Closing Bell - Closing Bell Overtime: Earnings Deluge Begins With Microsoft & Google; Qualcomm CEO On New Products 10/24/23

Episode Date: October 24, 2023

Major averages closed higher but investor attention was squarely on the companies reporting after the close. Vital Knowledge’s Adam Crisafulli, CFRA analyst Angelo Zino, Roth Capital analyst Rohit Kulkarni and our Michael Santoli help break down earnings from Microsoft, Alphabet, Texas Instruments, Visa, Snap and Teladoc. Microsoft and Alphabet shareholder Doug Famigletti weighs in on what to do with the heavyweight tech stocks. Plus, Qualcomm CEO Cristiano Amon on the company’s new chips and Advent International Chairman David Mussafer on best opportunities in private equity. 

I'm John Ford coming to you from CNBC's Technology Executive Council Summit in New York. And I'm Morgan Brennan at CNBC headquarters. It's a make or break hour for tech as Microsoft, Alphabet, Texas Instruments and Snap get ready to report quarterly results. In just a few moments, we will have live reaction and analysis of those names plus Visa and more. And a first on CNBC interview with Qualcomm CEO Cristiano Amon. He's going to discuss the new chips the company announced this hour, including, hey, an ARM chip for PCs. Remember the market action because of NVIDIA headlines yesterday. Now, as we await the earnings, let's bring in Vital Knowledge founder

Adam Crisafulli. Adam, I'm specifically wondering about the impact potentially of these results tonight on overall trading tomorrow, given the positive close for the indices and not only the numbers themselves, but how much the reaction after hours to these results might tell us about where investor sentiment is. Yeah, so just from a mechanical point of view, obviously, these companies are going to be crucial, but they dominate the indices. So, you know, we're going to be watching them very closely. The first week and a half of the Q3 earnings season was a little bit underwhelming. There were a number of red flags. The results that came out this morning and last night, they did look a little bit better. So you had a number of large cap-out performance today.

Adam, got to interrupt you here. Microsoft's numbers are out. The stock is popping after hours. Let's go to Steve Kovach with the numbers. Steve? Yeah, John, it's popping because of beats on the top and the bottom line, solid beats at that. Let's go over EPS, $2.99 versus the $2.65 Street was looking for. Revenue is also a nice beat there, $56.52 billion versus the $54.49 billion the Street was looking for. Digging through the report now, John, get you some Azure numbers and other stuff to look at in a bit. Well, Adam, I was just in the process of asking you about this. We have the stock, at least on this initial headline, moving higher by more than 5%. How much is this going to matter once again for the markets potentially tomorrow? I think it's crucial. So like I was saying, the first week and a half of rainy season was underwhelming. The numbers that we got this morning were a lot better.

And so I think the bar now has been knocked lower because of how the season started off. And if the results continue as they did this morning, and Microsoft is a good example so far, obviously we have to wait for the conference call and get guidance later tonight. But this is certainly going to be encouraging for the broader tape. And just mechanically, these names dominate the indices. So however they trade will have an enormous impact on the broader S&P and NASDAQ. OK, we've got earnings from Texas Instruments as well. Christina Partsenevelis has those for us.

Christina. Drew, you were seeing a mixed report. Revenue is coming in less than anticipated at $4.53 billion on EPS of $1.85. That was a beat. The street was anticipating $1.82. But the weakness is really coming from the Q4 outlook, which came in lower the range for EPS and revenues, both lower than what the street was anticipated. And just one line, the company saying revenue was flat, sequentially decreased 14 percent from a year ago. Automotive growth continued and industrial weakness broadened. So those are the two issues right there. Q4 outlook week, mixed report, only a EPS beat.

Back over to you guys. All right, Adam. Adam, stay with us. And we're also going to bring in CNBC senior markets commentator Mike Santoli as well. Mike, actually, I'm going to go to youBC Senior Markets Commentator Mike Santoli as well. Mike, actually, I'm going to go to you first. We just heard from Texas Instruments. The auto piece of that really got my attention, given what we saw with GM hitting fresh 52-week lows earlier today. Tesla popping, as you see. EV plans there, scale back.

