Closing Bell - Closing Bell Overtime: CEA Chairman Jared Bernstein On US Economy; CEOs of Freshworks, Arista Networks On Enterprise Spending 10/31/23

Episode Date: October 31, 2023

Averages were higher again but it wasn’t enough to stave off a negative month for October. Vital Knowledge’s Adam Crisfulli and Wilmington Trust’s Meghan Shue break down the market action with a busy next few days. Earnings from Caesars, First Solar, Match Group, AMD and Yum China. Wedbush’s Matt Bryson breaks down AMD’s numbers. CEA Chairman Jared Bernstein on the White House’s new initiative against junk fees and the state of the broader economy. CEOs of both FreshWorks and Arista Networks talk their latest quarter and what broader enterprise spending may reveal about the near-term economy. 

Stocks in near the highs. You got your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford. Morgan Brennan is off today. AMD headlines another packed hour of earnings along with Caesars' first solar match and IT spending bellwether, Freshworks. We're going to bring you the numbers and a first on CNBC interview with the CEO of Freshworks ahead of his call with analysts. Plus, we'll talk to Council of Economic Advisors Chair Jared Bernstein about the state of the American economy ahead of tomorrow's Fed decision and about a new move by the White House to crack down on junk fees and retirement plans. We begin,

though, with the market as we wrap up a bleak October, the third negative month in a row for the major averages and the longest monthly losing streak for the S&P 500 in more than three years. The Nasdaq saw the sharpest decline as a number of mega cap tech names got hit hard post earnings. Let's bring in CNBC's senior markets commentator, Mike Santoli. Mike, smaller stocks seem to have the best day to end October, whether you're looking at Dow versus Russell or even just at the mega caps, which are pretty mixed today. Yes, so whatever you hated the most, whatever the market hated the most in October,

seems like it got a little bit of a break starting this week. So markets going to see if there was maybe undue punishment meted out to some of these very cyclical parts of the market. The economy obviously has been the fixation of everybody. And can it withstand what's going on in yields? Are we on the precipice of more of a downturn? Market in October said we're going to just assume that's the case and sell everything, die to the economy. And this week, maybe you're having a little bit of mean reversion that's helping out.

Bond yields have been calm for a couple days. Oil also staying out of the way. I wonder about that. Bond yields have been calm for the past few days, especially yesterday and today. Does that make this rally harder to believe? I would say not harder to believe, but I think it still has plenty to prove and show us that it's more than just a little bit of a temporary bounce. You know, the 10-year yield has definitely stopped making new highs,

but it also has not exactly gone into full retreat. So we're still, you know, 490 is still what we would have considered unduly high just three weeks ago. I do think today the S&P 500 did make some progress in breaking above a very short-term downtrend line that goes back two weeks. So that sort of sense out there that we were just sort of really on slippery ground going lower has at least paused coming into this week. Well, we'll see how long that lasts. Mike, see you in just a moment. Meantime, Caesars earnings are out. Contessa Brewer has the numbers. Contessa. Hi there, John.

Caesars coming in with an earnings beat on top and bottom lines. 34 cents in earnings per share on revenues of $2.99 billion adjusted. EBITDA here, this is the crucial earnings metric, coming in now at $1.04 billion. That sets an all-time quarterly record and comes in slightly better than what the street was expecting. We might have seen a bigger beat there, except we heard last quarter that Caesars would set aside money in anticipation of a new contract with the culinary union. That has not yet been set. On digital segment, that's sports betting and online gaming. That comes in with a surprise profit at this point when a loss of a million dollars was expected. And, John, all segments showing growth over last

year's third quarter against some tough comps here and in a macro environment that has challenged competitors. We heard that last week. And there you're seeing the stock bouncing back up. I can't quite see the number myself, but maybe you can from where you are, John. I can. It's up about 2%, at least initially. Contessa, thanks. Now let's bring in our market panel as we await more earnings, including AMD. Joining us now is Adam Christofoulia of Vital Knowledge and Megan Hsu of Wilmington Trust.

