Closing Bell - Closing Bell Overtime: Chipotle CEO On Earnings, Consumer Spending; OneStream CEO On 30%+ IPO Pop 7/24/24

Episode Date: July 24, 2024

A very busy day of earnings with Ford, IBM, Chipotle, ServiceNow and KLA reporting. Jon speaks with both ServiceNow CEO Bill McDermott and IBM CEO Arvind Krishna about the latest quarter. Plus, Chipotle CEO Brian Niccol on the consumer and OneStream CEO Tom Shea talks the company’s IPO, growth strategy and AI offerings after its first day of trading sent the stock 34% higher. 

Well, that bell marks the end of regulation. Five serve ringing the closing bell for New York Stock Exchange. Prospect Capital Corporation doing the honors at the NASDAQ. And it's been a brutal day for the Bulls as the NASDAQ and S&P 500 turn in their worst day since 2022, dragged down by Tesla, Alphabet, Nvidia, and other mega caps. That is the unfortunate scorecard for many on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, this hour of

earnings will give investors some confidence. That's the question. We're ready to bring you the play-by-play as numbers come out from Ford, IBM, Chipotle, ServiceNow, and many more. Plus, we will talk exclusively with Chipotle CEO Brian Nicol before he talks to Wall Street analysts on the earnings call. And the new software stock on the block is bucking the downtrend today. The CEO of enterprise software firm OneStream joins us after the company made its public debut at the Nasdaq today. But as we await earnings, let's get to this sharp sell off with our market panel. Joining us now is Wealth Enhancement Group Senior Vice President Nicole Webb and CNBC Senior Markets Commentator Mike Santoli. It's great to have both of you here.

Nicole, I'm going to start with you because we had, it looks like, a 3.6% downdraft in the NASDAQ. For the S&P 500, the fact that we closed down, it looks like about 2.3%. This is the first time we've actually seen a loss, a daily loss of 2 percent in the S&P 500. Three hundred and fifty six trading days. It's the worst since December of 2022. How reflective of that is of the day and the trading or or is it more reflective of the fact that we've had a market that up until now has been very buoyant? I'm going to take the latter. It is more reflective of that. And I think above all else, what's happening in megatech, and that's really where most of this sell-off is coming from today, is that the expectations just got so stretched.

And so as we go in and we hear more of the likes of what we heard from Meta last quarter, which is spending is going to be expensive. And we don't know exactly when we're going to get a big return on that spend. And so when Google gives us what it gave us, which was just even the slightest miss, and really just none of those upside surprises that we got accustomed to, it starts to look expensive in the short term. And so you're starting to see that play out. Tesla, very different story. But going into more megatech earnings, I think the question is just going to be how stretched are those expectations? How big is the response to that? But then you have the

likes and the revisions on earnings forecasts and financials. And so you see some of that broadening. Our thesis going into this this earnings season was that we are in a soft patch with little expectation of a catalyst. So there's likely a consolidation through the first and maybe even second rate cut, where then we really get the validation that we're past peak inflation, we're past peak rates, and we're past peak tightening. And that's not good just for the sentiment, but also from the technicals. And so while it looks nice to see this value trade play out, while the first 10% of names coming in look pretty good, we also think that that next calidus is more on the validation side

and that there's this consolidation that continues over the coming months. What to make of the macro landscape, Mike Santoli? Because you do have a yield curve that's steepening today. You've had a number of traders pointing to Visa and LamWest and the results we got in the past 24 hours from those two names as showing more signs of weakness in the consumer. You take that, you couple it with the commentary from Dudley, former Fed official. Can we read into this yet, how much this economic softening is impacting the markets, whether it is just a normalization or whether it's something deeper? Well, Morgan, I think it definitely is now a bit of an overlay on this whole preset assumption that the soft landing was going to proceed in a pretty seamless way for months.

And so there were always going to be growth scares. We're probably in a minor growth scare. But what I also see is this very familiar effect of the market starts to have this kind of reset of expectations. We got a little too expensive. We got a little too optimistic. We got a little too, I guess, comfortable with the fact that we had this crowding at the top of the index. We start to unwind that. And then news comes along as plausible excuses for why it could be more than just a mechanical rebalancing of the market. That's what we're in right now. I do think there's a risk there that we're going to continue to question

exactly how reliable and resilient the economy is going to be. Earnings growth is expected to go up. This is what complicates the rotation story too, because premised underneath that rotation story was, oh, get out of those defensive, big secular growth mega cap tech stocks, get into what? More cyclical, small financial industrial stocks that hadn't moved