And, of course, impact of the strike. All right. We've got more earnings before we go there. Alphabet. Deirdre Bosa has those numbers. Hey, Dee. Hey, Morgan. Alphabet shares, they are down more than 6% in the after hours, though it is a beat on the top and bottom line. Third quarter revenue coming in at nearly $77 billion. Exactly coming in at $76.69 billion versus seventy five point nine seven billion. So a beat here. Also on the bottom line, EPS coming in at a dollar fifty five versus a dollar forty five expected. What may be hitting the stock are these cloud numbers, guys. I'm just going to give them to you because I have

them. Eight point six four billion was expected in terms of revenue. Eight point four one billion came in. That is a little bit of a miss there and could be the reason for some of the weakness. Remember that Google does not give guidance. We'll continue to dig through this and bring you more. Back to you. OK, those shares are down 5 percent right now. Dear Jabosa, thank you. Mike Santoli, I'm going to go back to you because we got Texas Instruments. We got Microsoft still going through some of the results there. And now we've got Alphabet with at least it looks like a miss in the cloud division. Yeah. And that was the one, you know, we just finished talking to a few minutes ago that Google was the one where people

seem to be pretty crowded into the stock. It went out a percent and a half below its highs. It really has shown a lot of upside. So that's it. By way of saying seems like maybe the threshold was higher for people to perceive a real beat as a beat. You get some color about some of the below the line stuff, I think, on the call, probably going to round out the picture. But I get why the reflex was lower when there were high hopes embedded in the price. Yeah, Adam, I wonder what you think about the difference in how Alphabet and Microsoft have been trading, certainly recently, but overall this year. As Mike just mentioned, I think Alphabet itself was just about a percent and a half from 52-week highs. Microsoft was well less than that. And Alphabet had a stronger session leading into these earnings than Microsoft did.

So given those two things, do we need to calibrate the after-hours reaction, perhaps based on expectations or no? Yeah, I definitely think that the bar was a little bit higher for Alphabet than it was for Microsoft. I'm still interested to see kind of the details on Microsoft's Azure business, but they implied on the last quarter that the AI ramp for this fiscal year would be a little bit more back-end loaded. And so I think people kind of lowered their expectations on Microsoft heading into this quarter versus Alphabet. And that kind of explains some of the discrepancy that you're seeing in the uptowers price action. Yeah, it looks like cloud revenue for Microsoft, Santoli, up 25 percent. And it says server products, well, revenue in intelligent cloud was $24.3 billion.

That increased 19 percent. Server products and cloud services revenue increased 21 percent. That was driven by Azure and other cloud services revenue growth of 29 percent. So certainly a juxtaposition potentially to be had here between what we're seeing, at least in these early combing through results from Microsoft versus Alphabet at a time where, at least until recently, these two had been trading in lockstep. But Alphabet, at least from a share gain perspective, has been outperforming since the last earnings. Yes, although at a much smaller base, I think that's the difference. Microsoft might be considered a little more the bellwether for what the overall industry might be expecting.

And, you know, it's always seemed to me that you pay close to 30 times earnings for Microsoft if you choose to, because they're going to figure it out. You don't have to worry quite as much about whether they're going to make the turn correctly over the course of a quarter. So understand the reaction. We'll see, again, Microsoft guidance on the call. You still have to keep yourself open to the idea that these narratives can switch back in a hurry. Yeah, Adam, a couple of things in these Microsoft numbers jump out to me. Of the major categories, productivity, business processes, intelligent computing, more personal computing, they beat expectations on each of those, probably the most in intelligent computing, but even more personal computing, where Windows, you know, the PC-related business lives, they beat by almost a billion dollars versus expectations.

But looking at some of the smaller divisions, LinkedIn in particular, LinkedIn revenue was up, but just 8%, and perhaps speaks to why there might be some belt, well, why there is some belt tightening there with Microsoft having announced some layoffs even in engineering in LinkedIn, perhaps trying to drive efficiency even as there is growth and relative strength across Microsoft's whole business portfolio. Yeah, no, I think, you know, the internet overall, the LinkedIn and then and the search business is kind of call options for the story, really. It's not so central to the narrative. So if they do well, investors kind of celebrate.

You know, there was a little bit of optimism a few months ago about Bing partnering with OpenAI and search. Didn't seem doesn't seem to move the needle dramatically. But, you know, by far, the big focus is on productivity and the cloud business as far as kind of driving the stock price and the narrative forward. So I think delving into those details is going to be really important. And on the PCs, you know, there's been a lot of indications that we're coming out of a very aggressive inventory correction in that industry. You know, you've got Gartner numbers out, you've got IDC numbers out, all suggesting that the market, that market is starting to rebound now going forward. And there may actually also be an AI driver to the PC market, that market is starting to rebound now going forward. And it may actually also be an AI

driver to the PC market, too. Adam, hang tight. We got Visa earnings out as well. Kate Rooney has those numbers. Kate? Hey, John. So it's a beat here for Visa. They're also announcing a 16 percent dividend increase and a $25 billion buyback. Getting to some of the numbers here, adjusted EPS coming in nine cents better than expected at $2.33, revenue of $8.61 billion. That was a beat here as well, up 11% year over year. They are giving guidance for the fiscal year. As I said, this is Q4, so we've got some full year numbers here. They're looking for high single digit to low double digit revenue growth. Estimates were 10.4% growth for that revenue number. No EPS guidance. We've got a quote here from the CEO saying they're looking at resilient consumer spending. They

