Episode summary
Alphabet, Amazon Outpace Meta in AI During Earnings Bonanza | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Scarlet Fu · Guests: Mandeep Singh, Anurag Rana, Sam Fazeli, Christopher Ciolino
Summary
Big tech earnings framed the market’s AI trade as a contest between spending discipline and monetization. The host and guests said Meta was punished because it raised capex without a clear near-term payoff, while Alphabet was rewarded for a smaller increase in spending that still produced strong cloud growth and margin upside. The guests argued that Alphabet looks like the most efficient hyperscaler because it can spread compute across Search, YouTube and cloud, while Meta is still searching for a convincing AI monetization path.
Microsoft and Amazon were also described as strong AI beneficiaries, but with investors focusing on relative growth rather than absolute scale. The guest said Azure is now a roughly $110 billion business growing about 40%, while Amazon Web Services is a $150 billion-plus run-rate business growing 28% and likely accelerating as enterprise demand stays intense. The discussion suggested AI infrastructure spending remains in a super-cycle phase, with demand still outrunning supply.
On healthcare, the guests said Eli Lilly’s raised outlook was driven more by ex-U.S. obesity demand than by its new oral pill, while Merck’s quarter was viewed as a more mixed, less exciting beat. Later, Caterpillar’s results were presented as another AI-linked winner, with record backlog, higher long-term targets and more power-generation demand giving the company unusually strong visibility.
Key takeaways
- The guest said Meta’s stock fell because capex rose faster than the company’s visible AI monetization plan, despite strong core revenue growth.
- The guest argued Alphabet posted the most impressive beat-and-raise because it is the most capex-efficient hyperscaler and is seeing fast cloud growth.
- The guest said Microsoft’s Azure business is around $110 billion and growing about 40%, but investors are comparing it against even faster peers.
- The guest said Amazon Web Services is a $150 billion-plus run-rate business growing 28%, with growth likely to improve as enterprise AI adoption broadens.
- The guest said Eli Lilly’s guidance increase was driven by ex-U.S. sales, while Merck’s beat looked lower quality because it leaned on inventory build and M&A accounting.
Notable quotes
“the market is reacting to the CapEx increase when they don't have much to show unlike their hyperscale cloud peers”
“Alphabet out of all the hyperscalers has the best CapEx efficiency. They are able to use their compute across their apps”
“this definitely has the makings of a super cycle. Almost everyone, you know, on the call yesterday from the management teams talked about how, you know, demand far exceeds supply”
“Over time, that's going to increase and that's where the growth increase is going to be and see a much rapid growth rate”
“the long-term visibility just continues to improve, which we think you know should continue to to drive this upward earnings cycle revision”
How the episode opens
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You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10:00 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app.
Listen on demand wherever you get your podcast or watch us live on YouTube. Yes, I after the close a lot of the big tech names reporting and it's kind of the market's kind of trying to suss out some winners and losers. Google I guess on the plus side, Meta on the downside.
So let's check in with Mandeep Singh. He does all the technology stuff for Bloomberg Intelligence. Mandeep, Meta trading down 10%.
Let's start there. What's the market reacting to? Well, the market is reacting to the CapEx increase when they don't have much to show unlike their hyperscale cloud peers who clearly have seen that top line benefit.
I mean, Meta's top line growth is very strong, you know, 33% at the $200 billion run rate is very impressive. It's just that when you look for that extra line item where AI is categorized separately, they don't have much to show for it and right now the growth in AI is around coding agents. So Meta has a model, they've released it, but it's not something that specializes in coding agent.
They are targeting more of the personalized super intelligence, personal assistant, that kind of a use case and they just haven't given us enough in terms of a timeline when they will start monetizing that use case. So all in all, CapEx increase tied to memory components, not really tied to additional capacity, it was enough to cause this, you know, 10% drawdown in the stock, but overall fundamentals were still strong when they reported the quarter for the core business.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai capex
- tech earnings
- cloud spending
- data centers
- pharma earnings
Companies and tickers mentioned
- META
- GOOGL
- GOOG
- MSFT
- AMZN
- LLY
- MRK
- CAT
- Meta Platforms
- Alphabet
- Microsoft
- Amazon.com
- Eli Lilly
- Merck & Co.
- Caterpillar
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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