT IT COULD DO FOR INFRASTRUCTURE AND ARCHITECTURAL PLAYS THEY ARE THINKING ABOUT. HITTING SCHEDULE IS INCREDIBLY IMPORTANT. WE NOW HAVE A TREMENDOUS AMOUNT OF DEMAND. A LOT OF WHAT WE ARE USING THE FUNDRAISING FOR IS TO GO MAKE SURE WE CAN DE-RISK THE SUPPLY CHAIN. DE-RISK THE SUBSYSTEMS MASS PRODUCTION, INCREASE THE FOOTPRINT, AND MAKE SURE WE ARE CONTINUING TO EXECUTE TO SATISFY THE MASSIVE DEMAND WE ARE SEEING. ED: REAL QUICK, YOU'RE LOCKED PROVIDER AND WHAT DOES LAUNCH LOOK LIKE FOR YOU GOING FORWARD? KARAN: THE FIRST, 20 KILOWATTS SATELLITE IS MADE FOR ANY LAUNCH VEHICLE, WE HAVE LAUNCHED ON FALCON 9 AND WE WILL LAUNCH ON OTHER LAUNCHES WITH SPACEX IN THE FUTURE. BEYOND THAT WE WILL USE OTHER PLAYERS BUILDING LAUNCH VEHICLES. IN THE FUTURE, THE 100 KILOWATT IS DESIGNED FOR SUPER HEAVY LAUNCH VEHICLES LIKE STARSHIP. WE ARE EXCITED ABOUT THE NEW LAUNCH VEHICLES COMING ONLINE. WE ARE EXCITED ABOUT WHAT SPACEX IS DOING. WE WANT TO BE ABLE TO TAKE ADVANTAGE OF THE LAUNCH OPTIONS OVER THE NEXT 10 YEARS. ED: K2 SPACE CEO, KARAN KUNJUR. THANK YOU VERY MUCH. QUALCOMM WARNED OF COMPONENT SHORTAGES IN ITS QUARTERLY EARNINGS REPORT. WE DISCUSS ALL OF THAT AND MORE WITH THE CEO. THAT IS NEXT. THIS IS "BLOOMBERG TECH." ♪ BACK TO EARNINGS. QUALCOMM GIVING A WEAK PROFIT FORECAST FOR THE CURRENT QUARTER CITING COMPONENT SHORTAGES, RISING COSTS. THAT IS THE FOCUS ON THE SMARTPHONE MARKET. SHARES DOWN ALMOST 3%. QUALCOMM PRESIDENT AND CEO CRISTIANO AMON JOINS US NOW. THE WAY I THINK ABOUT QUALCOMM'S IT IS ONE OF THE MOST INTERESTING TRANSITION STORIES AND SEMI CONDUCTORS PROBABLY SINCE NVIDIA. THE BUSINESS, SMARTPHONE, IS UNDER PRESSURE. THE MARKET IS FOCUSED ON THAT. LET'S GET IT OUT OF THE WAY. HOW LONG DOES THAT PRESSURE RISE? WHAT IS THE MAIN PART OF THE PRESSURE? PRODUCTION, THE PRICING SIDE? TELL ME WHAT YOU SEE. CRISTIANO: LET'S STEP BACK A LITTLE BIT. WHAT IS HAPPENING WITH THE HANDSET MARKET, THERE ARE UNPRECEDENTED MEMORY PRICES AND SHORTAGES. I THINK THE PRICE INCREASES ARE VERY DRAMATIC AS EVERYBODY KNOWS. YOU ARE SEEING QUALCOMM TALKING AND OTHER COMPANIES TALKING ABOUT IT, YOU SEE APPLE TALKING ABOUT IT. THE MARKET IS DOWN. JUST WHEN WE THINK ABOUT FROM 2026 THROUGH 2027, THE MARKET WILL BE ABOUT -- DOWN ABOUT 20%. THIS IS NOT BECAUSE OF DEMAND FOR PHONES, THERE IS NOT ENOUGH MEMORY, THE PRICES ARE SO HIGH, SO THE UNITS ARE LOWER. CONSUMERS REACT TO THE PRICE. THE MIDDLE TO THE LOW PART OF THE MARKET. THE PREMIUM TIER HAS SOME RESILIENCE, BUT EVEN IN THE PREMIUM TIER IS A MIX. CONSUMERS ARE PREFERRING TO BUY LAST YEAR'S PHONE, THEREBY THE ENTRY PREMIUM. I THINK THAT IS CAUSING THIS CHANGE IN THE MARKET. THERE IS A UNIQUE THING ABOUT QUALCOMM WHICH IS WELL UNDERSTOOD AS APPLE IS COMING OFF THE MODEL AND IT IS COMING OUT FASTER BECAUSE