Closing Bell - Closing Bell Overtime: Mega-Cap Tech Earnings Kick Off With Microsoft, Alphabet; Alphabet CFO Ruth Porat To Transition To New Position

Episode Date: July 25, 2023

Another day of gains for the major averages, including the Dow’s 12th straight positive session. Vital Knowledge’s Adam Crisfulli breaks down the market moves, including earnings from Alphabet, Microsoft, Visa, Texas Instruments, Snap and Teladoc. Wedbush’s Dan Ives and Madrona Venture Group’s Matt McIlwain on what today’s mega-cap tech earnings means for the rest of the week. Keybanc’s John Vinh on Texas Instruments report. CFRA’s Angelo Zino on Snap’s tough day. JPMorgan’s Michael Feroli on the Fed’s big week. Our Deirdre Bosa talks with Alphabet CFO Ruth Porat. 

Hey, you got your scorecard on Wall Street, but winners really stay late this time up in the closing dog overtime. I'm John Fort with Morgan Brennan and the Dow has extended its winning streak to 12 days, the longest in more than six years. The S&P 500 closing higher for the sixth time in seven. And now brace yourself for a whirlwind of big earnings reports. Alphabet, Microsoft, Visa, Texas Instruments, and Snap. We're going to break down all the results as soon as they hit the wire. So let's get right to it. Joining us now, Adam Christofouli, Vital Knowledge founder, and Dan Ives,

Wedbush Securities Managing Director of Equity Research here on set. Dan, how big a deal is tonight's rush of earnings? It's a super bowl for tech earnings. I'd say for the overall market, because of the AI revolution, this is really now the second, third, fourth derivative of that NVIDIA guidance heard around the world the last quarter. You look at Microsoft and Redmond, that's where the trophy case is. I'm expecting a cloud beat there, cloud beat on Alphabet. And I believe this is really, in my opinion, going to put fuel when I see tech stocks being up 12 to 15 percent second half of the year. Adam, that worries me a little bit because expectations are so high.

I mean, you got Google near alphabet near 52 week highs. It's year to date gains, though, trailing Microsoft. There's a trillion dollar market cap gap between them now. And you've got Microsoft just shy of all time high. So how good do these results have to be for them to go higher? Yeah, I mean, obviously the bar is very high. We saw last week, tech earnings season kickoff, and you kind of saw what happened. Sorry, just to interrupt you there real quick. Microsoft results are out and we are going through them now. The stock,

at least for the quick moment, taking a dip in the after hours. But we'll give you those numbers as soon as we go through them. Adam, back to you. Yeah, no, I was just going to say the bar is very high for these earnings. But you've seen in the last week, you know, NVIDIA, I'm sorry, Netflix, Tesla kicked the season off on a relatively downbeat note. But the broader markets held in well because you've seen a broadening out of the rally. So it was very, very tech heavy in the opening months of the year. But just in the last several weeks, you've seen a nice broadening out with banks, energy, capital goods. Other sectors are picking up some of the slack. So that allows the market to absorb some of these disappointing results. We'll have to go through

all the detail with Microsoft. Remember, Microsoft doesn't give out guidance for another hour and a half, two hours. So this is only half of the report that we're seeing right now. But definitely the bar is very high for all these companies. That's right. And of course, Alphabet just crossing the wires, too. We're going through those results as well. In the meantime, Dan, what matters more, when it comes to Microsoft and never mind, I'm going to go to Steve Kovac with Microsoft.

Steve, what do you have for us? Hey there, Morgan. So yes, we have a beat on the top and bottom lines for Microsoft, despite what the dip in shares are seeing. EPS coming in at $2.69, $2.55 was what the street was looking for. And a slight beat here on revenue, $56.19 billion versus the $55.47 billion expected. And I'll just throw in here, Azure cloud growth slightly beating expectations, 26% year-on-year growth versus the 25%,

or slightly above 25%, rather, the street was looking for. Now, keep in mind that slowdown continues. It was 40% growth in that year-ago quarter, Morgan. All right. Steve Kovach, thank you. Dan, I want to get your instant reaction to that. Azure better than expected, but still representing a slowdown versus what we saw last year. Does that matter? I think it's an initial beat. And this is all the drum roll to what I view is really the key with AI. And in terms of not just next quarter, next two or three years, where they are at the top of the mountain to monetize AI.