also talk about recovery of cross-border travel. That is key here as well. Payments volume up 9% and then cross-border, that international business, up 16% here. John Visa's up more than 2 percent after hours. Back to you. OK, Kate Rooney, I'll take it from you. And that's certainly been a theme we've seen since the last at least the last quarter with the credit card companies, the Visas and MasterCards and Amexes of the world. Snap earnings are out. Julia Borson has the numbers. Julia. Hey, Morgan, that's right. Snap beating on the top and bottom line. The company reporting an unexpected profit of two cents per share rather than the four cent per share loss that analysts had anticipated. We see Snap shares are up 20 percent or now about 19 percent in after hours trading. Now, digging into this, revenues beating in, beating expectations coming in at one point one nine billion dollars rather than the $1.11 billion estimated. The company is saying that they

are seeing the impact of improvements they've made to their ad platform boost results faster than anticipated. Daily active users were pretty much in line with expectations. Fourth quarter guidance looks a little bit mixed. Snap projecting fourth quarter revenues in a range of $1.32 billion to $1.38 billion. That is ahead of the midpoint of $1.33 billion that analysts are expecting. But Snap cautioning that profits could be less than Wall Street expectations, giving a range of $65 to $105 million versus the consensus $103 million estimate. Snap flagging uncertainty around the Hamas-Israel war, saying it caused some brand advertisers to pause campaigns. The company also announcing a half a billion dollar share repurchase program. Guys?

All right. Those shares up 16 percent right now. Julia Borsten, thank you. Adam, Chris Afouli, I'm going to go back to you on this one. I mean, we tend to see big moves in one direction or the other whenever Snap reports earnings. How much does this tee us up for Meta tomorrow? It's really hard to say. There haven't been, you know, there's not really a great correlation between the two companies. Snap is notoriously inconsistent

in terms of quarterly results that they post. So it's really hard to say. You know, Meta, Alphabet, TikTok, and then Amazon are really kind of pulling away as far as online advertising since they're and it's really concentrated in those companies. So if you want to really get a read on meta, I think Alphabet is going to be a much more important, more accurate barometer than Snap. So it'll be really interesting on the call.

And it looks like the advertising businesses at Alphabet perform decently. It's more just the cloud business that underperformed. But Alphabet, I think, is much more important as a read-across for the whole industry than Snap. All right, now let's get back to our Steve Kovach for some more on Microsoft. Steve? Yeah, John, I really want to point out this Azure growth number,

29% beating the estimates of 26%. This is something investors are really watching for, John, because we saw that growth rate just decelerate over the last two years. You might remember it wasn't long ago is growing 48% quarter every single quarter. It's dipped down to 29%. But again, it's re accelerating for what we've seen better than expectations. And that could also be why we see shares climbing even higher than what I was with you just a few minutes ago. And then I also want to point out Windows revenue. This is the money that Microsoft makes every time a third party sells

a computer, the Windows licensing revenue. It's return to growth. Now, it's up 4% over last year, and that's easier comps, of course, because we know people have not been buying PCs last year and a half or so. But it is a positive sign that there is some return to growth for the Windows OEM, John. All right, Steve Kovach, thank you. Mike Santoli, Steve points out something interesting here, Azure growth at 29% versus 26% expected, while Google Cloud turned in cloud revenue of8.41 billion versus $8.64 expected. What kind of setup is that for Amazon? Where does it set the bar for AWS? I mean, I guess they've got to be closer to Microsoft than Google here.

Yeah, well, I was going to say, help me answer that, because is it about Microsoft being a good tell on the end market demand and the fact that customers maybe are through that period of really trying to tighten up their spend? Or is Microsoft getting more share? I mean, I guess that's the question in terms of where it is. I think it'll probably be taken a little more as a net positive, maybe encouraging going into Amazon's numbers. Okay. Adam, I want to get your thoughts, especially since we know that these mega cap names have driven the market and the gains in the market more broadly this year. But even if you just look at the trading we saw today, which was very

earnings correlated with many other types of companies in other types of industries this morning, how do you expect this to play out tomorrow? And how does it set us up, given the fact that we did close in the S&P above the 200-day moving average today, which is a key technical level? Yeah, I mean, I'd say today was probably the best day of the earnings season. Now, we still have a lot to go, but you had this morning a number of, you know, large-cap non-tech companies, whether it be 3M, GE, Raytheon, Verizon, all had healthy results, all had decent guidance. And now after the close, you know, with the exception of Google, which seems to be confined to that one unit,

but Visa, Microsoft, the Google alphabet, the Google advertising businesses all put up healthy numbers, all came in at expectations. Certainly, I think, very encouraging. And again, after the first week and a half of the Q3 season which was underwhelming you know if the rest of the season looks like today it's certainly going to be a big a big shot in the arm for the market. Okay Adam Christofoli thanks for joining us Mike Santoli we will see you in a little bit we're also going to be breaking down Microsoft and Alphabet and Snap in much more detail throughout this hour. So we will have that reaction to all of today's After Hours action, including when an analyst and a shareholder of Microsoft and Alphabet make of those results.