yet. Well, cyclicals mean the economy had to hold up. That's the fix we're in. I don't think the alarms are red flashing right now. It still seems like a relatively routine pullback. But also a reminder, I just keep saying, a broader market is not a more stable or predictable market. It's a little more chaotic, and that's what we have. Well, Nicole, I'm going to have to apologize to you in advance because we're expecting IBM results any moment. I might have to interrupt you. But I want to ask about software and the overall global picture right here, because we should

expect to see some currency headwinds here based on the strength of the dollar. But at the same time, software has become such an important part of what every business is using, as we saw with CrowdStrike last week, right? So what kind of insight should investors expect to get from today's results from the likes of IBM ServiceNow that gives a sense of whether this turbulence today maybe isn't the biggest deal? Yeah, you know, I think one of the most interesting things that we've heard from IBM thus far is that the adoption and implementation of AI has been far faster than they've seen in other arms of consulting like Red Hat. And so what we will continue to listen for is just where enterprise

level spending goes. And then I think what we're all waiting for is what is the real return on that? Can we drive unit labor costs down? Can we drive productivity higher? And how much stability does that bring into an economic picture where we are bringing so much reshoring back into the narrative? So as we start to hear things like we heard last week about any glitches to GDP revisions to the downward when we know right now so much hangs in the ballast of the consumer keeping their head above water and growth staying sticky. Well, then I think there's just a great read through into where are we headed in terms of that growth trajectory for business. And at the heart of all of that right now is the utility level

of enterprise software and systems. Okay, so speaking of consumer-facing companies, we've got earnings from Ford. And Phil LeBeau has those numbers for us. Phil. Morgan, we have a miss on the bottom line from Ford and a beat on the top line. Ford earning $0.47 a share. The street was expecting them to earn $0.68 a share. That's some of the pressure you see on Ford. Revenue did come in better than expected at 44.81 billion.

Street was expecting 44 billion. Free cash flow, 3.2 billion, margin of 5.8%. But let's talk about the numbers within the numbers, the divisions at Ford. Remember, they break it out by the three divisions, starting first off with the EV division, a loss of $1.14 billion for the quarter. By the way, that means they are losing in this quarter about $44,000, pardon me, $44,000 per vehicle, an improvement over the first quarter, but still a big loss. The ICE division, internal combustion engine vehicle business, a profit of $1.71 billion. Vehicle, commercial vehicle division, a profit of $2.56 billion.

That's really where Ford has been doing well. Then you look at their guidance. They're raising their 2024 free cash flow guidance by $1 billion to a range of $7.5 to $8.5 billion. And then you've got the 24 EBIT guide staying the same at $10 to $12 billion. Within the divisions, a couple of changes here. The ICE division, the profit guide has been trimmed by $1 billion, down to $6 to $6.5 billion. Why? Growing warranty costs, which has long been a bugaboo for Ford.

They are raising their profit forecast for the commercial vehicle business to $9 to $10 billion by a billion dollars and affirming their plan that they have had for some time to lose $5 to $5.5 billion on the EV business this year. But again, Ford missing on the bottom line, earning $0.47 a share, the street expecting $0.68 a share in terms of a profit. Guys, we'll send it back to you. All right, Phil, thank you. Phil LeBeau, that stock was down about 8% after hours. IBM results just crossing in that amount of time. That stock is higher initially by more than 3.5%. IBM delivered a beat on the top and bottom lines for its Q2. Revenue came in at $15.77 billion versus the $15.62 billion consensus. Earnings per share came in at $2.43 versus $2.17 consensus. Big hero here for IBM is the software business, which came in a quarter

billion dollars better than expected for the quarter. Infrastructure was also strong. Consulting was weaker than expected. I spoke exclusively with IBM CEO Arvind Krishna about the results ahead of the earnings call, which is coming up. Here's some of what he told me. On what drove software's outperformance, he said, now, as you know, mainframe hardware has been outperforming for many years now. So effectively, as the hardware capacity goes up, people are going to want more software. But I think there's a few more reasons. Cyber, overall resiliency, as in keeping the lights running, as maybe some other operating systems had trouble with at the end of last week.

Crowd strike there. Now, the demographics on interest rates, inflation, and environments getting more complicated is driving the need for more and more automation. So we call the category automation. But in there is things like AppTO for cloud cost management, he said. Now, on the consulting business, which has been up low single digits when IBM projected mid to high, he said, we get 10 to 12 percent of the people who leave each year. Now, I was asking him about whether costs are contained there or if he's going to have to do some cutting. So he said,

when you're talking about a couple of points, the weakness here, you can manage that without doing anything extreme. If it was gonna be five to 10 points off, that requires action. I also asked him about geography and those currency headwinds. He said Asia is strong aside from China and Europe has been unexpectedly resilient for the last couple of years and continues to be.