So I think this is one conference call. I expect Nadella to be upbeat. And I think you look at these numbers, it's hard to pick holes in it. In my opinion, I think I'll call it an A-minus quarter. I expect A-plus in terms of the conference call. I think there's a stock 24 hours from now that will be green as long as we have a forecast that continues to be in line to slightly higher.

Does AI and these newer applications of AI enable Microsoft to take market share from others like Amazon? I mean, right now, they are gaining market share from Jassy and AWS. And I think ultimately, it's in their backyard of the enterprise. They're going to gain more and more share. We believe for every $100 of cloud spend, they could gain incremental $35 to $40. And that's right now. This is just get out the popcorn moment. Any sort of knee-jerk reaction, we view this as just sort of an asterisk. I view this as a $3.5 trillion markup in a year.

All right. I'm a little disappointed you didn't bring the popcorn to set today. It's popping backstage. Okay. Adam, it goes back to the question, and we'll see where the numbers shake out. You mentioned the guide comes on the call. Microsoft is in the red, at least for the moment, after hours, though. I'm looking through some of the business lines, and I'm sure we'll hear more from Steve Kovach in just a bit. You know, they look fine. LinkedIn revenue up 5%, 7% constant currency.

Office consumer products, cloud services up 3%, 6% constant currency. Office consumer products, cloud services, up 3%, 6% constant currency. Windows OEM down, which you'd probably expect in a quarter like this. But again, it goes to that question, how good, especially given that I was looking back, these stocks chop around for a little bit a couple days after earning sometimes and then make a dramatic move. No, right. I think with Microsoft and AI, Microsoft dominates AI mindshare. Now, I think it's a question of how quickly you start to see AI really start to hit the financial statements, the income statement. And that really kind of remains to be seen. It won't necessarily

be an immediate massive driver, especially for the Azure division. But over the course of the next fiscal year,, we're going to get insight into the next fiscal year tonight. This is their fiscal Q4. You know, that could be a different story. But I think for now, the mind share might be running a little bit ahead as far as the ultimate financial impact over the next couple of quarters with this company. OK, Alphabet earnings are out as well. Deidre Bosa has those numbers. Hey, guys, shares, they are popping up more than 4% on the back of this beat on both the top and bottom line. In terms of earnings per share coming in at $1.44 versus $1.34, so a 10-cent beat there. Revenue also better than expected, coming in at $74.6 billion.

$72.8 was expected. But here is some interesting news, guys. CFO Ruth Porat, she will assume a newly created role of president and chief investment officer of Alphabet and Google, of course. She has long been the CFO at Alphabet. And we know that Alphabet, I don't know the exact number off my head, but is sitting on tens and tens of billions of dollars in cash. She has been an advocate of buyback. So it sounds like her sort of responsibilities are expanding.

And it's very interesting that they have this role of chief investment officer. We'll have to see what she does with that. So that's where we are at now. Shares are at nearly 5 percent. All right. Dear Jabosa, thank you. Dan Ives, want to get your reaction to this with the stock moving higher and this expanded role for Ruth Porat, who we know has been somewhat of the Wall Street whisperer when it comes to numbers digital advertising stabilizing uptick and you look at youtube look at that google cloud i think more and more you will hear that in the conference call more and more gains from aws combine that with microsoft unless you have a telescope i don't see a recession out there and i think you combine this the bears they'll come out of their hibernation mode try to poke holes in it you look at alphabet this is stock that ultimately is going to be higher in my opinion everything you heard from both, check, check, check.