As those stocks you see right there on your screen move in opposite directions. And later, he's been called private equities corporate turnaround artist. David Mussoffer of Advent International joins us in a rare interview with where he sees opportunity right now. Plus Qualcomm making some big chip announcements as we speak from the Snapdragon Summit in Maui. CEO Cristiano Amon is stepping off stage to talk to us here on Overtime First before he's going to go back on stage after he speaks with us. That's all happening when Overtime First before he's going to go back on stage after he speaks with us. That's all happening when Overtime comes back in two. Welcome back to Overtime.

Both Microsoft and Alphabet reporting third quarter earnings just moments ago. You can see the opposite reaction in those stocks right now. Joining us to break it down is CFRA Research Senior Equity Analyst Angelo Zeno and Griffin Asset Management Portfolio Manager Doug Famiglietti. Doug holds a large position in Microsoft and a small one in Alfolio Manager Doug Famiglietti. Doug holds a large position in Microsoft and a small one in Alphabet and joins us for the first time here. So welcome to you, Doug. I will start with you, Doug. As an investor in these companies, what you think of the results that we've gotten so far? Well, I mean, I think the Microsoft results were great. I mean, as our revenue growth, I mean, I think that, you know, the estimates were more in the 26 percent range and coming in at 29 percent. So that's positive. It's no surprise to me that the stocks are moving the way that 58%, so coming in with a lot of expectations. I think both of them are pretty reasonably priced given their long-term growth,

but I think the cloud business for Alphabet was a little disappointing. And given the fact that it's a much smaller percentage of their total revenue versus Microsoft, which is 22% of their revenues is deserved, whereas with Al alphabet it's more like 13 14 so i think uh growth there being uh disappointing uh on a relative basis is probably what's hitting the stock right now okay angelo do you see it the same way is that why we're seeing both of these names move in opposite directions especially when you see microsoft azure up 29 and representing a re-acceleration of that business yeah no i i would completely agree with all of that. I mean, you kind of look at the numbers here. I mean, the 22% growth rate in terms of, you know, Alphabet's cloud business is definitely a big disappointment, a deceleration from the 28%

growth rate we saw in both Q1 and Q2 of this year. And, you know, completely different than what we're seeing right now on the Microsoft side of things, which is that now finally starting to see an acceleration on the cloud side of things. I will say, as far as Alphabet is concerned, the positive here is the digital ad spend landscape is looking a lot healthier than I think most anticipated out there. You're looking at search growth of about 11%. You're looking at YouTube growth at 12%.

So as far as the digital ad spend landscape, that does bode well also for Meta going into tomorrow night's results. And as we kind of go into 2024, there are still catalysts as far as the digital ad landscape is concerned, as far as kind of a major election out there and the Olympics as well. So I think that's something that investors should continue to be excited about as far as Apple is concerned with the sell-off here. Doug, on Microsoft, what key questions should investors really have about what drove Azure growth?

I mean, I'm also noting commercial products and dynamics products were pretty strong for Microsoft as well. And what might allow them to determine perhaps what made a difference between Microsoft and Google Cloud and what might matter for Amazon? Yeah, well, I think that, you know, given the two reports today, you have a much smaller base at Alphabet for cloud, and it's been decelerating growth and lower than Azure, which is a much share gains, overall growth in the market as a whole, but also what type of market share is Microsoft stealing in the cloud or taking in the cloud? All right.

Doug, Angelo, thank you. Thank you, John. Now, Texas Instruments, that chip company making a move lower in after hours after a revenue miss. But meantime, fellow chipmaker Qualcomm just unveiling a lot of chip and AI-related news at its annual Snapdragon Summit. Joining us now, fresh off the stage and a first on CNBC interview, Qualcomm CEO Cristiano Amon. Cristiano, I do want to note you are in Maui. That is important, of course, to that place right now, given the tragedy that they've just been through with those fires. I want to start asking about Snapdragon X Elite and your move continuing move into arm-based cpus for windows computing investors were paying a lot of attention to this yesterday with an nvidia headline in this

direction you've got some actual news that you're putting out on it why should if investors should pay more attention to qualcomm's arm chips than inVIDIA's potential chips. Why is that? Very good. By the way, great talking to you. I wish you were here with us in Maui. It's really great to be here for the Snapdragon Summit. Look, this is actually great news. I'm going to unpack it for you, John.