And on those currency headwinds with the stronger dollar, he said, assuming he's assuming and IBM is assuming that will continue. So, Nicole, to your point about some of those things, IBM, I mean, top line growth for IBM investors haven't always seen that. They haven't. And I think, you know, one of the things that we talk about often is that IBM has so much good stuff under the hood. And then it's how are we going to watch management execute on that? And when we start to see more of that consistent management execution, I think you'll actually see the market give more to IBM in terms of expectations. I believe it was just last quarter that they cut forward guidance for full year. So a little bit of an uptick here, although the consulting arm of the business is by far the largest part of their business. And so, you know, consulting across the board has been a bit weak,

which is a bit surprising, thinking about the advancements in technology and how, again, at that enterprise level, implementation, adoption is all going to happen for everybody. It certainly seems like some analysts were hoping this would be an inflection quarter for consulting. We'll dig into that more later in the hour. But in the meantime, Chipotle earnings are out. And Kate Rogers has those numbers. Kate.

Hey, Morgan. Yeah, Chipotle stock really rallying on this better than expected report up more than 7 percent. Now we'll take you through the numbers for Q2. EPS beats here 34 cents adjusted, you through the numbers for Q2. EPS beats here 34 cents adjusted better than the 32 estimated by analysts. Revenues also beat 2.97 billion. That's better than the 2.94 billion estimated. Same store sales also came in better than expected at 11.1% growth higher than the 9.2% projected by analysts. Its restaurant level operating margin was at twenty eight point nine percent. That's up one hundred and forty basis points. CEO Brian Nichols said

the quarter was, quote, outstanding thanks to a few things, brand marketing, including chicken al pastor returning to menus. He also noted that training around throughput and speed of service has really paid off for the company with eight percent plus transaction growth. That's a big number as well. Chipotle also reiterated its guidance for full year comp restaurant sales growth in the mid to high single digit range and chipotle ceo brian nickel will join us next for more on the quarter guys back over to you wow that stock 10 higher also higher at the moment service now up more than two and a half percent in overtime uh here are those results major news first, first of all, in ServiceNow's release,

a beat on both lines for Q2, a missed inline on Q3 for the subscription guide with management pointing to currency headwinds as the culprit there. At the same time, though, ServiceNow is raising the full year subscription revenue guide, which would imply Q4, by $33 million at the midpoint to offset an incremental $20 million headwind from currency. So that would be 22% year-over-year growth in constant currency. Now, here's the big non-financial news in this release. The departure of ServiceNow's number two, C.J. Desai, the president and chief operating officer. This after the determination that company policy was violated in last year's hiring of Raj Iyer, the former chief information officer of the U.S. Army, who had been leading some of ServiceNow's government business development efforts. I spoke with ServiceNow CEO Bill McDermott about all of this, bringing you some of that perspective in just a moment.

But first, let me get you the numbers. ServiceNow's overall Q2 revenue comes in at $2.68 billion. That's better than the 2.61 expected. Subscription revenue, $2.55 billion above the top end of the guide at 2.53. Earnings per share, $3.13 versus $2.83 expected. On the subscription guide for Q3, ServiceNow is giving a range of $2.66 to $2.665 billion versus expectations of $2.67. So roughly in line there. Now, on the backlog of business, CRPO, or current remaining performance obligations, ServiceNow reports $8.84 billion versus $8.68 perspective.

Now, as I said, I did speak with CEO Bill McDermott about the quarter. I started with some of those concerns out there that Gen AI demand might not be real and sustainable. Bill told me this. He said, let me tell you what's really going on, and it ain't that. Our Gen AI now assist platform doubled quarter over quarter and net new ACV. That's average contract value. In fact, he said, we had 11 now assist deals that were greater than 1 million, two of them that were greater than 5 million. Now, on the departures of Ayer and particularly Desai, he said this. We know that this was obviously a very isolated incident, but we are further sharpening our hiring policies and procedures as a result of the situation. So I think that it should be clear to you that when

you put discretion, utmost integrity, and complete transparency at the front of everything you do, I expect that to be reflected. He went on to say, if you look at our Fed business, John, it's up 50 percent year over year in our Fed customers. We actually have one across 100 million ACV in the second quarter. We love our government business. We would never compromise the integrity of ServiceNow under any circumstances. But as you know, when it comes to our government business and the pride that we have for it, there is zero room for error. We don't grade on a curve. Mike Santoli, stocks up 5% here in overtime on this beat on the top and bottom. And perhaps, you know, with this adjustment on the full year guide, some people might have been afraid that the momentum