Guys, welcome. Megan, you're still cautious as we head into November, which we're going to kick off with a Fed meeting and then end with the most important retail week of the year. Between yields and consumer demand, what's November going to be more about, you think? Yeah, I think November is going to be a pivotal point for the economy and for companies as we look at coming off of a very strong third quarter, which may have been a pull forward of demand. It may have been some statistical anomalies as we look at the economic data, but we expect a pretty decent amount of slowing to occur in the fourth quarter. And I think that will turn the focus to profitability, companies that have really sound balance sheets, a lot of cash in order to invest in different projects and technology. And I think the focus will be shifting towards earnings

in the fourth quarter and the first quarter, because I think this really is a potential turning point. We will hear from the Fed, but I think this really is a potential turning point. We will hear from the Fed, but I think the Fed is going to be stepping back from the limelight and will be more on a, you know, on a hold is our expectation going forward. But I think if you look at the outlook, we're a little bit cautious on equities, but not overly pessimistic and actually looking for maybe an opportunity in the relatively near future to start to add. OK, hang tight. First Solar earnings are out and Pippa Stevens has the numbers. Pippa, how do they look?

Hey, John. Well, the stock is falling here after First Solar reported a mixed quarter for the third quarter. The company earned $2.50 per share, which was ahead of the $2.06 estimate. But revenue did miss expectations, coming in at $801 million, short of the $895 million that Wall Street was looking for. The company did reaffirm its full-year revenue guidance, and it raised the lower end of its full-year EPS guidance, although they did point to a decrease from the prior quarter

in terms of the volume of modules sold. So that is certainly something to listen for on the upcoming call. Those shares just about flat here. John? Yeah. Can't decide whether it's rising or setting. We'll see what happens after the call. Adam, we've got the Fed meeting coming up tomorrow. A lot of people seem to expect a pause. So maybe it goes more to the color in what's said. What are you going to be listening for? Yeah, I expect that you're going to hear from the Fed a message that was in line with what Powell recently spoke about at the Economic Club of New York, where basically he acknowledged that

financial conditions have tightened, essentially doing the work of the Fed. And therefore, the need for an incremental rate hike is a lot less than before. He's not going to fully shut the door to it. But I think you're kind of seeing central banks in general, as Megan said, kind of become a little bit more benign, take a step back. You saw it with the ECB, saw it a little bit with the BOJ, and I think you're going to see it with the Fed, too, where they've reached everyone other than the BOJ. Policy hikes are largely finished at this point in time. No one is thinking about cutting at this point. Balance sheets continue to shrink, but they're done hiking. Now they're going to just sit back and wait to see how inflation evolves from here.

But I suspect that to the extent that Powell's speech from the Economic Club is codified in the official statement and during the press conference tomorrow, that will be welcomed by stocks, especially given what's happened over the last couple of weeks. Yeah. Megan, you're still overweight, fixed income and cash. How far do equities have to fall before you start licking your chops there? Yeah, well, we are actually pretty constructive on the economy and expecting us to have a soft landing. And if we do see inflation continue to slow and economic activity slow but not overshoot to the downside, I think it could be a very favorable environment for equities, especially U.S. large cap. And so I think, you know, a 10 percent correction is pretty nice. Valuations for the overall index when you strip out mega cap tech

are not too demanding. So I really don't think it takes too much further, but there are a lot of geopolitical risks. And the technicals on both the fixed income side as well as the equity side are not terribly favorable right now. So I think patience is OK, but waiting maybe for a little bit more weakness in the equity markets to deploy some of that cash is what we're looking to do. OK. And Adam, today, real estate as a sector in the S&P did particularly well. How long can that go on? How are you feeling about that and a couple of other sectors, even say financials right now, which also did well, but has been having a rough time. Yeah, I mean, I think for real estate, you kind of have to be more specific about the various different subjects. I mean, you know, office market is still experiencing a lot of challenges, even though you have seen increases

in return to work statistics. You know, retail REITs are holding in relatively well. Simon Property had a pretty strong day today. Decent results out of that company. Home builders, you know, perversely have benefited enormously from rate hikes as that took so much existing home inventory out of the market. But that might be kind of nearing its end run. You've seen home builders trade pretty poorly of late as the recent round of rate hikes is likely going to catch up to that entire market. So I think for real estate overall, it's going to be specific to the end market. You know, banks have not traded well over the course of the Q3 earnings season. The larger cap money center banks had decent results. They have a lot more pricing power that helped their net interest income and net interest

margins. But the smaller ones, they're really seeing, you know, they're at a peak or past their peak of net interest income as deposit pricing pressure really starts to weigh on some of those names. Right. Megan, we've also seen the labor disputes starting to kind of sort themselves out. The UAW seems to have made out quite nicely. So on the one hand, that takes some risk off if you know that that's getting resolved. But on the other, you've got some costs that are really going to be sitting there for a number of companies. Do you feel like you've got your arms wrapped around the costs? I mean, Contessa Brewer was