First of all, the NVIDIA announcement, it's awesome because what it really shows is what we've been on this journey for a number of years. PCs are changing to an ARM-compatible instruction set. And that is the whole story about Windows on Snapdragon and this journey we've been on Microsoft. Today is a very special Snapdragon Summit for us because we basically unveil what we've been busy working on. We announced our new SOC for next generation AI PCs. It's Snapdragon Elite X, and there is a new Cheryf in town. Right now, it's the fastest CPU on a single-threaded performance than anything available from ARM.

It exceeds the performance of the M2 Max and also exceeds the performance of the fastest laptop gaming you can get on the x86 the intel i9 13 980 hx so we're very excited we've been busy at work we've been changing qualcomm from a communications company to a connected processor company in ai and investors should definitely pay attention to that christy i know i gotta press you on this because there was real market share movement when Apple came out with the M1 processors. And a big part of Apple's story on why the performance of those machines, those ARM-based machines, was so good is that they control on their machines the chip, the operating system, and a lot of the applications. In the Windows world, it's more distributed. So are you going to achieve the same kind of battery life on a Qualcomm-based system, ARM-based system, say, running Adobe software, Photoshop, Premiere, et cetera, that we're getting on M2s today?

Is that your claim, or is this a different kind of benchmark claim? No, actually, this is a great question. I will love to answer this question. Look, Apple has done a wonderful job, I think, with the M-Series. And when I think about the next transition of compute, we've been talking about the conversions between mobile and compute for a long time. And that's what we're doing. The reason we have a very close partnership with Microsoft, you should think about Qualcomm as the in-house silicon partner of Microsoft. We've been developing this together.

And what we're actually doing right now is enabling the next generation computing performance in Windows, not only moving to a modern mobile architecture, but also having the industry-leading AI performance for the Microsoft co-pilot. That's a huge leadership position that you see right now with Microsoft and OpenAI and the ability to run all the things on the device. The product we announced today, we can exceed the performance of the M2 Max, but if you actually match the performance, if we peak at the same performance, we do with 30% less power. That means more battery life. And more important, exactly you have more room to run pervasive AI models on your neural process unit engine. So it is,

we've been waiting for this moment. It's about really transitioning PCs. I know that you're transforming the business, you say, from being not just a communications company to being more than that, but hey, smartphones, still a core product, a very important piece of your business. The Snapdragon announcements that you made are going to have a big impact potentially. They

should on the premium end of the smartphone market. That's been languishing from a demand perspective. So what technology are you bringing, particularly when it comes to AI, that you think is going to make a difference here? Yes. Actually, when you think about the other major announcement that we have at Snapdragon Summit, it's about Gen AI phones. So we are announcing today our next flagship, Snapdragon 8, is Gentry, which is basically the leading platform and becoming the platform of choice to run Gen AI models on the device. And, you know, I wish I had more time to explain it to you, but what those Gen AI is going to do on smartphones, it's going to change the user experience, almost like we see changing from when we went from feature phones to BlackBerrys to smartphones.

The AI is going to be always there and help you with every task. And we're going to start moving from an app-centric world to an app plus cloud and AI world. And, you know, we're hopeful that what this will do will create a new upgrade cycle. We can't really precise the timing, but we're excited that devices with this Gen AI capabilities in phones is actually coming in a couple of weeks and throughout 2024. All right. I wish we had more time, too, and I wish I were there with you in Maui. But come back for earnings, Cristiano. We'd love to have you on overtime. Good to see you, Cristiano. I'm on CEO. Good to see you, too. Thank you.

Great stuff. After the break, the earnings keep rolling in. We'll diagnose what's weighing on one-time pandemic darling Teladoc when this jam-packed hour of overtime returns. Welcome back to Overtime. Teladoc earnings are out. Pippa Stevens has the numbers. Pippa. Hey, Morgan. Those shares are down 4% after a mixed quarter for Teladoc, posting a smaller-than-expected loss of $0.35 per share, two cents better than estimates. Revenue missing expectations, though, coming in at $660 million, short of the $664 million. The guidance, however, is really what's weighing. Teladoc sees Q4 revenue between $658 and $683 million

against forecasts of $687 million. They also see a per-sh of between 33 and 23 cents, worse than the forecasted 15 cents per share loss. Once again, those shares down 4%. John? Pippa, thanks. Now let's get back to our dear Drabosa with more color from Alphabet's earnings. Dee?

