Closing Bell - Alphabet Raises Capex Bar; What’s next for Software? 2/4/26

Episode Date: February 4, 2026

A busy earnings session puts Big Tech and software squarely in the spotlight. Alphabet headlines the night. Qualcomm, ARM, and Snap also report, adding fresh signals on chips, mobile demand, and digital advertising. Ben Reitzes, Managing Director at Melius Research, breaks down the broader software and tech landscape. Citizens’ Andrew Boone reacts to Alphabet’s results and huge capex outlook. Market positioning and investor flows discussion with Sonali Basak of iCapital and Steve Sosnick of Interactive Brokers. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bell is bringing an end to the trading day at the NYSC. Radiant Group ringing the bell and at the NASDAQ, deep blue sports and entertainment. Welcome to closing bell overtime. Live from Studio B at the NASDAQ market site. I'm Melissa Lee, along with Mike Santoli. Another interesting day for the markets. The Dow jumping at one point getting very close to an all-time high, closing just short of a record high.

But the S&P 500 was down, and the NASDAQ hit hard once again by a decline in software stocks. More in the market straight ahead. We also have another busy hour of earnings coming up, including Google, of course. Will its results and commentary slow the software slide or maybe make it worse? We're also waiting for Qualcomm, Arm, Snap, and several others. But let's start with Simomodi with more color on today's market action. Well, my worries around the advancement of AI continue to send software stocks lower the IGV software ETF, which we've been talking about throughout the day, recording its seventh day of losses, down 15% during that time period. We've been hearing that hedge funds have been increasing their short bets and separately short, short,

sellers have already made about $24 billion in software this year. That's according to data from S3 partners. Now, today's biggest losers, App Loven, Cypher Mining following a debt deal and Palantir giving back its big gains tied to earnings. We did see some buying in names that have underperformed as of late, Adobe Workday, Salesforce, and Tyler Technologies following a $1 billion stock buyback. That's a positive sign, especially if we see other companies follow suit. Now, within large caps, Apple posting notable gains. And now, just just about 3% away from its recent high. Amazon, Google, pulling back ahead of earnings,

chip stocks posting their biggest one-day drop since October following AMD's AI Demand Outlook, which really failed to impress the street. Bank of America remaining bullish, upping its price target on that stock to $280 from $260. Lastly, the AI industrial names trading down today, Caterpillar on some insider selling. We saw GE Vernova closed down over 4%.

All right. Seema, thank you very much. Sima Modi. what'd you make in the market action? Just violent internal shifts back and forth. Now, if you wanted to play the software destruction by saying software over semis for a trade, it actually worked today because semis are down 4%. Also, software finished like 3% off its lows.

Besides that, though, it's much more just flowing from, you know, tech into old economy-type stocks, value overgrowth. I think there's limits to how far that can run. Value doesn't look cheap right now. It's pricing in a pretty good re-acceleration. We're also five weeks into the year, the S&P is like barely moved, and the VIX is at 19. So maybe we're gearing up for a little more broad volatility. Qualcomm earnings are out.

We want to get to Christina Parts and Nevelas with those numbers. Christina. Melissa, Qualcomm did beat on the top and bottom line posting of just an EPS of $3.50 on revenues of $12. Sorry, $12.25 billion. The QCT division, which encompasses hardware chips and software, beat expectations, as did their IP business. But you're seeing shares down $6.5 billion. That's because the Q2 guide fell short and memory is to blame. Q2 revenue and EPS had the guidance ranges that fell entirely below consensus.

I was able to catch up with Qualcomm CEO who said, quote, memory is going to define the size of the mobile market. Foemakers are just adjusting purchases and inventory based on memory availability and pricing and smaller manufacturers, especially in China, are going to be impacted by the ability to secure memory. There is a small silver lining though. is concentrated in premium tier handsets, where the CEO says demand has been, quote, very, very strong, both for Apple modems and within the Android ecosystem.

The theory is premium consumers can absorb higher memory prices better than the mass markets. Auto as well as internet of things also continue to grow, which bodes well for diversification, but you could see the guide right now is really what's hurting shares down 7 percent, guys. All right, Christina, thanks. Christina Parts Nebless. Alphabet earnings are out as well. McKenzie Sagalos has got those, Mac. Hey, Mel. So shares down more than 6% even though we've got a beat on the top and bottom line.

Adjusted EPS coming in at 282 versus the 263. The street is expecting to see. Revenue also beat at $113.8 billion versus a $111.4 billion estimate. I've also got a cloud revenue number for you there. It's a beat there, $17.7 billion versus $16.18 billion. This is what we were really looking at in the quarter. CapEx spend has been up to $93 billion last quarter. We're going to see what that number is now, but they've been really going big on their cloud business, very much an underdog to Amazon and to Microsoft.