just talking about the culinary union, which has issues for some of the Vegas properties as well. Yeah, I mean, I think the strikes have gotten a lot of headlines, and I think they are very critical for certain parts of the country and certain industries. At the aggregate level, I don't think they will move the needle too much. We actually got the employment cost index today, which is probably a broader look at labor costs and some of those key input costs, especially for service companies. And those were pretty much bang in line. And I don't think that we're looking at any sort of concerning upward pressure on wages. And if companies are able to utilize technology to generate a little bit of productivity, that's not necessarily a bad thing for inflation either. So looking at the input costs is

definitely important. I think the strikes getting resolved, some resolution in Washington, taking some of those risks off the table is definitely a good thing for investor sentiment and consumer sentiment. And going forward, it's really going to be about the inflation data. All right, Adam, bringing it back to today and the after hours action for AMD, what do the semiconductors need to show you? What do you think is the most important thing to come out of AMD once we get those numbers? So I think investors are going to be obviously listening very closely for any update on their new AI chip. It's supposed to be launching in Q4. Again, any commentary around specificity when it's hitting the market, if they have any

new customer wins that they can announce, et cetera, et cetera. That's going to be the most important part of the story by far. You know, we already heard from Intel and from Microsoft, the PC market is enjoying a pretty big upswing at the moment. They've gone through several quarters of an aggressive inventory correction. That's coming to an end. Demand is decent for that market. So the PC part of AMD should be healthy.

The data center, the traditional data center market has not been as strong, so that might see some softness. But I think everything will be determined by the commentary color that AMD gives around this new AI chip that's going to be launching soon. Yeah. Now that those inventories are normalized, I guess we'll see what real demand looks like. Adam, Megan, thank you. As we've been talking about, October was a rough month for MegaCap Tech, the group that had been powering the markets rally all year long. Mike Santoli is back with a look at the damage that's been done. Mike?

Yeah, John, pretty modest damage in the grand scheme of things to that little cohort of stocks. And it's almost all in the last couple of weeks. Going into last week, there was a pretty plausible case to be made that, look, the big guys were going to be reporting earnings. They typically show pretty good profitability. They have a habit of beating and showcasing their tremendous profit margins. While you have seen that the CNBC Magnificent 7 Index, this is just since the mega cap started reporting early last week, have lagged just slightly, 2.5%.

But let's look at the same relationship on a year-to-date basis. And you see virtually, in fact, truly unprecedented dominance by this small handful of stocks compared to the equal-weighted S&P 500 year-to-date. So now there's always a bunch of stocks in any given year that go up 75%, 100%. What's unique about the current environment is they're all the very largest stocks. And so 25% or thereabouts of the S&P 500, represented by a half dozen stocks, are the ones that have kind of consumed all the oxygen and provided all the support. So we'll see how that goes in terms of whether it can continue, whether there's re-rotation, whether you can have a more balanced market at some point in whatever direction. And it's so interesting to

me, Mike, that the two biggest mega caps, Apple and Microsoft, are now pretty close together in market cap, just less than 200 billion in market cap away from each other. Because in the last two weeks, Microsoft has really pulled away from Apple. Apple reports this week. What does it mean? Yeah, well, first of all, $200 billion used to be a good chunk of money, and it's probably like a top 25 market cap company. But you're right. Microsoft has really stolen the mantle of the most predictable, the company that's going to be able to chug along in most environments. And it's got all the strong balance sheet. It obviously has the call option on whatever is

happening in AI. So beyond, you know, beyond that, I'm not sure it means a whole lot in terms of its horse rates. Of course, I remember very well when Microsoft was the very largest market cap in the S&P 500 back 20 plus years ago. Yeah, seems like just yesterday. Mike, thanks. See you in a bit. Paycom is tanking after its earnings crossed. Pippa Stevens, what happened? Yeah, John, well, this stock is down 25% right now, and it really is the guidance from Paycom that's weighing.