Hey, John. I just got off the phone with Alphabet's still CFO, Ruth Porath. Remember, she is moving into a new position as soon as she finds that replacement for CFO. I asked her first about cloud missing expectations, and she said that cloud growth was essentially affected by customer cost optimization over the quarter. She did also say that there was healthy customer engagement for AI optimized infrastructure and generative AI products. Another area of strength she identified was search advertising, particularly the retail vertical. In terms of costs, they did slow the pace of hiring. They actually shed some jobs this quarter. She mentioned that they will continue to slow that

pace and they continue to re-engineer the cost base. With regards to her new role, she will be putting more emphasis on other bets and long-term planning. Remember that other bets are the moonshot projects that are still money losing. So it'll be interesting when she moves into that role. Back over to you guys. All right. Shares down 5%. Deirdre Bosa, thank you. We've got breaking news out of Washington now. Emily Wilkins is here with that. Emily. Hey, Morgan. So just hours after Tom Emmer became the Republicans' third choice for nominee for speaker, he has now dropped out. We knew that it was going to be a bit of an uphill climb for him. We knew initially that more than 20 Republicans were concerned about Emmer and not playing to vote for him on the floor.

But really, things got much worse when Donald Trump posted on Truth Social, calling out Emmer, saying that he wasn't a real Republican, that he wasn't a real conservative, and raising a lot of concerns about him. And you know, there are still many Republicans here in Congress who are very loyal to the former president. And so now at this point, Emmer has just announced that he will no longer be in the running for the Republican nominee, which means it is once again back to square one, back to where we were this morning,

back to where we were really several weeks ago. Of course, Mike Johnson has now said that he will get back into the race. Kevin Hearn, Byron Donalds, those were also members today who were getting a good amount of support from their colleagues and could potentially try to run again. And, of course, there's still that plan hanging in the wings to empower Patrick McHenry, the current acting speaker, to be able to pass legislation. Because, remember, you have that November 17th deadline when government funding runs out. Plus, you have the White House's request for aid to Israel that a lot of members want to see passed.

Morgan? MORGAN MCLEAN, U.S. Secretary of State for the United States of America, Okay. This just took two days. How many legislative days do we have left until this November 17 deadline, where this continuing resolution runs out? LYNN HIRSCHFELD, U.S. Secretary of State for the United States of America, Not enough to fully fund the government without having some stopgap funding. I mean, it's going to be way uphill work at this point for Republicans to go.

And it's not clear how many days we have just because, you know, they were supposed to be back home in their districts for the past two weeks. But they spent that time here trying to figure this out with the speaker. So it's really unclear at this point what the schedule is going to be, if they're going to be here this weekend and really just how long it's going to go on. None of that is clear at this point. It's very uncharted territory. Wow. Three weeks and three days until November 17th. Emily, thank you. Now, Visa is rising in after hours trading after topping quarterly estimates on the top and bottom lines. Mike Santoli is back with a closer look at how that stock stacks up versus fintech competitors. Mike? Yeah, John, pretty well. Kind of the revenge of the incumbents is one of the ways to tell this story. This is Visa, MasterCard,

as well as Pfizer, which is the old first data, plus Pfizer. So these longstanding fintech platforms are really just electronic payments and processing companies. And that's compared to the fintech only ETF. That would include stocks like PayPal and Square, which have done even worse over the last three years than that fintech ETF. So my line has always been fintech doesn't really exist as a separate thing, or if it does, it's within the bigger companies. Now, take a look at Visa compared to Microsoft. Obviously, different businesses, but the market sort of treats them the same way. Consistent, predictable, high quality, very profitable. And you see this over the last 10 years. They were kind of in sync here.

And then you got some liftoff, obviously, from Microsoft right here. Visa was one of the best stocks after its IPO in 2008 for the next 10 years. Microsoft obviously kind of playing off a lot more growth drivers, most recently AI and the digital transformation. But look at the valuation side. It has been a lot closer in terms of how this market has treated them in terms of price earnings ratio, especially here in this period where they were moving more or less in lockstep into the high 20s. Microsoft really cheap at the beginning, by the way, of the Nadella era. And now you see once again, you got that step higher. Visa, certainly still a great company,

but it's got its premium compressed, maybe because longer term, it might have a little bit less leverage to future payment systems and things like that, Morgan. All right, that's a really interesting chart. Kind of speaks to the role that large cap tech is playing as being defensive as well. Mike Santoli, thank you.