I'm going to keep digging into these numbers. So share is still about 5.5% lower. See what's dragging down sentiment. Back to you guys. All right, Mac, thanks. Mack, thanks. Mackenzie Segalos with those numbers. At first glance, it does look like the cloud quarter on quarter was an acceleration there.

so that is a positive thing. But obviously, there's more to this report here with the stock down. It did seem as if, you know, the whisper of the buy side looking for 40% growth, well, who knows exactly what the real mental bogey was when the stock's been such an outperformer. Initial reflex is, you know, down a bit, giving back what's been like a 6% year-to-date game. Yep. Let's get to our next guess here. Software stocks continuing to face pressure, as we mentioned before, the IGV down more than 20% year-to-date.

It is more than 27% off its most recent higher. Next guest says AI can be a way. win for some of these businesses, but that doesn't mean all the software stocks will benefit. Melius Research, Head of Technology Research, Ben, Reitzis, joins us now. Ben, great to have you with us. Hey, Melissa, great to be here. So it's interesting because at some point, these are going to be values in your mind. At what point is that? Have we reached that point and passed it? Actually, where are we in terms of the fundamental analysis of the decline? Well, you know, it's kind of funny. We've been saying AI is going to eat software for

a long time, a couple years now. And today actually was the day where SaaS really popped and a lot of the momentum stuff like chips and the pipes, the infrastructure software names all sold off. So actually today, SaaS got a bid. It really has just gotten overblown to, on a near-term basis. These companies are probably not going to really miss numbers this quarter and maybe even the next. But over the long term, SaaS is not out of the woods. They had a great day today. And we actually favor a lot of the names that sold off today and think it's a buying opportunity, whether that's in chip land or probably in the infrastructure software space.

Art, do you think we'll actually see guide downs at some point very soon in the next quarter or two based on what AI is doing to SaaS businesses? Or is this just the existential fear that is somewhere farther away off, but still out there? I would be surprised if we saw it right away, like meaning first half of this calendar year, but I think over the long term, yeah, AI is going to do something. See, the key here is, and we wrote about this today, is that the market in SaaS was like had a disruption where things went to subscription, you know, maybe 10 to 15 years ago. And now it needs to move to consumption.

And that's going to be really tough for the SaaS companies at some point. Agents consume a lot of compute. they have outcomes. They happen in the background. And it will eventually mean more consumption models, which is probably going to be a little hairy for the SaaS companies over the long term. At some point, they've got to bite the bullet and sell more consumption. Right. Ben, stay right there. We want to go back to McKenzie Sagalas. Alphabet shares are actually higher right now by about 2%. Mack, what's the latest? Okay, so let's look at the bright spots first, and then I'll go to some of the pressure points.

So in terms of Google search ad revenue, that segment came in at $63.07 billion. That's a beat versus the $61.47 billion expected. This is really a key read on both the ad market and whether the shift to generative AI has been cannibalizing, really the company's revenue engine. So that was a promising sign there. Cloud revenue was up 48% year over year. Another good sign, justifying backlog and a lot of the spend that they've been putting in on the CAPEX front. And speaking of CAPX Target for fiscal year 2026, they're looking at $175 to $185 billion. It was an upward part of the range was $93 billion as of last quarter.

So this is a huge adjustment there. We can dig into those numbers in a minute. Now, the two pressure points where we're seeing misses here, Q4 YouTube revenue, light, $11.3 billion versus $11.84 billion expected. And I mean, this is despite the fact that YouTube has really become. the top player in the streaming industry overtaking Netflix. And then the other category here, this is a smaller one. There are other bets revenue. But this is where Waymo lives, which just closed around, valuing it at $126 billion. That was light, $370 million in the quarter versus

$463 million expected. I'll keep digging into this, but those shares now 1.5% higher. Yep, 2% higher as we speak. Mack, thanks. Mackenzie Sagalus. Want to go back to Ben Wrights as familiar. Yeah, Ben, you know, we have this number that Alphabet just put out there, $175 to $185 billion and expected CAPEX this year. You know, you had some of the sell sites saying, oh, we maybe expect 125 plus or something like that. Here the market seems to be willing to swallow that. My question to you is, we're talking about this in terms of dollar expenditures. The cost of this stuff keeps going up. Are we getting as much for the money in terms of building of capacity? How much, you know, we actually going to have to scrutinize these numbers in terms of what is going to be delivered in terms of computing power?

Mike, I'm going to almost ignore the question because that is the most incredible CAPX number. You have Broadcom, a lot of companies that sold off today in the Google cohort of CAPX. That is an incredible number. We are laughing because that number is so good. for the Google cohort. And a lot of those stocks that sold off today are probably being scooped up as I'm speaking. I'm actually floored by that KAPX.