wouldn't continue here. For sure. And I think obviously the setup, you know, the stock after the close is regaining what was lost plus a dollar during the regular session. So clearly just the message that things are made on track, you know, what we thought we were going to deliver, we actually were able to produce is probably good enough for the moment. I see that, you know, kind of across the board. Chipotle is a clear beat, but also a similar situation where you had a really kind of struggling stock going into the report. And it's kind of a steady as she goes quarter into that. OK, well, we've got Las Vegas Sands earnings out as well. Julia Borsten has those numbers. Julia. Morgan, Las Vegas Sands missing on the top and bottom lines. Revenues of two point seven six billion falling short of the two point eight billion that analysts estimated. E share of 55 cents a penny light of estimates you see shares now down about four percent now the results in macau did weigh on the quarter the company's saying visitation to the market remains well below levels reached prior to the pandemic and marina bay sands

or mbs that's the company's sing business, that was in line with expectations after some solid beats for that division in recent quarters. The company also announced it gets bought back $400 million of its common stock, with the remaining $645 million under its share repurchase program. Back over to you. All right. Julia Borson, thank you. Shares down 3.5% right now. Well, KLA earnings are out. Seema Modi has those numbers. Seema. Morgan, a sizable beat from KLA 10 Corp. The semiconductor equipment player reporting earnings of $6.60 adjusted.

The estimate was for $6.15. Revenue topping consensus. And what's most important here, of course, will be revenue outlook for the first quarter, which is the current quarter for KLA 10 Corp well above the street estimate, 2.75 billion. Analysts were expecting 2.6 billion. At this time, it seems like analysts are no longer just wanting that beat and raise. They're really looking at and quantifying the raise that companies are delivering. We're looking at the stock up here by around 2% in overtime.

CEO Rick Wall is saying we are encouraged by the early signs of a strengthening market environment for our customers at the leading edge and are increasingly confident in our plan for steady improvement. Guys, back to you. All right. Sima Modi, thank you. Nicole, thank you for joining us. Mike Santoli, we're going to see you in just a bit.

But let's get a check on Chipotle again, because it looks like those shares are rocketing higher, up about 13 percent right now, rallying on better than expected results for the second quarter. Joining us now is Brian Nichols, CEO of Chipotle, and Kate Rogers. Kate. Morgan, thanks so much. And Brian, thanks for joining us. Yeah, great to be with you guys. So I'll start here. So many names and competitors in this space are offering value deals right now. Chipotle has not had to go in on that. There's no $5 combo menu option for consumers right now. Tell us how you're managing this level of transaction growth, which was up by

more than 8% this quarter. Yeah, obviously, I'm really proud of the team and the results that we were able to achieve in the second quarter. You know, the comp, the 11% comp was driven by eight points or eight percentage points of transaction growth. And that's really a testament to our operators executing great throughput, our restaurants being staffed correctly, being deployed correctly. And then our marketing really hit with some terrific menu news around Chicken Out Past Store. So it really was a terrific quarter. You know, I've said this over and over again, the value proposition for Chipotle really hinges on, you know, great culinary, provided great customization with terrific speed. And then obviously one of our key equities are

these generous portions that we provide. And I think our teams have done a fabulous job of doing that. And Brian, last quarter when we spoke, you had shared that you saw transaction growth in every income cohort. Has that stayed steady in the face of cheaper competition, particularly for the lower income consumer? Yeah, you know, we're very fortunate to continue to see the strength of transaction growth coming from every income cohort. You know, obviously, the peak of the quarter for us was in April. I think we talked about this on our last earnings call where we really just, you know, hit on all cylinders between the launching of Chicken Out Past Store, our throughput really elevating because as I've talked about, that's kind of peak burrito season. But yes, we continue to see really nice, you know,

performance out of every income cohort. And I think that's a testament nice, you know, performance out of every income cohort. And I think that's a testament to, you know, great culinary, great customization done at great speed. Brian, it's Morgan. It's great to have you back on Overtime. I realize Chipotle is bucking the trend here with a report you just put up. But but we did get the commentary from Lamb Weston this morning about restaurant industry traffic slowing down. We had Tillman Fertitta on our air earlier today talking about the French fry effect, the Dom Perignon effect, what he's calling the steak effect as higher-end consumers pull back on their spending, too. What metrics are you watching? How do you continue to sustain this growth in the face of

what does seem to be a broader slowdown across the industry? Yeah, look, as I mentioned, the peak for us was really in April. We've definitely seen consumers continue to talk about tightening up, you know, and we saw, you know, consumers frankly move their buying behaviors throughout the quarter. And I think we've talked about this in the past. You know, as we move out of peak burrito season, we kind of move into this summer season where a lot of behaviors are still out of the ordinary. And we're still trying to understand what that behavior looks like between all the travel that people continue to take and how that just changes their normal routine. So, you know, what I keep reminding our team is, look, whatever happens macro or seasonally, we have to figure out how to operate to our best of our ability. And we have the saying around here, we're going to treasure every guest that comes into our restaurant and let's control the things that we can control.