Coming up, the massive PE firm that's flying under the radar. We'll talk to the chairman of Advent Partners, which has nearly $100 billion under management, about where his firm is putting money to work in this volatile market. And we are just under an hour away from Snap's earnings call. We will ask an analyst what he wants to hear from management as that stock gives up its huge post-earnings pop and turns negative, now down about 3%. We'll be right back. Welcome back to Overtime. It's no surprise amid a rising rate environment, private equity is facing one of the worst years in a decade for exiting investments. That's according to data from PitchBook. Meantime, Blackstone shares dropping earlier this month after reporting a 12% drop in profit. Advent International is one of the largest private equity firms with nearly $100 billion in assets under management

and says tough environments can breed some of the best opportunities. So joining me here on set, chairman and managing partner David Mussifer. David, it's great to have you here. Great to be here. Thanks so much for inviting me. Is this a good time for Advent or a tough time for Advent, given what we just laid out? Well, it's a it's a challenging time for certain if you're in the private equity industry more broadly. And so, you know, the the good news and I'm an optimist is that for the Fed, the medicine's working. And so we feel it. And you see the effects and the consumer and some

of the challenges out there in the rising cost of capital. And so obviously that creates opportunities from the dislocation that you see in some of the markets and the pressure that it creates. But more broadly, it's also creating a balanced environment for new investments. Interesting. So I had one investment banker recently tell me that the spread between bid and ask is still too wide. Are you finding that valuations need to come down further or are we actually reaching a right sized place in this market? That's a great way to describe it. The nature of price discovery is so difficult in this market. And so liquidity is very thin in so many areas of the market today. And so it's really difficult to know how to price assets in this environment because you've seen such an increase in the

cost of capital. And so I think there are still meaningful gaps out there. And that's what's slowing down M&A volume. That's half of what it was traditionally, if you look at the volumes this year. And it's making it a lot more challenging for PE firms to exit investments. More challenging to exit investments. Are you finding that within your own portfolio? And I guess just as importantly, because I know you've got something like $30 billion that you've raised in the last couple of years. How much of that have you been able to deploy in this market? Are you still waiting on the sidelines? Well, you know, it is a challenging time to find great investments,

but it doesn't mean that they're not there. They are. And so we're really fortunate because we can be patient and really try to find just the right situation. And so we're really fortunate because we can be patient and really try to find just the right situation. And so over the past year, actually, we've invested about $7 billion. And so we've put about 30% of the funds that we raised just last year to work. And so we've been able to find some amazing new investments. And so you and I spoke earlier this year about Maxar, which was an exciting deal that we invested in. But we've invested in a host of interesting companies. Another one more recently, Zimmerman, that's an apparel business and a host of businesses along those lines. I do want to go back to Maxar for a moment, because in addition to a high rate or a rising rate environment, we do also have increased geopolitical risks. How does that factor into your investment thesis right now, especially given the fact that, I mean, you have this broader portfolio with many different companies that touch many different industries across many different parts of the world?

But you do also have these investments in companies like Maxar that speak specifically to the aerospace and defense environment. Well, I mean, sadly, the aerospace and defense industry have tailwinds because of some of those geopolitical challenges that we see out there. And so it's a much more uncertain world, and Maxar provides earth intelligence. And so in a lot of respects, some aerospace and defense businesses like that have been some of the unfortunate beneficiaries of some of these challenges. But more broadly, we invest globally. So whether it's China or Latin America or throughout Europe. And I think that you're right. It's a much more difficult environment. And so trying to understand how we believe prospective companies are positioned and then helping them

through some of those challenging times. You mentioned consumer. You're also a founding investor, Advent's a founding investor, Lululemon. You're a director there as well. What are you seeing, whether it's at that company, which I know is a very strong brand, sort of bucks the trend. But what are you seeing more broadly when you do look at the consumer data? There's been a lot of debate about it and this idea that maybe it's starting to crack. I mean, Morgan, it is really hard to get a clean read on exactly what is happening with the consumer. But we're seeing consistent signs of softening. And so across the board, the consumer only has so much disposable income. And in a lot of respects, they've used a lot of those savings that were built up during

COVID times. Now, the other thing, and I was listening to a guest earlier today from the home building industry that highlighted that 20% of their new sales were buyers with cash, and nearly 50% of the sales by 50 people, 55 and over, were cash. And that, I think, is part of the dichotomy that you see where there are some buying groups that still have disposable income and are still able to maneuver through these environments. And then you have other consumers that, while we have near full employment, have really reached the end of being able to make some large discretionary purchases. And so I think we're really seeing that bifurcation. And certain companies like Lulu are doing quite well

and able to navigate through that because they benefit from some of the tailwinds of fitness and nutrition. But there are other signs that we see through some of our payments companies and others more broadly where you're beginning to see those cracks emerge. Okay. More will be revealed.

David Mussifer of Advent International, thanks for joining me here on set. Thanks for having me. John? Great broad perspective you got there from Mussifer, yeah. Analyst calls, meanwhile, from Microsoft Visa and Snap are about to get underway. Investors are going to be closely watching Snap after it gave up a double-digit pop. We will get you caught up on all the after-hours earners next.