I want to hear about it. It is showing that Google's really going for it on AI. And sorry, I'm pivoting your question. But this is all, this is all anybody cares about. To your point, Broadcom is up like 5%. Yeah, it should be. It should be up a lot more than that, a lot more. And I'll tell you the whole cohort there.

That is an amazing number. They're really going for it in compute. And it's probably good for Nvidia too because they're going to spread the love, not just their own TPU, but also to Nvidia. And it really shows that there's probably momentum with Gemini, and they see a lot of good things ahead. It will crush the free cash flow. So this stock is going to look very expensive on free cash flow.

But as long as you're beating revenue and guiding up, generally investors forgive. When you miss and then you whiff cash flow, that's when there's, you know, a problem. And so we'll have to see how people digest that. Does this underscore the notion that Gemini is in the lead? We don't, I don't know. I got to get on the call, guys. But, you know, what's going to matter? And, you know, I'm talking to you guys, is the MAU number.

They gave a 650 million user number 90 days ago. We have to see where that number is on the call unless they already said it. And we prefer they move that to weekly users, so it's more on par with OpenAI. And that'll be a key disclosure. And then we also want to see what they say about OPEX going forward for the bottom line leverage. We want to make sure that some of these companies get hit if the OPEX is really much higher than expected because it shows how much you have to invest in AI. But that CAP-X number has us kind of smiling and laughing

because we were a little worried about some things today. And I don't think you have to worry too much when you see Google spending that much in CAP-X. Yeah, it is a stunning number. I'm out on the chip side. I mean on the chip side. Yeah, yeah, absolutely. We have Nvidia as well as Broadcom higher in the after hours.

Ben. Ben, great to see you. Thank you. Ben Wrightsist. Yeah, great to see you. Thanks. Arm holdings meantime, those earnings are out. Christina's got the numbers. Christina. It's another case of where the guide just isn't enough.

We're seeing an EPS and a revenue beat for the third quarter, so earnings per share, 43 cents on revenues of $1.24 billion. Ben just talked about, you know, if they guide up, investors will forgive. Well, it seems like that's not the case right now, because shares are down 7%, and Arm did guide a little higher. Q4 EPS, the midpoint was 58 cents. The street wanted 57 cents, so really only a one cent difference. Q4 revenue guide, a 1.4,000.

$7 billion. The street was at $1.44 billion. There is a 19-page shareholder letter. I was trying to skim right now in that shareholder letter. They said there's strong momentum for AI across every layer of the AI stack from edge to cloud. They said they're going to be separating their business into edge AI, which is smartphones, IoT, physical AI, so auto and robotics, and then cloud AI. And then one line stood out.

They said that, you know, with AI workloads are constantly running, especially with agentic AI. And they're going to be power constrained. They're arguing that's where CPUs will be in top demand. These are central processing units that ARM specializes in, that Intel specializes in, that AMD specializes in. But nonetheless, really, it's another story of just the guide not being high enough for this market shares down 8.5% guys. Christina, thanks. Christina Parts and Avalis. Do not miss a first on CNBC interview with ARM's CEO. That is tomorrow. 9.45 AM on Squawk on the street. Meantime, snap results. Those are out as well. Julie Borsons got those. Julia. Hey, that's right. Snap revenues of $1.72 billion, a hair ahead of estimates. The company

reporting three cents and earnings per share that's not comparable to analyst estimates, but the company's adjusted EBAA of $358 million as well ahead of estimates of $300 million. The company did guide to first quarter revenue and a range below analyst estimates guiding to adjusted EBITDA in a range of $170 million to $190 million. That means, midpoint just ahead of the analyst's consensus. You see shares now down about one and a half percent. The company's daily active users declined more than expected to 474 million, which the company says reflects in part their decision to substantially reduce marketing investments to focus more on profitable growth. CEO Evan Spiegel saying improving average revenue per user through more

direct monetization of the core products remains a key priority. Now, the company also announced in additional $500 million stock repurchase program. Guys, back over to you. All right, Julia, thanks, Julia Borson. Want to get back to Alphabet shares. We're tracking those, of course, in the after our session. It's a stunning number in terms of the CAPEX. It was a very solid quarter across the board, beats pretty much on every metric. But the CAPEX really stands out. I mean, Ben was just saying he's laughing. He's laughing because it's doubling the last CAPX number that they issued here. I mean, 175 to 185 billion, that's the new number, $93 billion was given last quarter.