OF THE SUPPLY SITUATION. THAT IS THE SITUATION IN THE SHORT-TERM TERM CAUSING THIS ISSUE. IT CAME OUT IN THE EARNINGS REFLECTED INTO THINGS. THE WEAKNESS ON HANDSETS. WE DID THE FOLLOWING DISCLOSURE. THERE WAS ABOUT $1.50 IN EARNINGS POWER THAT NOW WILL COME BACK TO QUALCOMM ONE HANDSETS NORMALIZE. IT IS THE OVERALL MARKET IS DOWN. IT IS NOT A DEMAND ISSUE. IT IS MEMORY PRICES AND SUPPLY. REFLECTED IN EARNINGS IN TWO PIECES. THE WEAKNESS ON THE GUIDE WHICH IS A MARKET WITH THIS. AND THEN THERE IS GROSS MARGIN. THE GROSS MARGIN IS VERY SIMPLE. WE ARE SLIGHTLY BELOW THE OPERATING MODEL OF THE COMPANY. INPUT COSTS ARE UP. IN A SHORTAGE -- WE SAW THIS FROM THE PANDEMIC -- THE ENTIRE SEMICONDUCTOR INDUSTRY IS AT FULL CAPACITY SO COSTS GO UP. YOU HAVE CONTRACTS, NEW DESIGN CYCLES. THERE IS A MISMATCH IN QUARTERS BETWEEN THE PRICE ADJUSTMENT AND THE CONSTANT THAT CREATES THIS TEMPORARY ISSUE AND SLIGHT DECLINE ON THE GROSS MARGIN. WE WILL GO BACK AS PRICES FLOW TO THE MODEL. WE WILL GO BACK TO THE OPERATING MODEL. THE EXCITING THING ABOUT THE COMPANY IS THE NEW BUSINESS. ED: LET'S TALK ABOUT IT. IN THE PAST WE HAVE CALLED IT DIVERSIFYING. I CALLED A TRANSITION. I READ THE EARNINGS PRESENTATION SITE. YOU SAID BY 2029, THE HANDSET BUSINESS IS ONLY 1/3. OF DATA CENTER? WHAT PUSHES THAT MOST? CRISTIANO: THIS IS A GREAT QUESTION. IF YOU LOOK AT WHAT IS HAPPENING WITH THE COMPANY, EVERYBODY KNOWS ABOUT THIS. THIS APPLE TRANSITION IN A HANDSET. EVERYTHING WE DID TO TRANSFORM THE COMPANY. A COUPLE THINGS ARE DRIVING THIS CHANGE. WE TALK ABOUT FROM FISCAL YEAR 2026 TWO NEXT YEAR GROWTH WILL BE 50%. THE DRIVER IS AUTOMOTIVE. IN THE EARNINGS CALL BE SAID OUR EXIT RATE, WE ARE $1 BILLION HIGHER FOR 2027 THAN WE THOUGHT. IT HAS CONTINUED TO ACCELERATE. WE HAVE MORE ASSISTED DRIVING AND AUTONOMY SILICA. THE BEGINNING OF THE DATA CENTER RAMP. $5 BILLION IN DATA CENTER REVENUE IN FISCAL '27. THE IOT IS STARTING TO GROW. THERE IS ALL THIS CONVERSATION ABOUT OPEN-WEIGHT MODELS, AI ON THE EDGE, IN THIS FISCAL YEAR ALONE WE HAVE $3.5 BILLION OF PIPELINES. ALL THOSE THINGS WILL GO TO THE PROJECTION WE MADE OF $40 BILLION BY FISCAL '29. YOU WILL SEE A 50% YEAR-OVER-YEAR INCREASE WITH ALL THOSE BUSINESSES. THAT IS REALLY THE FUTURE STORY OF PAUL,. ED: THIS IS "BLOOMBERG TECH" LIVE ON BLOOMBERG TELEVISION AND BLOOMBERG RADIO. WE ARE SPEAKING TO QUALCOMM CEO CRISTIANO AMON. YOU LAID OUT A $15 BILLION-PLUS DATA CENTER OPPORTUNITY THROUGH '29. HOW IS THAT GOING? WHAT PROGRESS HAVE YOU MADE? CRISTIANO: IT IS GOING VERY WELL. THE MOST IMPORTANT MILESTONE FOR US RIGHT NOW -- WE BUILT A ROADMAP. THERE ARE PRODUCTS COMING OVER A COUPLE YEARS. WE ARE VERY CLEAR HOW THE ROADMAP IS EVOLVING. THE FIRST SET OF REVENUES, THE MAJORITY OF THE $5 BILLION HAPPENING NEXT YEAR