I think Microsoft as well, and this is just getting ready for the Nadella, the tactician Hall of Famer on the conference call. All right. Well, hang with us because we've got another earnings report to tell you about. Texas Instruments, those results are out. Christina Parts Nevelis has the numbers. Hi, Christina. Hi. Well, I did see a top and bottom line B EPS of $1.87 higher than the street on revenues of $4.53 billion. That was a 3% increase sequentially, but down about 13% year over year. The concern that you're seeing in the stock right now, it did drop. It could have to do with the Q3 guidance.

Q3 EPS guidance came in at $1.68 to $1.92. That is a little bit lower than the estimate at $1.91, where we're talking about the range. And then the company in the press release also said they experience weakness across our end markets, with the exception of automotive. So it seems they're still experiencing weakness across all markets. Analog Embedded also did beat, but you're seeing the reaction in the stock right now, most likely because of the more conservative guidance for Q3 EPS. Back to you guys.

Yeah, I think important to note, Texas Instruments, not exactly a read-through to other chip makers who people might be looking forward to this week, including Intel. And then in the days after AMD, et cetera, they're very broad in consumer electronics. And so it's more of a kind of general consumer products read, if anything, you know, noting the difference between automotive strengths and analog, but don't necessarily read through there. Do we have Visa out? We do indeed. Kate Rooney has those numbers. Kate. We do, John. We've got Visa's third quarter earnings, fiscal third quarter. Looks like a beat here on the top and bottom line. EPS, $2.16. That was four cents

better than expected on revenues of $8.12 billion. Also a beat there on revenue. Payments volume up 9% in the quarter. Transactions processed, or transaction volume pretty much $54 billion as well. And it looks like the stock here moving slightly lower after the report here. We don't have guidance quite yet, but we'll bring you any updates. John, back to you. All right, Kate, thank you. Adam Crisafulli, we got a lot fast and furious there, so maybe now let's sit back and digest for a bit.

I'll note that Microsoft after hours, and again, we get guidance on the call, so don't put too much into this. It's now just down fractionally. We had that news out of Alphabet. Ruth Porat is transitioning from CFO to president and chief investment officer, which is an unusual title for a technology company. She'll continue to serve until February, I'm sorry, until September 1st during that transition. Again, that's stock higher. I mean, is this a situation where the news is pretty good from these big names that have been so important to this market?

Yeah, I think for Google, the key takeaway is that just the core advertising business is performing a lot better than expected. You're seeing a nice rebound in that part of in that business. And that's obviously very cyclical. That bodes well for the broader macroeconomic outlook. You know, management hinted on their last call that they were going to see stabilization. It looks like that's happening a little bit quicker than expected, and you're seeing a nice rebound, and it's probably going to accelerate further into the September quarter. So that's the big takeaway from Alphabet. Texas Instruments, I think, you know, their problem is their auto business, as far as

a percent of the total mix, is not as big as what was with the case with NXPI, which came out Monday, and and had very strong numbers. Their business is dominated by autos. Autos is very strong right now as far as unit output, which is really doing well. But the other parts of their end markets are still suffering from some sluggish demand conditions and destocking. All right. But the alphabet advertising numbers are the big highlights so far. Gotcha.

All right. Well, Snap's results are out as well. Kate Rogers has those numbers. Hi, Kate. Hey, Morgan. Snap reporting an hour than expected. Adjusted loss of two cents a share better than the four cent projected loss. Revenue is a slight beat at one point zero seven billion versus the one point zero five billion anticipated. Daily active users beat at 397 million in the quarter. That is above the 394.9 million projected. On the advertiser front, Snap says it has record active advertisers in the quarter up more than 20 percent year on year and through improved retention, rather, compared to this time last year. In terms of guidance, which it has not given in recent

quarters, the company giving some official guidance here, seeing Q3 daily active users of between 405 and 406 million versus the street's expectation of 406 million. The company says forward visibility of advertising demand remains limited. Q3 revenues anticipated between 1.07 billion and 1.13 billion. And Q3 adjusted EBITDA between negative $50 million and negative $100 million. Both of those numbers disappointing the street. And as you can see, the stock is down about 16 percent now, guys. Back over to you. All right. Kate Rogers, thank you. Don't miss an exclusive interview with Snap CEO Evan Spiegel. That's going to be tomorrow at 10 a.m. Eastern on Squawk on the Street. Dan.