Right. So if we can give them a great experience with great food, great bowls, great burritos, we get rewarded with their business coming back. You know, some of the other things around how their behaviors change based on consumer confidence, the seasonality, those are things that are out of our control. So we're better off spending our time on the things that we can't control. Hey, Brian, it's John. Good to see you. It's one of the things that you can mostly not control, but maybe control a little bit. Labor costs. Give us, if you will, an update on that. They were twenty four point four percent last quarter. I believe you said you expected them to stay in the mid twenty four percent range. And what's going on in California with the wage increases there? Yeah, look, luckily, you know, wages have kind of settled in this kind of mid single digit inflation kind of range. Obviously, California is the exception to that. We have a huge step up in April.

We had to take some pricing for it. That's been really tough, frankly, on the restaurant industry in California. From what we see in the data, you know, consumers in general are saying, geez, you know, restaurants have gotten a lot more expensive as a result of all the pricing coinciding with the big move in labor. But the positive is on labor right now, we're seeing tremendous applicant flow. Our restaurants are really performing with great staffing and stability. And when we get that staffing and stability, we get better repetition, we get better culture in the restaurant, and then we get, I think, better outcomes. And I think that's what you're seeing in our restaurants right now. Brian, it's Kate again.

Quick last question here. We talked a lot about the U.S. consumer. I'd love to look internationally as Chipotle is starting to expand with that licensing deal with the Al Shaya Group in the Middle East. You opened another location there this quarter. What are you seeing internationally, and how's the consumer feeling in that market? Yeah, look, there's definitely some pressure on the consumer internationally. I am happy to say that our European team is making tremendous progress. I think they've really improved the culinary execution. I think they've really improved our supply chain. And they've also really improved, I think, our throughput speeds. So those are our

company restaurants in Europe. And then with our new partnership with the Al Shaya Group, we're off to a terrific start. You know, the first restaurant we opened in Kuwait continues to perform really well. Excited to open our second restaurant in Kuwait. And then we'll be opening a restaurant in Dubai with them in the fourth quarter as well. So proving to be a terrific partner. They share our passion and love for great culinary, great teams. And obviously, that's why we picked them to be a partner and they've been terrific. All right. Brian Nickel, CEO of Chipotle. Thank you. And thank you to our own Kate Rogers for bringing that to us. Well, after the break, we're going to take a deeper look at ServiceNow's quarter with that stock up more than 6.5% and stock reaction continuing over what's

going to be a very closely watched earnings call at the top of the hour. And financial software firm OneStream surging in its Nasdaq IPO on a very ugly day for the index overall. But the company's co-founder and CEO will join us to talk about this public debut. Those shares finished up 34 percent. Stay with us. Welcome back. Some news from Bank of America just crossing. The company authorizing a new $25 billion stock buyback. That's effective August 1st. The stock is a bit higher here in overtime, up about half a percent. We're going to bring you more details as we have them. Yeah, more than a bit higher is service now.

That stock is up more than 6% in overtime on top and bottom line beat. The company also announcing that its president and chief operating officer has resigned effective immediately. Now, Joel Fishbein of Truist Securities joins us. He's got a hold rating on the stock and I believe a $750 price target. It's trading above that right now in overtime. So these results strengthen the top and bottom line. I wonder how you look at this subscription subscription guide and what you make of the size departure. So number one, I think it's a sigh of relief. This is a company that has a lot of large deals that they need to make every quarter. They have a lot of large customers. And as you know, software has been under pressure here for the last several months and service now delivered a really solid quarter. The key takeaway, I would say, is that backlog number. It was $18 billion

up 31%. That is a significant, again, sigh of relief that business is alive and well here. In terms of CJ departing the company, I think this is a loss for the company. I don't know the circumstances around his departure. He was very prominent in the organization, a big spokesperson, dealt with a lot of customers as well. I do know that they have a very deep bench there, but CJ was, in some minds, thought of the heir apparent to Bill McDermott when and if he decided to step aside. Certainly true. Also, when I'm looking at what Bill McDermott told me about this quarter, and I'll just read a little bit of this to you again, on the questions about whether Gen AI demand is real and sustainable, people who are net new ACV, 11 new now assist deals that were greater than a million, two of them greater than five million. How much does the size matter when you're talking about these Gen AI deals? So as you know, Gen AI has been obviously

invested in, talked about, et cetera. There's two companies in our infrastructure coverage that are actually benefiting from Gen AI. Number one is Microsoft. Number two is ServiceNow. In the press release buried in there, say they have over a billion dollars in pipeline in Gen AI. There's no other company besides Microsoft that has that much actual backlog that are actually monetizing AI, Gen AI workloads. I think this is a big deal for the company. And I'm looking forward to the call and the pressing bill on some of these big customers and who's actually spending $5 million and above on ServiceNow for Gen AI. How does this set us up for the rest of software earnings that we will see over the coming weeks, particularly for those companies like ServiceNow that are deploying Gen AI