IS CUSTOM WITH TWO HYPERSCALERS. EVERYONE ASKS US WHO THEY ARE, ALL I CAN SAY RIGHT NOW IS ONE IS IN THE U.S. AND ONE IS IN CHINA. WHEN YOU THINK ABOUT THE $15 BILLION, THERE IS AN ACCELERATOR, A NEW HIGH BANDWIDTH TO IMPUTE AND OUR CPU. THE EXCITING THING IS WE WILL HAVE IN A COUPLE QUARTERS -- PROGRESSING WITH THE DEVELOPMENT -- IN A COUPLE QUARTERS WE WILL HAVE SILICON ON THE HBC WHERE PEOPLE WILL BE ABLE TO EVALUATE PERFORMANCE CLAIMS. THAT WILL CREATE EVEN MORE INTEREST IN WHAT WE HAVE WITHIN THE $15 BILLION. ED: THE WAY THAT I LOOK AT QUALCOMM ON THE SMARTPHONE SIDE, ANDROID IN CHINA, AND WHAT I THINK ABOUT THE DATA CENTER, I'M TRYING TO UNDERSTAND WITH THE BIGGEST OPPORTUNITY IS. GEOGRAPHICALLY, CHINA OR U.S.? A SIX OR YOUR OWN PRODUCTS? TRYING TO PUT THEM IN ORDER FOR ME. CRISTIANO: WHEN WE PROVIDED THE $15 BILLION NUMBER FOUR FISCAL '29, IT IS WELL-BALANCED ACROSS CUSTOM A SICK WITH HYPERSCALERS. ESPECIALLY FOR NEW ENTRANTS. YOU SHOULD EXPECT A LOT OF DEVELOPMENT. IT IS WELL-BALANCED ON THE CPU, WHICH WILL START RAMPING IN '28. WHEN WE TALK ABOUT HBC AND THE ACCELERATOR, HBC IS PART OF SOME OF CUSTOM. OUR EXPOSURE TO CHINA WILL BE SIMILAR TO A PERCENTAGE OF DATA CENTER REVENUE TO ALL THE SEMI CONDUCTOR PROVIDERS IN THE BUSINESS TODAY. CHINA IS A BIG MARKET. IT IS A FOUNTAIN OF GDP. WHEN YOU LOOK AT SOME DATA CENTER SPECIALTIES, THEY HAVE EXPOSURE TO CHINA. OURS WILL BE ABOUT THE SAME PERCENTAGE. ED: UNDERSTOOD. SOFTWARE. YOU CLOSED THE ACCUSATION OF MODULAR -- YOU CLOSED THE ACQUISITION OF MODULAR. WHERE DOES IT FIT IN YOUR STRATEGY? CRISTIANO: I'M SUPER HAPPY ABOUT THIS. NOT EVERYBODY UNDERSTANDS IT. I WILL BE ABLE TO BRAG ABOUT IT IN A FEW YEARS IN THE FUTURE. THIS IS A GREAT TEAM. I THINK YOU HAVE AN INCREDIBLE TRACK RECORD. THE FOUNDER AND CEO OF A TRACK RECORD ABOUT WHAT HE HAS DONE IN THE APPLE PROGRAMMING LANGUAGE. THE INVENTOR OF LVM. DEVELOPING THE TESLA AUTOPILOT. THEY PUT ON A MISSION TO CREATE AN OPEN PLATFORM FOR AI THAT SCALES FROM EDGE TO CLOUD. SOME MODERN DEVELOPMENT. WE ARE EXCITED ABOUT WHAT IT WILL DO FOR QUALCOMM AND THE WHOLE INDUSTRY. WE ARE COMMITTED TO PROVIDED OPEN PLATFORM FOR THE WHOLE INDUSTRY. THE INTEREST HAS BEEN INCREDIBLE, INCLUDING FROM OTHER SEMI CONDUCTOR COMPANIES. THE GOOD THING ABOUT ALL OF THIS, ED, NOBODY ASKS ME ANYMORE ABOUT BEING WORRIED ABOUT YOUR SOFTWARE CAPABILITIES IN THE DATA CENTER. THIS IS AN INCREDIBLE ACQUISITION. ED: THE SECOND HALF OF THIS YEAR -- VERY QUICK -- SMARTPHONE DETERIORATES, OR DO YOU SEE SIGNS OF THAT IT IMPROVES AND OVER WHAT TIMELINE? CRISTIANO: WHAT WE STATED BEFORE, THE Q3 QUARTER IS THE BOTTOM FOR CHINA ANDROID. THAT IS STILL THE CASE. WE WILL SEE SEQUENTIAL GROWTH ON ANDROID IN CHINA. HAVING SAID THAT, THE MARKET IS DOWN. IT IS NOT A DEMAND ISSUE. THERE