Snap. It has not had a good go of it these last two years. I mean, is there a secular story going on with Snap in a situation where despite a macro, an uncertain macroeconomic environment, advertisers are spending money, but they're spending money on places like Google instead? Yeah, if you looked up disaster in the dictionary, you'd see snaps ticker. Because ultimately, they continue to lose market share in digital advertising.

And again, again, if you look, there's no confidence in this management team. Execution, in terms of what we've seen from a marketing perspective, you know, and ultimately, you look at these numbers, it just feels like a quicksand feel. And ultimately, those dollars, they're going to others. Because look at what we saw from Google. Look at what I believe we're going to see from Meta. You look at what's happening across the board. Right now, they're just on the wrong side of this trend.

This is an ever-so-like uphill battle for growth, in my opinion, for Snap. All right. Adam, I want to get your thoughts on this, too, whether it is Snap or, by the way, Visa, which is such a key read on the consumer and talked about a resilient consumer and continues to see some growth there. I would imagine travel again this quarter as we still go through the results here and await the call. I would imagine travel continues to be one of those areas where we've seen that resilience coming from. No, I think in the case of Snap, it's just another issue of online advertising. It's kind of dominated by Meta, Google and TikTok.

And your other more ancillary players just are subscale increasingly. The user growth is nice, but you saw a decent user growth with Spotify also. And if it's not translating into profitability or revenue growth, investors are just kind of giving up on the story. So Alphabet, Meta, I agree, probably going to have pretty healthy results based on what Google's posting. And then TikTok also is a huge player that's hovering up market share in this market. And it's those three that are really dominating. And Snap, unfortunately, just, you know, it's hard for it to really grow in this environment. Dan, the two things in Alphabet's report that I was primed to zero in on, and I still am, are the YouTube number, which beat at 7.7 billion versus about 7.4 expected,

and Google Cloud hitting 8 billion in revenue versus 7.8 expected. I mean, the overall ads strength is great. I mean, it's certainly a big difference between Snap and Alphabet, but those are the kind of growth areas that you would really, if you're going to be excited about Alphabet, you really want to see outperform, right? And a big part of the stock getting re-rated is what we see on cloud. I mean, because ultimately, I could argue they're gaining more and more share. That cloud business, some of the parts, they talk the talk. Now they're walking the walk, gaining more and more share. And you have the AI.

And I know they'll talk about it in this conference call that they're going to integrate more and more of that into the cloud. You look at YouTube, it's a flex the muscles moment. You combine this. If you are an alphabet bull right now, you are relaxing, just watching this, waiting for that conference call, and really being happy. Because ultimately, for tech, a lot of fear is coming in here. You look at Microsoft, you look at Alphabet, I think you'll see smiles from the bulls by the end of these conference calls. All right. But the Fed's tomorrow. So I don't know how much you can entirely relax. Teladoc earnings are out now. Bertha Coombs has those numbers. Bertha. Hi, John. Teladoc beating on both the top and the bottom line, posting a loss

of 40 cents a share. That's a penny better than what the street wasoc beating on both the top and the bottom line, posting a loss of 40 cents a share. That's a penny better than what the street was looking for. And the top line revenues came in at 652.4 million, also better than the estimate of just over 649 million. What's really interesting is when you look at their membership numbers, some of their membership numbers were a little short, particularly when you talk about their mental health division. BetterHelp came in at 476,000, Street looking for more like 485,000, and that's down sequentially from last quarter.