applications in that layer at a time where there's been a lot of focus on where investors should be putting their money to work as we begin to talk about return on investment. Yeah, so we've been talking about this. There's been a rotation out of software and into the semis, and we think that rotation is going to shift back starting in the August-September timeframe. What I really like about this quarter is that the fact that the stock is up, they got it in line. They didn't guide up, right? And what that means is that the estimates going forward for Q3 are probably likely beatable going forward, just like they beat this quarter. And so they're de-risked. And when we get into the situation where software becomes de-risked, people will invest in it because it becomes less

risky as an investment. And I think people were going into this quarter thinking that these guys might miss or guide down. And the fact that they didn't, I think, bodes very well for the rest of the software group. And I expect more of the same. People beating estimates slightly, not raising the guide just by what they beat, not raising it more. And having favorable setups in the 3Q, 4Q, where we have, number one, government spending cycle where ServiceNow is very well positioned. And number two, we should have somewhat of a budget flush, even though that's under controversy right now. We do think people have held back technology spend, particularly around software, for 4Q. And we think we'll get that.

And that should drive software higher going into the back half of the year. Okay. And ServiceNow shares are up now 5%. Joel, thank you. And you do see some other names like Oracle, like Salesforce, higher in sympathy as well. We've got a news alert on Viking Therapeutics. Angelica Peebles has the details for us. Angelica. Hey, Morgan. Viking Therapeutics shares are up about 11 percent right now, and that's after the company is saying that it will advance its experimental shot for obesity into phase three trials. Now, this is important because Viking has already shared positive data from its phase two trial, but there were some questions on whether they would have to run additional studies

before going to phase three. But Viking Today is saying that it's making this decision after receiving feedback from the FDA. It will have another meeting with the agency later this year, but they feel confident to go ahead and plan for that phase three trial. Now, they're also saying that they are planning to move its experimental pill for obesity into phase two trial in the fourth quarter of this year. And of course, everyone's so focused on this space that we should expect to hear more and we'll certainly come back with anything else we hear. Morgan. OK, shares of Viking up 11 percent. Angelica Peebles, thank you. When we come back, Mike Santoli puts today's big market pullback into context. Three charts you need to see. And another check here on Ford. It is hitting the brakes in overtime after a big earnings miss down 12 percent.

Ford reporting a one point one four billion dollar Q2 loss for its EV division, affirming guidance of a loss of five to five point five billion dollars for that division this year. Overtime will be right back. The Matadors won today with the Bulls on Wall Street. The Nasdaq and S&P 500 turning in their worst sessions since 2022. Let's bring back Mike Santoli for his perspective. Mike. Yeah, John, this pullback has brought the market

to kind of an interesting spot. Take a look at the S&P 500 on a one-year basis. It closed right at its 50-day average. It seemed like once we broke down decisively below 5,500, this trend line was kind of a magnetic force to a degree to the downside. Now, we were below it as recently as April. Remember, we had a 5% to 6% pullback back then after the first quarter, finishing on a high. Here we have some third quarter weakness, still some seasonal turbulence we're going to have to deal with, too, for a little while to come, potentially. Take a look here at banks relative to the Nasdaq 100, because over the last one-year period, the banks are now in the lead. Obviously, anything longer

than this, Nasdaq 100 is well in command. But it is interesting right now that the banks, even declining today, have nosed ahead of the NDX, which is off about 8% from its all-time high. Take a look at homebuilders, another somewhat interesting spot. You think lower treasury yields would be the thing? Well, housing data has been weak. This is a, what is this, a two-year. And you see we just nosed above that old high and then have pulled back below it.

So you see, it seems like the ingredients for homebuilders to do okay are there. But we have some macro kind of jitters going on right now, John, or Morgan. So we'll see how that plays out. Either one. Yeah. John or Morgan. We're both here. Yeah.

Utilities, though, doing well. Up 1% in the S&P. And Dow Utilities hitting a fresh 52-week high. Mike Sant both here. Yeah. Utilities, though, doing well, up one percent in the S&P and Dow utilities hitting a fresh 52 week high. Mike Santoli, thank you. Breaking news on NBA rights. Julia Borson has details. Julia. That's right. Big news. Morgan, the NBA has struck its next 11 year series of deals, signing new 11 year media agreements with the Walt Disney Company, NBCUniversal, CNBC's parent company, as well as Amazon Prime Video, through the 2035-36 season. As part of this, the NBA is saying that it rejected Warner Brothers Discovery's attempt

to match the offer that Amazon had made for its package of games. Disney remains home of the NBA Finals, Christmas Day, ESPN Games on Wednesday, NBA Saturday, Primetime on ABC, and NBA Sunday showtime packages. NBCUniversal to telecast opening night, new Sunday night primetime games, and Tuesday regionalized games. And then Prime Video also getting its own package of streaming games. Back over to you. Dikembe Mutombo treatment to Warner Brothers Discovery there.