It's $50 billion more than we thought an hour ago was going to be going into all the hardware companies, right? This is an annual number. And you're seeing basically the food chain get a bit on that. Microsoft's actually backed off just a little bit. I mean, it barely bounced today. So clearly Microsoft's still the proxy for the other side of things, the Open AI economy. So we'll see if this kind of recharges that sort of chip, you know, memory type of trade that

was in place for a while. now, market's really tolerant. Look, arguably, Alphabet's got an under-leverage balance sheet. I mean, it's not like they have a problem meeting these obligations. And maybe it means they're going in for the kill, and they have that much of a head start. We'll see. Yeah, it's bouncing around a little bit. It is lower by just over a percent. You also have to wonder if these numbers, the KAPX number, sort of puts a little bit more fire under the whole software is dead narrative, because if AI is really that strong, where they're investing so heavily into Gemini and, you know, it's cloud business, et cetera, then.

Yeah, they seem to think it's just kind of like the brute force of the computing power and the training is going to get them where they need to go. Of course, we'll continue going through these numbers, down 2% right now in shares of alphabet. We do want to get to Elf Beauty. Those earnings are out as well. The company reporting a huge earnings per share beat. $1.24 versus a 72 cent estimate revenue coming in at $490 million. That's compared to expectations of $460 million, fueled in part by its acquisition of Haley Bieber's road brand. That deal, a big reason the cosmetics maker is also raising. its full year guidance. That stock is, wow, up 16 and a half percent. We mentioned the moves in

alphabet, but of course, that ecosystem, as you mentioned, the hardware ecosystem is catching a bend in the after-hour session. Broadcom in particular, right? So that's the side of the sort of AI chip supply area that should be the biggest beneficiary. So we'll see if that carries through tomorrow. Comey at much more analyst's reaction to the Google results. You're watching closing me up We're live in the NASCAR market site. Back right after this. Welcome back. Let's get another check on Alphabet shares. They have been bouncing around above and below the flat line as investors continue to digest the latest quarter out moments ago.

Invidia and Broadcom moving higher after Alphabet announcing a huge CAPX forecast for 2026. Joining us now is Andrew Boone. Citizens JMP analyst. Andrew talk about this CAPX plan, where it sits relative to your expectations and what it tells you. about Google's intentions here. Yeah, I mean, we're surprised as well in terms of the intensity for CAP-X, but if you look at what they just put up in the quarter,

cloud, I'm looking at my model, accelerated 14% versus 3Q. You'd had Microsoft talk about what would have been 40% growth. We expect Amazon to report accelerated growth for AWS tomorrow. I think the big picture is just the demand for AI just seems unconstrained at this point and that everyone is supply constrained.

And so Google has, trying to get ahead of that with what appears to be just a pretty large increase in terms of the expectation for CapEx. What would you want to hear from the company in terms of what they're seeing right now in terms of AI returns? In other words, how are they monetizing things like Gemini Search Summaries and all the rest of it? Or is it just a matter of, you know, they obviously see the opening to spend this heavily and eventually make it back? Yeah, I mean, I think we're seeing some of that within their search business. They talked about this last quarter and we'll get more details when the call starts shortly. But I fully expect query growth to accelerate again. They talked

about 750 million users now for Gemini. That's up 100 million quarter per quarter. Basically, the usage of AI tools on Google is leading to better search results. And you're seeing that. Search accelerated two points in terms of the quarter. We'll see what happens when they start to ramp ads in terms of later this year. But you see. start to think about what is the opportunity for search, search is getting better with AI, and Google is collecting more ad revenue with that. And then within cloud, I think Google is taking share within the hyperscalar market. They're going to be the fastest growing cloud provider in terms of 4Q. And so they're spending right into that. And so I think the ROI is there,

and you're hearing that from the end market as well. And so Google's just leaning in where they have an advantage here. Andrew, I'm curious if you really, want the company to spend that much more on CapEx? Or if the stock reaction would have been actually more positive if it had kept that CapEx number firm, but still be it on all these metrics, saying that demand and all the monetization metrics are increasing? I mean, I'm a big believer that AI is only going to get better on a go-forward basis, and it's only to get more deeply and grand across more areas of our economy and companies that I cover. And the only way to do that is to spend billions more?

Well, I think the question behind your question is, hey, is AI demand persistent, right? Are you going to actually get multiple years of returns in terms of this CAPEX? I think so. And that's kind of what I'm saying there. We'll see, of course, right? Like, you can't look around the corner and see what the future is for AI. But man, it seems to be helping a ton of businesses do more and create new services that are going to be unmanageable just three, four, five years ago. You mentioned that AI is making Google search better, but the bare case, not more than a year ago on the search business with AI was, well, it allows people to kind of get to a shortcut for the answer as opposed to having to go directly to paid links and things like that. So what's actually happening? I think that's true, because I do think that it's cutting off what is publishers in the open web more broadly. I think I saw a stat that 80% of what is AI overviews now have no click associated with it. Historically, Google was at 50%. And so you are seeing Google consume more of the web. But I think that's my bigger picture point, is that if I think about what Google is now offering to customers,

they're doing more of the actual search themselves versus relying on publishers. And so that should open up more of the search market and enable them to be able to capture more intent, more advertising, more overall spent from the market. And I think that's a positive. Andrew, the market message in terms of the reaction to that increased spend number is you see a bumps higher in shares of Broadcom as well as NVIDIA. Is that necessarily the right message that the money will be spent towards chips? I mean, Google has its own TPUs. They could be spending on all sorts of other things. What's your interpretation on where that extra CAPEX goes?