IS DEMANDED TO BUY PHONES. MEMORY PRICES AND SUPPLY. YOU SHOULD EXPECT THE MARKET TO COULD YOU TO BE SUPPRESSED, EVEN THOUGH I THINK WE CALLED THE BOTTOM ON Q3 AND THAT IS STILL THE CASE. ED: QUALCOMM PRESIDENT AND CEO CRISTIANO AMON, BACK ON "BLOOMBERG TECH." THANK YOU. APPLE REPORTS AFTER THE BELL AND IT IS THE END OF AN ERA. THIS WILL BE TIM COOK'S FINAL CALL AS CEO. WHAT IS NEXT UNDER THE INCOMING CEO? MARK IS WITH US NOW. WHERE WOULD YOU LIKE TO START? LET'S START WITH TIM COOK. IT IS A BIG MOMENT IN THE HISTORY OF THIS COMPANY AND THE TRANSITION TO ITS FUTURE. MARK: THIS THIRD QUARTER IS TIM COOK'S FINAL FULL QUARTER IN CHARGE AS CEO OF APPLE. HE WILL REMAIN CEO UNTIL SEPTEMBER 1. HE WILL BE IN CHARGE UNTIL 2/3 OF THE WAY THROUGH THE FOURTH QUARTER. THIS WILL BE HIS FINAL EARNINGS CALL. YOU WILL HEAR JOHN ON THE CALL TODAY. TIM COOK WILL WANT TO REASSURE WALL STREET THAT THINGS WILL STAY STEADY UNDER TERNUS. ANY WAY TO DESCRIBE THIS IN A POSITIVE WAY THEY WILL USE TODAY AS A FORUM FOR THAT. THE PRODUCT PIPELINE IS EXTREMELY STRONG AND WE WILL SEE TERNUS ANNOUNCED A FOLDABLE IPHONE AND NEW WATCHES IN SEPTEMBER. TIM COOK IS HANDING TERNUS A LAYUP. THE NUMBERS TODAY WILL PROBABLY BEAT WALL STREET EXPECTATIONS. THEY ARE LOOKING FOR $109 BILLION. TODAY'S WORD WILL BE TRANSITION. THE OTHER WILL BE CONTINUITY. ED: THE ENVIRONMENT IS TOUGH. PRINCIPALLY, WE TALK ABOUT MEMORY. WHERE WILL THAT SHOW UP? THIS IS A COMPANY THAT HANDLES THE BOTTOM LINE WELL. MARK: THEY RAISE PRICES AT THE EXACT TIME THEY NEED TO RAISE PRICES IN ORDER TO OFFSET THINGS. EVEN IF THE MEMORY SHORTAGE WILL CONTINUE TO CREATE HEADWINDS FOR THEM, THE PRICE INCREASES WILL ERASE THAT WHEN IT COMES TO THEIR MERCHANT. AND GIVEN THE DEMAND FOR THE NEW PRODUCTS IN THE FALL, THE PRICE INCREASES MAY LEAD TO HIGHER REVENUES. MARGINS LIKELY TO STAY STEADY, REVENUES LIKELY TO GO UP. THEY WILL HAVE THEIR CAKE AND EAT IT, TOO. ED: WHICH PRODUCT WILL BE THE MOST IMPORTANT IN THE JOHN TERNUS ERA? MARK: THE IPHONE. I SAID THAT BECAUSE I STRONGLY BELIEVE THE IPHONE WILL REMAIN THE CENTER OF THE APPLE UNIVERSE. TERNUS WILL NEED TO EVOLVE THE IPHONE UNDER AI OVER THE NEXT 15 YEARS. I BELIEVE PEOPLE WILL ALWAYS CARRY SOMETHING IN THEIR POCKET. YOU PROBABLY THOUGHT I WOULD SAY GLASSES BUT I DO BELIEVE THAT WILL REMAIN SECONDARY TO THE PHONE. MAYBE IT IS 1A, 1B, BUT THE PHONE IS THE CASH COW. THIS IS WHERE THEY MAKE $200 BILLION A YEAR. ED: THE $109 BILLION OF REVENUE. BLOOMBERG'S MARK GURMAN. THAT DOES IT FOR THIS EDITION OF "BLOOMBERG TECH." MORE TECH EARNINGS ARE COMING. APPLE, AMAZON, RIVIAN AFTER THE BELL. RECAP THE CONVERSATION OF TODAY SHOW ON THE PART TEST. FIND IT ON THE TERMINAL AND ONLINE. ONE MORE DAY IN A BIG WEEK FOR TEXT. HAVE A GREAT DAY. THIS IS "BLOOMBERG TECH." ♪