But starting here with the company's third quarter results, they did earn $177 per share on an adjusted basis. That was ahead of the $161 analysts were expecting. Revenue, though, a bit light of expectations at $406 million versus the $411 million that Wall Street was looking for. But once again, it is the guidance here. So they expect to earn $177 per share. I'm sorry, they expect to earn, they expect revenue during the fourth quarter to be between $420 and $425 million. That was well short of the $552 million that analysts were looking for. Once again, that stock down 25 percent. John? Yeah, way short. Pippa, thank you. Chip stocks

got chopped in October with big drops for Lattice, NXP, and Marvell, among others. And now we're awaiting numbers from AMD. They are due out any moment. We're going to bring you those as soon as they cross. And later, the CEO of Arista Networks, the top performer in the S&P 500 today, is going to join us to break down the earnings results that are powering those gains. Overtime is back in two. AMD earnings are out. The stock moving lower initially. Christina Partsenevelis has the numbers. Christina. Well, what we're seeing is earnings per share coming in at 70 cents adjusted.

That is a slight beat, but its revenues also beat 5.8 billion. So top of bottom line beat, but what's concerning is the guidance for Q4. We have Q4 revenue guidance coming in at $6.1 billion. That is lower than the $6.37 billion that the street was anticipating. You're seeing the estimates for gross margins at 52%. So that's in line. So that's a little bit strong. If we go break it down to categories, data center revenue, 1.6%, so flat at that point.

Client revenue, which encompasses PC sales. We saw strength from Intel just very recently. So that did a little bit better at 1.6 percent, so flat at that point. Client revenue, which encompasses PC sales. We saw strength from Intel just very recently, so that did a little bit better at 1.5 million. Gaming coming in line as well. Just one line, John, that stood out to me in this report is that in the fourth quarter, we expect to see strong growth in data center and continued momentum in client, which is the PCs, partially offset by lower sales in the gaming segment and additional softening of demand in the embedded markets. The embedded markets is the programmable chips. We saw weakness from Lattice just yesterday.

We saw weakness in Intel's programmable chips business as well. So that category doing a little bit weaker and expected to be weaker in Q4. You can see shares are dropping 4.5 percent, partially because probably of that Q4 revenue guidance. You know, embedded, too, you point that out. I had seen some analysts' expectations of $1.32 billion in revenue in Q3 for that, and it looks like they turned in $1.2. That's a pretty profitable business for them, no? And a little bit of a miss, that's the one line? Yeah, that's what I was referring to. So that's $1.2 billion down 5% year over year.

To your point, yes, that is a miss if you're using the fact set estimates of $1.3 billion. So they missed in embedded, they were in line with gaming, they were higher with clients, and they missed ever so slightly with data centers. All right. Christina Parts and Nevelis, thank you. Thanks. Let's get some more reaction from Wed Bush, Senior Vice President of Equity Research, Matt Bryson. He has an outperform rating on the stock. Matt, the embedded line on these results seem to be the sticking point. And then how do you feel about the guidance?

Yeah. So with embedded, they've told usedded is going to get a bit weaker. You heard from Intel that Altera, their FPGA segment, is going to get a lot weaker in the second half. And so I'm less concerned there. I think a lot is going to depend upon how they frame guidance. So the concern has been largely their CPU shipments into servers. And so when you look at that 6.1 billion number, what is the makeup of that number? If servers grow, if they have positive things to say about where MI300 is,

in terms of they certainly set in-production shipments this quarter, but they have good things to say about it moving into 2024. I think that will allay a lot of concerns. Is this a sort of situation where we could see this stock move around quite a bit after hours based on that conference call commentary? I mean, I know that investors have been punishing stocks during this cycle for even a little bit of bad news, but AI is such an important story in the market this year, and AMD's got quite a bit to say about it. Yeah, no, certainly. I think that, you know, depending upon what that Q4 makeup is, what they have to say about 2024.

That's going to be largely deterministic in terms of where the stock ends up. Again, more positive comments around AI because it is so important. More color around what's going on in the standard server market, particularly if that's getting better or they can offer some hope that that gets better early in 2024. I think that would be positively by the street. What about AI for clients? We just heard from Apple overnight. They've got new M3 chips that are going across their Mac line, and they gained a whole lot of share over the past couple of years with thisseries chip that they've got. Do we need to see that from AMD? More specifics on when their heterogeneous computing strategy is going to

show up even more in clients? I think with AMD, it's a little bit less important in the sense that it certainly is important that they have a strategy, just as it's important that Intel has a strategy. But both of those companies are very tied to what Microsoft is able to offer. So how Copilot rolls out, I think at this point, the expectation is that it's second half of 2024, 2025, when see that that type of silicon gain traction and i think for amd it's on the pc side it's more important in terms of how they compete against intel versus say where where apple is today because again intel's got about 80 of the market amd only has 20 of the microsoft market but Apple's more like 10% of the total market. So it's, you know, it's still more important that they compete well against Intel.