I mean, the number that big, I think everyone benefits. We'll see what happens in terms of what the split is for NVIDIA versus TPUs versus anything else. But with a KAPX number that size, the entire ecosystem of AI just got a ringing endorsement from Google. Obviously, the fundamental momentum is there. Where does it bring you with regard to the stock, which, of course, came in with a pretty premium valuation relative to its history and its peers? Yeah, I mean, we're most focused on cloud and search, and both of those numbers. came in better than our expectations. YouTube bounces around and it is what it is.

They're lapping what is a political quarter in terms of last year. And so I kind of give them a pass in terms of the missed there. My guess is, and again, we haven't finalized our model yet, but my guess is that numbers go higher in terms of if I think about 26 and 27. Gotcha. Andrew, great to have your way and thank you. Thank you, guys. All right.

So far this year, tech is the worst sector in the east. S&P 500. And the stable staples are near the top, up 12%. Coming up, we'll take a closer look at the rotation within the market. And we'll also dig into the growing split between the two obesity drug leaders, Lilly jumping after results, Novo Nordisk sinking once again. Overtime, overtime will be right back. Welcome back to overtime. Take a look at chairs of workday falling after hours. As a company said it would reduce its workforce by 2%. As a result, the company estimates it will incur $135 million in charges. The company also reaffirming. its previous full year guidance.

Well, despite a down day and what has been a down week so far, we did see 87 new highs on the S&P 500 today and a third of them on the third of them on the Dow, including several consumer staples names, Walmart and Coke, both at all-time records. Pepsi and Hershey getting back to levels not seen since late 2024. Yeah. In fact, Walmart is like about 40 times earnings. It's wild. It's actually become a bit of a buying panic there.

We can dig a little deeper into Staples and the relationship with more consumer cyclicals. Here's the equal-weighted consumer discretionary relative to equal-weighted consumer staples. On a one-year basis, now Staples have caught up. Now, obviously, they've been a long-time laggards. Maybe that's a good thing in the broadening of the market. But it also shows maybe there's a little bit less confidence in the power of the consumer going into this year, even though, you know, everyone expects a little bit of a pickup. And it parallels that, you know, the more volatile, higher beta stocks have obviously been pounded

while, you know, defensive and stable ones are being picked up. We'll see if that's anything more than just mechanical rotation. Well, an interesting split developing between the two leaders in the obesity drug race, Eli Lilly and Novo Nordisk. Novo down 6% today and 20% so far this week on sales concerns. But the company's CEO, Mike Duster, telling Jim Kramer he is optimistic due to the early success of its Wagovi pill. It has been probably one of the best, if not the best, pharma launches, albeit on a short period of one month. We have now on a weekly basis 50,000 prescriptions coming in.

And that actually translates to 170,000 Americans are on the pill in four weeks time. Meanwhile, Eli Lilly jumping 10% getting its market value back above a trillion dollars. And according to CEO David Ricks, the company is also part of another exclusive club. Q4 margins were 47% operating margin. and we're growing over 40%. There's only a couple of companies in the entire S&P 500 with 40% top line and 40% margin.

We're one of them. NVIDIA is another one, for instance. Here with more on why Lilly is soaring. Novo sinking, Annika, Kim Constantino. Anika. That's right, Melissa. So the news here today is that Lilly is solidifying its dominance

in the weight loss drug market. And so Lily posted an outlook that Blue Pass estimates on strong demand for Zepbound, as well as Minjarro. And Lilly said it sees sales growing by around 25% this year. On demand for those products, Medicare coverage coming online for obesity drugs for the very first time, as well as the upcoming launch of its obesity pill or for Glypron in Q2, pending FDA approval, of course.

And so Lily said these factors should really help the companies sort of offset the pricing pressures it's seeing after the deal it struck with President Donald Trump in November. And this is a really stark contrast from Nova Nordisk. You know, Novo yesterday said it expects sales to decline by as much as 30. 13% this year. And so Novo pointed to the same pricing pressure as Lilly did after the Trump deal. But the big difference here between the two companies is the fact that Lily is just seeing more demand for its drugs here. And when I talked to Leering Partners analyst David Risinger, he did say that this is partly because Lily simply has more effective injections than Novos does. And also it's just more preferred at this point by doctors as well as patients.