Yeah. Julia, thanks. All right. Still ahead, much more on all the big earnings movers that need to be on your radar as we count down to the analyst calls from IBM and Ford. Plus, one stream going public today, and the stock was a huge winner on Wall Street. Up next, the enterprise software company's CEO joins us next in a First on CNBC interview. Welcome back to Overtime, the worst day for tech stocks this year,

but one bright spot in today's sea of red, OneStream. The enterprise software company soaring over 30% after its IPO. OneStream is a financial software company. Prominent customers include UPS, Capital One and Doc Martens. Joining us now in a first on CNBC interview, founder and CEO Tom Shea. Tom, congratulations on going public today. That's exactly where I want to start with you. The fact that you had the worst day for the Nasdaq since late 2022, but you bucked the trend.

Do you feel like investors are embracing the narrative you're bringing to the market here? Absolutely. With all this uncertainty that we're seeing, CFOs really need a platform, and that is what OneStream provides. So I think what you're seeing today is investors are understanding that story and really recognizing that we have an outsized opportunity. So we're really excited about our listing today. Now, I've read reports that you considered going public a few times in recent years. The last private valuation that we have for you is $6 billion. I realize with the stock surging today, we're back at a market cap similar to that. But

why the decision to go public now? Well, we've had this idea to be a platform from the very beginning, from the first line of code, from the first customer. And it's always been a large opportunity and we felt that the company should and could be public. And so what you've seen is a demonstration of our execution over a number of years.

And investors have really seen and been able to experience that sort of trend-based performance. So we didn't feel that we had to go public. We felt that it was the right time for us to really amplify our business and accelerate where we're at. After going to $500 million in annual recurring revenue, we're really at this point where we feel that we can take this to another level with more and more awareness and opportunity and transparency that comes from being a public company. Tom, you're going up against Salesforce, Workday and others. I'm thinking particularly the likes of Salesforce that have these software platforms that they try to build on.

I know you go to market both on your own and with the likes of Accenture and PwC. pwc but how do the the hyperscalers factor in here and uh in your go-to-market motion as you seek to scale uh into the the billion plus arr range that's a great question john and we really think about uh one stream as being very uh focused on the office of the cfo so so like you've seen you know the companies that you've mentioned, Salesforce, ServiceNow, Workday, who have really focused on other particular functions, we feel that we have the right platform and capabilities for the office of the CFO. And that's what we're focused on is delivering the ability for CFOs to become more efficient at what they do as well as be able to become a more strategic partner by getting leverage on that

efficiency. So we have a strong partnership with Microsoft as a hyperscaler for delivery and those two things combined give us the ability to execute at that level. How does that partnership factor into your AI strategy and how you would use OpenAI versus others perhaps as you build that more and more into your software? Great question. Our AI strategy is really focused on delivering applied AI technologies to the office of the CFO. So thinking about how would a CFO actually need to use and interact with large language models. Microsoft is critical in delivering the infrastructure that we use to deliver on our AI services platform. So really, it's a very synergistic relationship,

and at the core of it is the compute and the large language models, and then we provide the applied technology set that gives a CFO the ability to have a fact-based interaction with an LLM, which is critical for this type of customer. All right. A big day for OneStream. Tom Shea, the CEO, thanks for joining us. Thank you. Up next, a top analyst reacts to IBM's results, tells us what he wants to hear from management when the call starts at the top of the hour. Overtime.

IBM shares higher by more than 2.5% after it posted a beat on the top and bottom lines earlier this hour. Joining us now is Evercore ISI Senior Managing Director Amit Dhariannani. Has an outperform rating and $215 price target on IBM. Amit, it looks like a lot of good news here, raising cash flow to over 12, the guide here, the expectation to over 12 billion and strength on the top line. Does the consulting business weakness matter?