Yeah. We'll watch how they do on the margins as well. Matt Bryson, thank you. When we come back, a First on CNBC interview with the Council of Economic Advisors Chair Jared Bernstein, ahead of tomorrow's Fed decision and Friday's jobs report, his read on the economy and details on a brand new crackdown on junk fees and retirement plans. That's when Overtime returns. Welcome back. The White House proposing a new rule cracking down on so-called junk fees in retirement accounts. These fees can occur when advisors recommend products for which they receive a higher commission, but that aren't necessarily better for the client. The White House says these hidden costs can reduce a middle-class household's retirement savings by 20% over a lifetime.

Joining us now, White House Council of Economic Advisors Chair Jared Bernstein. Jared, the flip side of this is that detractors say it's going to result in a bigger regulatory burden for advisory firms, might reduce the number of advisors willing to work with investors, especially those with smaller accounts. Why is it worth this fight? Oh, let me start out with one number, $5 billion. That's the aggregate amount of which these fees can cost investors in just one area of this rule that we're trying to talk about today. So, look, you set it up correctly. We are very much interested in protecting retirement security by pushing back hard on this particular junk fee. Now, this is not the first time this has occurred.

We've seen this in securities markets, and I don't think we've seen anything like the kind of cautions you just talked about. So I'm convinced that we'll still have robust offerings in terms of products. It's just that they'll be more in the interest of savers and pushing back on any conflict of interest therein. And after this week, autoworkers might have a bit more capacity to save. The United Auto Workers are working through what looks to be a deal with the major automakers. You said a few weeks ago that this tight labor market we're in had emboldened workers to bargain for a fair slice.

What's the impact on the economy now, certainly on the pro side for these workers, but then these companies, these car companies are going to have some higher costs, right? Right. Well, let's start with the workers in the economy. You know, the president talks about Bidenomics through the lens of middle out, bottom up growth. And one of the things we've consistently seen time and again, a lot of forecasters have have missed this, even though it's, I think, pretty straightforward, is that we have a 70 percent consumer spending economy. We have a healthy middle class drawing real pay gains. That's going to help keep this economy moving forward as it has reliably done so far.

Now, you've got 14 million jobs since this president got here, over 800,000 in manufacturing, an unemployment rate below 4% for 20 months in a row, and now we have some of these union victories we're talking about. That means more buying power for working people. But you raise the point about the overall economy. Well, again, this has been keeping the economy going forward. Consumer spending pulls in more investment and we've seen some of that. In terms of the automakers themselves, look, there were years when real pay was going down for these workers and these companies were profitable. There were years before

that when their pay was going up and the companies were profitable. So there is, it is, there's no question in my mind that we can have successful, profitable, expansive, innovative auto companies with workers getting paid a fair share uh jared we've we've also got higher rates and consumers that have been relying on credit cards like never before which makes it more expensive for them these higher rates also make it more expensive for the government to spend more than it takes in what does biomics do about that? Well, when it comes to the fiscal outlook, it sounds like what you're asking about there, they were really talking about the president's budget proposals, two and a half trillion of deficit reduction, both from some cuts on the spending side, especially in health care.

And it's probably important to emphasize those in this context. If we're talking about lower junk fees, better retirement savings, you know, paying, getting rid of hidden fees, whether it's a bank or a concert or an airplane flight. Well, it's the same thing when it comes to saving medical costs, lowering insulin costs, lowering the cost of prescription drugs. In fact, allowing Medicare to bargain for lower drug costs not only saves consumers, it saves the budget $160 billion over $10 billion. So between cutting costs and adding fairness into the tax code by ensuring that the wealthiest pay their fair share, part of that is getting the IRS to go after wealthy tax cheats.

Part of it is, again, just injecting fairer rates into the code, not touching anyone below $400,000 of AGI. That's how we help deal with a more sustainable fiscal path. All right. Well, now you've got a House speaker to bargain with on that budget. Jared Bernstein, we appreciate you joining us. My pleasure. Time now for a CNBC News Update with Eamon Jabbers. Eamon? They confirmed Jack Lew as the new U.S. ambassador to Israel. Lew's confirmation comes as Congress is