So that's really what's driving uptake here for Lily and market share here. All right, Annika, thank you. Annika, Kim Constantino, also in the world where a loss of exclusivity weighs, that is a factor in Novo's decline in yesterday's session. But Lilly has a much broader pipeline than just obesity and insulin. It's got towels, Jardians. Those things were bright spots in the quarter as well. Exactly. And I guess pushing a trillion or did it cross a trillion?

Cross, yep, back above a trillion. Time now for a CNBC News update with Kate Rooney. Hey, Kate. Hey, there, Mel. The Supreme Court is allowing California to use a new electoral map designed to give Democrats, five more congressional seats. The High Court denied the California Republican Party's request to block that map, which was endorsed by voters last year.

California redrew the map in response to a similar effort in Texas aimed at giving the GOP five more House seats. In December, the Supreme Court cleared the way for Texas to proceed with its map. Iran's foreign minister, meanwhile, says nuclear talks with the U.S. will be held Friday in Amman's capital. A U.S. official confirmed the news to Reuters. It does come after President Trump said in an exceptional. exclusive interview with NBC that Iran should be very worried about rising tensions with the U.S. Amid, rather.

And a federal judge will hear arguments on Friday in New York and New Jersey's emergency request to force the federal government to restore funding for construction of the Hudson River Rail Tunnel. The two states warn construction on the $16 billion project will be paused that day if the freeze is not lifted, guys. All right, Kate, thanks. Kate Rune. Check out shares of App Lod. Down 16% today, down 40% so far this year. This is a major winner last year's at 11, along with many other software names, A Value or a Value Trap.

And here's a look at some stocks hitting multi-year lows, Netflix, Boston Scientific and Progressive at 2024 lows. Netflix and Progressive rebounding a bit midday. And PayPal continue its decline hitting the lowest level since 2017. Overtime. Be right back. Welcome back to closing bell overtime. Live from the NASAC market site, a split market today. The Dowell, Closing Higher.

500 with a small loss. But the NASAC hit hard again, down 1.5% led lower by software stocks. Alphabet reporting results this hour, beating on earnings by 19 cents a share and a couple billion in revenue. Cloud revenue beat, but YouTube ads were short of the estimate. The eye-popping number has 175 to 185 billion dollars in CAPX in 2026. It hopes for continued spending, helping some of the chip names, Nvidia and Broadcom, both moving higher in the back of that new CAPX number. But two chip names, which reported after the bell are getting hit hard. Qualcomm lower, despite a beat on earnings and revenue. Arm also lower its results in guidance, all better than expected, but by narrow margins. Well, investors hitting the jackpot with casino stocks today, Contessa Brewer explains why. Hey, Contessa.

Look, Melissa, this is really driven by MGM. BetMGM gave an earnings update today, which beat analysts' expectations. It issued some impressive 2026 guidance for the gambling operation, anticipating 13% revenue growth this year and 48% EBIT of growth. That alone would have been enough to boost the stock of co-owners, MGM, and Entain. And you can see it for sure did MGM's up 8%. Antain was up more than 10%. Analysts, though, were surprised to get their fourth quarter financials for parent company, MGM. It was inadvertently attached to the bet MGM release.

And MGM was supposed to announce Wednesday results, or next Wednesday they were supposed to announce results, whatever. The results were better than expected. 4.6 billion dollars in revenue for MGM, EBITA better in Las Vegas with 735 million, much better than expected in Macau with 332 million dollars. That upside surprise also lifted shares not only of MGM, but Caesars, which has a big operation on the Las Vegas Strip and win as well. You can see Caesars up. Almost 7% went up, four and a half percent. Mike? Yeah, I guess reinforcing some of the enthusiasm As a reason around travel and leisure, which has been one of the stronger parts of the market. Contessa, thank you.

Well, software had another brutal day as investors continue to fret over the impact from AI. The IGV software ETF is down 13% in a week. Some of its components, including Unity, App Loven, and Circle have lost more than a quarter of their value in just five sessions. So when does this selling lead to a buying opportunity? Joining us now are Steve Sosnik from Interactive Brokers. He is looking at how retail investors are playing the space. And Shanali Bassack from I Capital is here to tell us whether opportunities are starting to emerge. So, Shanali, part of this is, hey, we wanted a broader market.