Two mega-cap tech stocks reported this hour. Opposite reactions from investors who are cheering Microsoft's Azure revenue growth reacceleration, less pleased with Alphabet's cloud numbers. And check out on the smaller side, Boyd Gaming under pressure after Q3 earnings missed estimates. CEO Keith Smith saying in the release, results were impacted by declines in play from our retail customers and ongoing cost pressures,

both related to the challenging economic environment. Morgan? Well, another earnings mover from this morning, RTX. Those shares had their best day since 2020 after reporting Q3 results, finishing the day up 7%. I sat down exclusively with Chairman and CEO Greg Hayes this morning. He said the geopolitical landscape is the, quote, most muddled he has seen in his three decades in the industry. We ended the quarter with a backlog in our defense business of about $75 billion, and we know there's more to come. The fact is there is a lot of work to do in terms of ramping up the industrial base to meet this unprecedented demand. Again, the war in Ukraine does not

end soon. It's unfortunate it continues, but there is going to be a significant need not just for munitions for the battlefield, but also to replenish the war stocks that we have been providing Ukraine. The war in Gaza or in Israel, again, a tragic situation. It will eventually lead to additional orders. Well, meeting the growing demand for defense will hinge on the supply chain as well, which has struggled industry-wide since the pandemic. He said as far as electronics go, things are mostly sorted out, but the challenges remain for complex machine parts, for example. John? All right. Well, up next, an analyst's first

reaction to Snap earnings and the stock's wild after hours moves. We'll be right back. Check out shares of Snap seeing an initial surge on earnings after beating on the top and bottom lines. But it's since given up all those gains and it's now lower by almost 2 percent. Joining us now to break down the results is Rohit Kalkarni, Roth MKM Managing Director. Rohit Kulkarni, Roth MKM Managing Director. Rohit, welcome. So, I mean, even though Alphabet and Snap are both down right now after hours,

when I look at the fundamentals of what they reported, isn't this a positive read-through for Meta? If anything, I mean, Google Search and other beat by almost a billion dollars, and YouTube ads was just about in line. Yeah, absolutely. I think Met meta read-throughs are positive. The overall ad spend, ad ecosystem read-throughs are positive. YouTube, Search, and even Snap, all three of them are

outperforming expectations on the top line. Regardless of the stock reaction, that's an expectations game and some minor misses on the cloud as well as exec reshuffle on Snap. But at a very high level, what we are seeing in the ad market, it's stable, it's growing and accelerating. Okay, so tell me then about the expectations for Meta. That stock, from what I can see, is down about a percent after hours. Maybe it should be. Maybe it shouldn't be. Any dangers you see on the expense line? There had been some concerns about how much Meta was spending on the metaverse, but investors seem to have turned away from that lately. There are still concerns on the

margin when it comes to how much more are they willing to spend on the metaverse, that gap or the width of how wide the dispersion is from the spend expectations is wide. That makes me a little bit worried, which essentially means that somebody is going to be disappointed tomorrow. People who are expecting at the low end versus high end, somebody is going to be disappointed. So that's the hair on the stock right now on the bottom line, about 24 expectations. But the top line, I feel Meta is the fastest growing ad company right now in this ecosystem. And that's what they're going to prove tomorrow. So then would you be buying Meta here on the dip?

Yes, absolutely. I think Meta is the cheapest, most free cash flow generating mega cap and probably the fastest growing mega cap right now. And that's why we would be buying. So, Rohit, how did the comps look year over year, given that we're not talking about those iOS headwinds anymore? And it seems that a lot of these advertising-driven companies have figured out the targeting issues. The comps are still easier as the year progresses. So remember last year, Q4 was a little bit slower for Meta as compared to, say, Google and Google Search as such. So from an optics standpoint, comps are easier for meta, relatively speaking.

So the expectation is meta continues to accelerate from 3Q to 4Q, and that's where higher-end buy-side bogeys are around. Mid-20 growth rate for 4Q is what they would probably end up guiding. So those are the comps, but still from an Apple headwind standpoint, that also kind of disproves the hypothesis that fundamentally Meta is a broken company.

Now they're coming back. So that's why we like Meta here, and I feel buying on weakness in Google stock is the right move for Meta. Are we still in early innings in terms of the AI applications and deployment versus investment here? Or do we already sort of have a sense of who the market leaders are going to be, especially when you look at an alphabet, for example? I think we are still very early in terms of experiments turning into real- world use cases, into commercialization, into monetization,

and then that virtual cycle looping back into bigger experiments, bigger commercializations as such. I think we are still in the first cycle as such. The first cycle, we'll probably see that happen internally with all these advertising technology companies applying AI internally, and then you can expand that externally. So it's still going to be a long virtuous cycle. And if you have a longer term horizon, I think all these companies,

Google and Facebook, are going to show a significant upside. All right, Rohit, thank you. That certainly sets us up for an interesting continuation to this huge week, Morgan. Vernon? That's right. And the deluge of results will continue tomorrow, including here on Overtime with more mega cap tech meta tomorrow. That's going to do it for us here at Overtime.