expected to take up legislation that would provide billions of dollars in support to Israel. Lew was the White House chief of staff under President Obama and served as the Treasury Secretary. Cornell University said the person who made anti-Semitic threats toward Jewish students over the weekend has been identified and taken into custody. The threats came after weeks of increased tension on college campuses and a rise in anti-Semitism. The Anti-Defamation League reported a nearly 400 percent increase in anti-Semitic harassment, vandalism and assault since Hamas attacked Israel on October 7th. The Biden administration approved a plan to install 176 giant wind

turbines off the coast of Virginia. The project will create the country's largest offshore wind farm. Once completed, the farm would produce enough electricity to power more than 900,000 homes without releasing any carbon dioxide emissions. John, back over to you. Eamon, thank you. And now we've got a news alert on WeWork. Pippa Stevens has the story. Pippa? Hey, well, WeWork is planning to file for bankruptcy as early as next week, according to the Wall Street Journal citing sources. Those WeWork will file for Chapter 11 in New Jersey. The company, once worth more than $47 billion, of course, has had a stunning downfall and is now worth $127 million. In a filing today, WeWork said that it struck an agreement with the bondholders for another seven days to negotiate before a default is triggered.

Once again, John, WeWork planning to file for bankruptcy as early as next week, according to the Journal. Back to you. Big player in the office segment of the commercial real estate market. Pippa, thank you. After the break, the market's October surprise. Mike Santoli returns with a look at the asset class that had a very strong month and just leapfrogged the S&P 500's gains for the year. And another check here on AMD. It is still falling despite a beat on the top and bottom lines. Fourth quarter revenue guidance coming in below estimates. The embedded segment missing as well. We'll be right back. Yum China earnings are out and yuck, big move down. Pippa Stevens has the numbers. Pippa.

Hey, John, that stock dropping 11% here after Yum China missed revenue estimates. The company did earn 59 cents per share on an adjusted basis, but revenue coming in at 2.91 billion. That was short of the 3.06 billion that Wall Street was looking for. The company did say that Pizza Hut same store sales were up 2%. That was also short of the 4.3% that analysts polled by Street Account were looking for. Now, the CFO did say that they started to observe softening consumer demand in late September through October. And so while the company did not give Q4 guidance, John, that suggests that maybe there is some softening in October and maybe beyond. Once again, that stock down 10 percent. Back to you.

All right, Pippa, thank you. Now let's talk about something that's doing better. Mike Santoli is back with a surprise winner in the market for October. Mike, what won? Yeah, John, a surprise to everybody except those who always think gold is the only real asset to own. And you have seen the price of gold go above 2000 an ounce. It's been consolidating sideways for a while. It has broken to a high. Here you see it on a year to date basis. It is just shy at this point of the S&P total return. But you see, since the conflict erupted between Israel and Hamas, that has been the move that has, you know, catalyzed this latest spurt higher. Now, some will argue that it's impressive gold was able to hang in there as real interest rates, real yields were going higher.

So kind of if you're great on that curve, it works. And this is now the four year chart of both of those things. So still playing catch up to the S&P 500 since here right before the pandemic started. Gold didn't give you a lot of outright benefit from owning it during that big inflationary surge we got in the early 2020s. But here it is starting to perhaps perform for now. Although, as you can see, it kind of goes in these little bursts as it did once in the early 2010s as well.

And then it doesn't always follow through. We'll see if it changes here, John. Well, it's glittering now. Mike Santoli, thank you. Shares now, customer service software maker Freshworks. They're higher by about almost 3% after an earnings beat. Up next, the company CEO is going to break down those results and join us here before he speaks to analysts on the earnings call. We'll be right back. Welcome back to Overtime. Check out the move higher for Freshworks. That's now up more than four and a half percent. The company reporting Q3 numbers earlier this hour, revenue up 19 percent year over year, topping the street on

the top and bottom lines. Joining us now is the CEO, Girish Mathur-Bhutham. Freshworks is a customer relationship management company with customers like American Express, Bridgestone, Databricks. G, good to see you. So first off, tell me how large accounts did in this quarter. Last quarter was a big one for those. Thanks for having me on the show, John. And, yeah, this is a solid quarter. And specifically, I think it came in line with what we were expecting. And so I would say large deals still continue to be the biggest growth driver for the business, specifically on the ITSM product side, our first service product. So we are seeing more and more success in mid-market and larger enterprise deals. And how is the AI news that you put out over the past couple months been accepted? What's

the momentum look like there? So it's fantastic in terms of what we are seeing. In last quarter, Q2, we actually put out a beta of our Freddie self-service and then we followed it up this quarter with Freddie Insights and Freddie Co-Pilot, both going in beta. We have started monetizing our Freddie self-service product through our bots usage. We announced new pricing.