We wanted a rotation away from growth into value in cyclicals. This, though, seemed more than that. Obviously, there's panic about disruption. Does it rise to the level of where you should start to believe that it's time to be a contrarian? You know, it's interesting that you ask that we are starting to get calls from clients looking for notes that are tied to this trade. certainly looking at everything kind of being thrown out with the bath water here. You even look at the underlying components of the ETFs themselves, and you can see, well, wait a minute, not everything in these buckets are going to be impacted by AI in the same way.

And by the way, if you look at the ETFs, actually there's Bitcoin miners in there too. So throw crypto into all of that. So certainly people are looking to pick at the trade. I would say that there's a lot that's been sold out, including in private markets, tied to the trade. and there are software players, particularly the incumbents, that will win at the end that are worth looking at soon, if not now. I actually think that it's an interesting feedback loop that's going on. You mentioned the private capital because part of it is software used to feel like it had a valuation floor because they were candidates to be taken private.

And now you have private capital that's overexposed to software that is in no position to be doing any buying. But it's interesting. We have been talking to loads of managers in the last couple of months, actually. So this is not a new problem. It's not something that people didn't see coming. You might have seen the reports about Apollo, for example, recently pulling back exposure to the space. But equally, we have a lot of managers that have invested in the space trying to pick the winners in software that would win off of AI. You look at some of the biggest privately held firms, data bricks, right?

Is perhaps the greatest example of this. There are going to be winners in the end. See, the retail investor has been trained and has gone in and bought the dips. consistently, are they doing the same here for software, for these individual plays that Chenali was mentioning? You're right, Melissa. It's almost Pavlovian. There's a dip. It has to be bought. We're not actually seeing them race into software stocks. One big exception, Microsoft, if you still want to consider it a software stock. We had buying in that name that I've really never seen before on that big 10% drawdown. And then it continued as the stock continued

to have further drawdowns, we saw continued buying. Oracle, to the extent you see that as a software stock, we saw that, but we're not seeing them really come in for like CRM and some of these other names. You know, to me, this is sort of the flip side of the AI trade, right? Because everybody was so excited about how AI was going to advance the bottom lines of software companies and really help them out. But then all of a sudden it was like, wait a minute, if they're disruptors, who are they disrupting? Oh, wait, this is the group that's getting disrupted. And I do think that we're not seeing our customers fly back into that because of that reason. So there is always reflexive dip buying, but not in these names to that extent.

Is this specific to software that retail's not going in and buying the dip? Are you seeing in other trades that haven't flushed as well? Like silver comes to mind. I mean, are they sort of hanging back and not doing the buy the dip right now? They bought plenty of silver on that dip. So silver was, silver in Microsoft actually moved past Tesla and Nvidia to be the most active stocks in our platform, SLV. They also bought AGQ, which is the triple levered silver, because if a 35% fall in silver is not enough for you, why not buy something that fell 70%. So we are seeing that kind of activity. They haven't gone away from dip buying, but they just have, they just, software hasn't captivated them in the same way.

Shannali, I mean, just more broadly, there have been times in the past couple of years when AI was kind of the only theme that there was a lot of excitement about, and it was covering up for a lot underperformance in some economically cyclical areas. We have the flip side this year. Is this a rotation that you feel can last for a little while? I mean, do we have fundamental backing for that? It's so exciting. You look at the broadening of the market and you think it's the healthiest thing you've seen all day. And on one hand, it is upsetting to see, for example, look at Alphabet. Today came out tens of billions of dollars of more in spend. Will that kind of thing increase sentiment in the tech trade? It hasn't been as of late. But every

else, look at the financial sector. For example, of the S&P 500, it's one of the worst performing sectors. Does that make sense to you, based on what we're seeing in the broader economy? We're looking at what we're calling a reflationary environment right now. Growth has maintained strong. The labor market is stabilizing. Interest rates may or may not drop as much as anybody expects. And so in that environment, plus the capital markets environment we're in, financials would win. We don't think cyclicals are uniformly going to be helped, though. We can't tell if in consumer discretionary, the trade down is happening and whether there's real strength there yet. So earnings will show that out.

Shannali and Steve, thank you so much. Good to see you both. Well, Alphabet shares, they have actually turned higher up by just about a percent right now. The analyst's call just kicking off. We'll get the highlights in how fast monies Tim Seward is trading the stock when overtime returns. Alphabet's earnings call is underway. Mackenzie Segalis has got the highlights. Mack.

Hey, Mel. So I've been watching shares of Alphabet Clums. during CEO Sundar Pachai's opening comments on the call. He kicked off his remarks by pointing to the launch of Gemini 3 as a major milestone for the company. Monthly active users of the Gemini app now jumping up to 750 million up from 650 million. Alphabet annual revenue exceeded $400 billion in the quarter for the first time ever. And Pachai pointed out that its core search business is continuing to accelerate growing 17% in Q4.