You know, the consulting business, at least at this point, I would say, was in line to what was expected. The question, I think, going forward, John, does that inflect higher into the back half of the year? To your point, the software business is doing fairly well. The AI consulting piece, at least on the booking side, has more than doubled to a $2 billion number for them right now. So the question really for them will be, can the consulting business also show growth in the back half of the year? And if that happens,

then I think you have both software and consulting sort of firing all cylinders for this company. Well, I mean, Arvind told me, no, don't expect much better out of the consulting business in the back half of the year. At the same time, though, the infrastructure business mainframes, not just on the hardware, but also on the software, contributing quite a bit here. So is that enough to make up for any disappointment over the consulting business perhaps not perking up? Yeah, I would say, listen, software is probably the most crucial thing for them, right? It's the highest margin business at 80% gross margin, if you think about it that way. Consulting is probably the second most critical thing for them and then hardware is probably the third one so i would say as long as the software business is the one that's

offsetting the weakness which is what happened in june for them uh software doing well consulting a little bit weaker uh then i think investors are going to be okay with it uh but i don't think investors are willing to assign a higher valuation to a better hardware story at IBM if consulting doesn't recover. What to make of Red Hat? You know, listen, the numbers look okay. They don't look great. They look okay at high single digits, up 8%. The software business actually did very well because of this transaction processing platform business is not double-digit. That's actually more tied to the hardware mainframe business. But Red Hat, the part I would say that is interesting is their bookings seem to be accelerating to mid-teens. And so one of the questions beyond consulting would be for them,

when does that mid-teens of acceleration in bookings at Red Hat translate into a better revenue number for them as well? Now, what about, oh, sorry. I was going to say, the macro backdrop here. I mean, we're talking about it with ServiceNow earlier in the hour, but in terms of where companies are putting their tech dollars to work, how does that continue to shape up here? How does the commentary and the numbers we get out of IBM contribute to that outlook? Yeah, I mean, listen, I think companies are spending money. It's just a question of which buckets are they putting the dollars in. And so far, AI seems to be the big bucket of investors companies actually investing more and more

aggressively right uh the question is where is that dollars coming from right and certainly in ibm's case it would appear that consulting especially the discretionary part of consulting seems to be a bit weaker for them versus not um there's almost an argument to be made that some of the mainframe assets they have are starting to play very well into the AI narrative, and that could be the place where this is. Let's say consulting is where you're seeing some headwinds potentially from AI investments taking up more of the budgets versus what we're traditionally going to,

a more discretionary consulting environment. What about HashiCorp and the hybrid narrative in this environment? Arvind told me he's seeing strength across the globe, you know, ex-China pretty much. Does that cloud management narrative continue to be important even as the macro backdrop is uncertain? You know, I think this will matter a lot to them. And one of the things that's happening, I believe, at IBM right now is customers post the Broadcom VMware transaction are looking at alternatives to VMware, given how high the market share there is. And IBM with Red Hat, I would argue, is probably one of the most logical places for them to end up at. We've also had a couple of their peers, a couple of their competitors that have gone private in Europe against Red Hat. And so I do think there's a bit of a share game dynamic that's going to come and favor ibm along with the reality that a lot of these generative ai models are very likely going

to end up being hybrid in nature versus being 100 in the public cloud okay ahmed thank you for joining us shares of ibm of three percent i say big blue. Apparently I'm dressed for the occasion. Very nice. All right. Well, defense contractors and transports take center stage tomorrow on the earnings calendar. All the names you need to watch, plus a key economic report that the Fed could be closely watching. Stay with us. Welcome back. Let's get a check on some overtime movers. Quantum Scape is lower by about 5% after a wider than expected loss for the second quarter. Align Technology is lower by nearly 9% after narrowly

missing revenue estimates. Guidance was light as well. And Edwards Life Sciences also sinking nearly 14% after a revenue miss. The lower end of the guidance range coming in below expectations as well. Well, Chipotle giving up nearly all of its huge pop during the earnings call. Kate Rogers is back. She's got the reason why all the context. Kate. Hey, Morgan. Yeah, we saw those shares start to slip on some comments that were made by outgoing CFO Jack Hartung on the call saying, quote, We expect our margins will be under pressure for the next couple of quarters. Most, if not all of this pressure is seasonal, temporary or it's an investment that we can offset through efficiencies. And we believe our industry leading margin structure is still intact the company as a reminder though is maintaining

full year comp guided guidance rather of mid to high single digit growth so still strong guidance there just a little bit of a reality check perhaps on margins and what is a very tough environment and chipotle had quite strong results in back over to to you. All right. Kate Rogers, thank you. We've gone from up 14% to up about 1.5%, 2%. That is quite a swing. ServiceNow still up, looks to me, about 6.5%. IBM holding in as well, up nearly 4%. So pretty strong result for software after the NASDAQ took a beating today. Yeah, I'm still focusing on Ford.

They're losing $44,000 per vehicle in the EV unit right now. That's just a huge move lower for that name. One to watch tomorrow. Yes, indeed. All right, that's going to do it for us here at In Overtime, where the S&P and the NASDAQ had their worst day since 2022. Fast Money starts now.