Freddie Co-Pilot will be monetized. We'll start charging customers for the value that they're getting. We are thinking of Q1 next year. But there's a lot of excitement. What impact do you expect that to have on demand based on what you've seen thus far? Are you going to start charging for it? Are people ready to pay based on the results they're likely to get?

Absolutely. We have not modeled any of that because it's still early days and we are still working on our estimates. But the early news that we are hearing, first of all, from a pretty self-service and bots standpoint, there's tremendous value for customers

in terms of the automation that we're able to deliver for business. So they're happy to pay us. And Freddie Co-Pilot would actually help by making their agents more productive. So Freshworks happy to pay us. And Freddie Copilot would actually help by making their agents more productive. So Freshworks stands to gain when there's more automation. And then also we stand to gain when agents need to be more productive. There's a lot of questions about what's happening to demand in Q4 and beyond.

And, you know, customer service, I imagine people buy more of it when they've got more customers, more demand to deal with. How are you modeling demand heading into 24? How does that affect the guidance that you're giving? So specifically for 24 guidance, we are not giving that yet. We'll do that in the next quarter. But from a demand standpoint, I would say it played out pretty much exactly as we had expected. I would say that the macro companies are still cautious about spending. And sometimes we benefit because of that, because we are an affordable player building for the Fortune 5 million, not just the Fortune 500. We are also planning for a slower expansion because I don't think hiring has really come back

to previous levels yet. And as you know, agent expansion is one of the key drivers of our expansion revenue. But we are factoring all of that into our guidance as we move forward. When you say slower expansion, is that particularly in certain geographies or just across the board? I think in SMB and geography-wise, it's across the board in terms of hiring has not picked up. There are some pockets where growth is good, like Asia, for example, but mostly I think it's still, we're not back to the previous levels of hiring anywhere. All right. Well, I'll let you get to the earnings call. G, appreciate you joining us here on Overtime. Thanks, I'll let you get to the earnings call. G, appreciate you joining us here on Overtime.

Thanks, John. Thanks for having me. Now, Arista Networks, the best performer in the S&P 500 today after beating Wall Street's earnings estimates. Up next, the CEO of the cloud networking company, which counts Meta among its top clients, is going to break down those results in an exclusive interview.

We'll be right back. Match Group's results might be getting ghosted after hours. Pippa Stevens, how do the numbers look? Hey, John. Well, the stock is down 4% here thanks to week Q4 revenue guidance. But starting here with Matches Q3 earnings, the company earned 57 cents per share. That did beat estimates by 3 cents, with revenue coming in at 881.6 million. That was 1 million above estimates. But once again, it is that week Q4 revenue guidance. They expect to see between $855 and $865 million. That is short of the $895 million that Wall Street was looking for. The Tinder parent company cited currency headwinds as well as a weakening macro conditions globally

for that lighter Q4 revenue. Those shares down 2%. John? Yeah, it's off the lows. Maybe investors will show up after all. Pippa, thanks. Today's top S&P winner, meanwhile, Arista Networks. The cloud networking supplier hit a 52-week high today after beating earnings expectations and providing higher-than-expected guidance. The company also getting some upbeat reaction following the report. Morgan Stanley upgrading its rating to overweight, raising its price target to $220 a share from $185. KeyBank and JMP also raised their price targets.

Joining us now is Jayshree Ullal, the CEO of Arista Networks. Jayshree, welcome. What were investors getting wrong when they assumed that the CapEx spending of Meta, you know, that getting a little tighter, was going to hit you guys? Well, great to be here, John. Thank you for having me. You know, when you look back at our stock, we've always had a lot of volatility. And last week when Meta announced their CapEx was slightly reduced, we took a beating with that. But as you know, volatility is something we plan for. And last quarter in our earnings, I had already said a certain cloud provider had provided lower guidance.

And we have factored that into our forecast. So it wasn't a new piece of data for us, nor was it a surprise. We'd already planned for it and planned it in our forecast and our guidance. So and it played out exactly that way. And at the same time, your gross margins are coming in stronger than a lot of analysts had expected. So it's kind of like a double surprise for some to the upside. How are you managing those? And what is it that customers are demanding from your technology stack that's allowing you to continue doing that?