We also got color on the Google cloud business. It's significantly accelerated with revenues growing 48% now on an annual run rate of over 70 billion. But Chai saying that 75% of its cloud customers are using its full stack from its chips to its Gemini models, really backing up this vertical stack thesis. It's driven Alphabet's market cap past $4 trillion. Now, Pichai says they're also signing larger customer commitments, the number of deals in 2025, over a billion dollars surpassed the previous three years combined, and then backlog, which is really the best indicator of future revenue growth for its cloud

business, grew by 55 percent, quarter over quarter to $240 billion. Pachai saying that that represents a wide breadth of customers driven by demand for its AI products. One other quick note here, guys, the Alphabet CEO, briefly weighing in on the new Apple deal, saying that he's pleased that they're collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation models based on Gemini technology. A lot of questions about those deal terms. We're going to see if we get more during the Q&A portion of the call. Mack, thanks. Mackenzie Seagallos, let's say with Alphabet earnings, Tim Seymour is a C&BC contributor and of course fast money trader, CIO is Seymour

asset management. Tim, good to see you. Great to be here. This capus number is stunning. That was a stunning number. Stunning, but they are monetizing. And we are clearly seeing the benefit of where Gemini is growing and where it's having traction in terms of, in terms of search, in terms of ad revenue, the macro backdrop that we had coming into this from meta in terms of their ad business is very strong. The Google Cloud number is, I think, I mean, that number blew away what the bogey was. The bogey was like 39. I think if you look at, you know, where searches, you largely beat the boge. The YouTube numbers were a little weaker. It's funny, though, because when people look at the valuation of Google, I think we can still come away and say today,

Google doesn't really price in Waymo and YouTube in a way that they should. So this is a relief. It's a relief for the market. I mean, I would have said coming into this number, now the most important stock for the market. And interesting to see where extraordinary growth, doubling year over year is actually still okay and rewarded by the market because for everybody it's not. Over $4 trillion, I wonder if you're starting to actually recognize that Waymo and YouTube are there. But, you know, grant your point. I guess the question is, are we going to be still being a zero-sum type of a deal where Al-FARL.

Alphabet gets the benefit and it comes from somebody else. Maybe. And, you know, but right now as it relates to where we are seeing the companies be successful in terms of growing their valuations right now at a time when not everybody is monetizing, I think Google is a great example of where the street was very wrong on this stock. 150% back from, you know, from May into these numbers and still to deliver on this shows that there are companies that probably are worth spending the money that they're spending. You know, this number shows that.

All right. Tim, we'll see you in a few minutes. Thank you. See more on vast money. Coming up next, Amazon has been the second worst performer in the MAG 7 over the last year behind META. Up next, what's that take for Amazon when it reports earnings after the bell and the key numbers you need to watch for tomorrow. Stay tuned. Welcome back to overtime. Amazon, the big name on tomorrow's earnings calendar.

Let's bring in Kate Rooney for the key numbers investors will be watching for. Hey, Mike. So the setup is interesting here, too, investors I'm talking to are really hoping. Amazon can bring glimmer of hope to what has been a very tough week for tech. A big theme here. AI investors in Wall Street really does also want proof that the spending and attention on AI for Amazon is translating into its cloud business. In particular, AWS cloud growth expected to come in at 21.7% on revenue of $34.9 billion, roughly. That's the big one to watch.

Spending in CAPEX. Also a focus here, as has been the case with a lot of the hyperscalers, latest update from Amazon, $125 billion last year. In terms of spending, executive said that amount it's going to increase in 2026. Also a lot of focus on AI efficiencies in the core retail business as well. William Blair focused on automation and fulfillment, also advertising and then any positive impact driving retail sales, which still account for about 40% of revenue. At least they did in the third quarter. Fund strat also pointing out more competition from brick and mortar retail, namely Walmart. And then Telsi advisory looking for an update on Amazon's physical store strategy after closing some Amazon Go and fresh stores, as well as ongoing head count reduction, guys.

All right, Kate, thank you very much. Yeah, I guess we got to watch the CAPEX number there, too. I think the big five are slated for like more than half a trillion dollars of CAPEX spending in 2026. How many chips can that buy? Exactly. How many chips at what price and I guess where does it all bring us in the commoditization of it all? And then, you know, how's the rest of the market digesting all of this? Because we've been in this kind of away from tech kind of snapback rotation.

And how will the cloud numbers, the growth there compared to others? Azure was a little bit disappointing. We had a blowout from Google Cloud, and then we'll have Amazon. We're looking for that 21 plus percent number tomorrow, as Kate had mentioned. For sure. We'll see if we hit that number. Oracle was in there somewhere as well and is investing very heavily for sure as well. All right, that's going to do it here for overtime.

Fast money begins right after this quick break.