Yeah, that's a really good one. First of all, I want to give the team credit by credit to you. Last year, we had a very painful supply chain crisis where we couldn't get the parts, and even when we got them, they were, you know, 100 to 1,000 times the price, and we were really filled with shortages. And the world has certainly changed. We're getting our fair share of components, and that's allowed us to normalize both our supply, improve our lead times, as well as improve our gross margins.

Couple that with the fact that we're getting a lot of momentum from an alternate sector of customers that we call the enterprise. So we sell to a lot of the large cloud titans and now the enterprise as well. And so the margins was a nice mix of both types of customers to give us an improved 100 basis points or so more than we were expecting. From a big picture perspective, help investors understand how the AI era changes the networking needs in data centers and in these cloud providers. When you've

got to move so much data around, sift through it, you know, do that continually to solve problems, what's the different sort of need that you have of the equipment? Yeah, no, this is one of my favorite questions. And AI has really come upon us like a storm lately. If you just step back and look at Arista Strength, let me start there. We've been, as you described us, known as a cloud networking company. And most of that meant we were processing data from compute and storage clusters and connecting a lot of them up and powering some of the world's largest networks and Microsoft Meta and so many more.

And that was what we've been doing the last decade, and that has fueled a lot of our growth. Over the last couple of years, our customers are now planning their backend network. And what's a backend network? It's sort of a cousin or a sibling to the front end where that data you just mentioned in the front end now has to be crunched and processed at much higher rates. And it's very compute intensive. It's very, very data intensive.

And you're using these large GPUs and AI, whether it's generative AI with inference or large language models and training, requires a tremendous number of processes to crunch that data. And you're doing this in a cyclical way over and over again. There's a compute function. There's an exchange function. There's a reduce function. And all of these collectives are adding tremendous bandwidth requirements on the network.

Now, if you don't do that right, you could use up very expensive cycles of compute time and have a lot of idle time. And so the network is critical to use your compute and therefore your AI applications to its fullest. Otherwise, your job completion time can take much, much longer. And the latency is as long as the largest culprit in that job completion. So the network is pivotal. Okay. Finally, how confident are you in your view of inventories right now? We've heard some things about stockpiling of those AI chips that are part of the systems

that you're talking about. Is there any risk that your equipment as well is being stockpiled? We always, a few years ago, we took a multi-year view on this. Our board of directors approved a multi-billion purchase commitments. I wouldn't call it stockpiling. I would call it just good, prudent forecasting and planning. And so we've been buying chips for multiple years so that we could address the AI

as well as the cloud and the enterprise customers. So I think that's played out well. Obviously the forecast isn't exactly always the way you plan it and there's different kinds of mix, but we're very comfortable that over a period of time, we'll be able to fulfill all these orders. And especially as the supply chain improves, we can really get on our front foot

and make more of these available. All right. Big day for the stock. Jay Shree, ILL, the CEO of Arista. Thanks for being with us on Overtime. Thanks, John. It was fun. Up next, the after hours movers that need to be on your radar right now as AMD gets ready to kick off its earnings call with analysts. We'll be right back. Welcome back. Plenty of red on the screen after hours on Halloween. It's like a poem. Here's your rundown. AMD is lower on soft Q4 revenue guidance. That call kicks off at the top of the hour. Paycom is the biggest decliner, dropping sharply after revenues missed and fourth quarter revenue guidance came in light. Yum China also in the red after a miss on revenues. Pizza Hut, same store, sales were below expectations.

And First Solar, also missing on quarterly revenues. That stock moving between gains and losses. Freshworks is still up, though. Tomorrow, we'll get the Fed decision at 2 p.m. Eastern, followed by Chair Powell's news conference. It's going to be a very busy day of earnings. In the morning, we'll get Humana, CVS Health, Yum Brands, and Kraft Heinz. And after the bell, here on Overtime, we're going to hear from Qualcomm, EA, Airbnb, PayPal, and DoorDash. Speaking of DoorDash, you'll hear from the CEO of DoorDash right here after those

earnings cross before the conference call with analysts. Mike Santoli, any suspense in the Fed tomorrow? Only in what's said afterward after Jay Powell gives his press conference. They're going to pause. It seems like the Fed, by all accounts and appearances, wants to be done, but they can't say that. We're going to see what they acknowledge about what the long end of the Treasury yield curve is doing in terms of the growth outlook. Before that, though, we also do get ADP jobs and the Jolt Report. It's going to inform his commentary about how tight or loose the labor market is. That's going to be big news, of course, as always.

Mike Santelli, we know you'll be covering it. That's going to do it for overtime. Fast Money begins right now.