But the margins there were strong, and the overall revenues in the BetterHelp segment was also better than expected. As far as their guidance, they're guiding near the high end. They're looking at a loss now of $1.25 to $1.60 per share. The street is looking for a loss of $1.34 for full year. And they're also looking at revenues of $2.6 to $2.68 billion, which also tops what the street is looking for on the high end. You can see that shares up more than 8%. I will note there is a 15% short interest

in Teladoc. Back over to you. All right. So maybe a little bit of a short squeeze playing out here too. Bertha Coombs, thank you. We've got breaking news on PacWest. Leslie Picker has the details. Hi, Leslie. Hey, Morgan. As was earlier reported by the Wall Street Journal, PacWest is merging with Bank of California, a deal announced just moments ago. For all intents and purposes, this is really Bank of California acquiring PAC West. It will retain the Bank of California name. It will retain Bank of California management. There's a lot of financial engineering as a result of this transaction here. There's a $400 million equity program

led by Centerbridge and Warburg Pincus. They'll invest about $400 million of newly issued equity securities concurrent with this merger. And the proceeds of that capital raise are expected to be helping to kind of shore up the balance sheet of the combined company. Essentially, they'll repay $13 billion in wholesale borrowings funded by sales of assets,

which PacWest has already been doing a lot of selling of its assets as part of kind of just shoring up its balance sheet in the wake of what we saw in March and April. It had experienced some volatility as a result of this, partly due to its location in California, partly due to some underwater loans on its balance sheet as well. It has been deleveraging as a result of kind of trying to restore confidence in the market as a result of this. They say that the deal will be accretive with estimated 2024 EPS intangible book value accretion of 20 plus percent and 3 percent, respectively. So quite an interesting deal, quite an interesting turn of events. Of course, all of this is subject to regulatory approvals,

which in this environment is a bit more of a question mark than maybe it would be historically, especially in the banking system. Morgan? Yeah, that's going to be key to watch. It looks like we've got a conference call on this, maybe 530 Eastern Time as well. Leslie Picker covering the story for us. Thank you, Adam. I got to get your reaction to this because PacWest was one of those names that was hit so hard. There was an expectation that this could be another one of those beleaguered regional banks with some questions around the balance sheet, deposit outflows, et cetera, where something would need

to be done. Now we get this. I realize there's some financial engineering here, but you could argue that this is a take under. Stocks still down 66 percent. Is this the beginning of the next chapter for the regional banks or is this a one off? I think it remains to be seen, but it's very notable that this is the first deal. There was a smaller regional deal announced this morning, but this is kind of the first notable deal since the March panic that the Fed or the FDIC is not involved in. So this is all private sector participants. You have outside funds providing equity to facilitate the transaction. That's obviously a vote of confidence. And I think, you know, the big take, the big I think what remains to be seen is how quickly

this will be approved. So you saw the TD First Horizon deal that collapsed relatively recently. You know, I think that was a real negative as far as deal activity. So the fact that this is being announced all with outside, with non-government participation, that's encouraging. And now I think it's just a question of how quickly they can get regulatory approval for it, because that's going to be really critical. Regulators want more regional consolidation. They have to accelerate the process for them approving these deals.

Yeah. And that's going to be sort of the key thing to watch. We've certainly had a number of regulators on this show in recent months who have suggested that maybe they would be more open to that type of consolidation. But we'll see if the rubber meets the road here. Adam Crisafulli, thanks for kicking off the hour with us here on Real-Time Reaction to Earnings. Dan, we're going to see you back in a little bit, so don't go too far. We're just getting started. It is a wild hour of earnings and other breaking news. Up next, much more reaction to results from Alphabet and Microsoft. Plus, we will bring you any headlines from Texas Instruments. That call kicks off in just a

few minutes. Overtime, back in two. Welcome back to Overtime. Alphabet and Microsoft just reporting earnings. Those stocks moving in opposite directions right now. But Microsoft is paring the losses and shifting back closer to the flatline here. Dan Ives, Web Bush Securities Managing Director of Equity Research, is back with us, along with Matt McElwain, Madrona Venture Group Managing Director. Matt, I'll kick it off with you. The results we just got from Alphabet and Microsoft, the read-through, your reaction, the read-through to the broader tech landscape right now and what we could

see from other big cap tech names and what it means for the startup landscape too which we know is very focused right now on ai yeah well i think the read-through is is that we're just getting started in what i'll call the ai windfall and that ai windfall is going to help all of these big tech companies their challenge is they got to put the caEx out first before they can start to even get their own internal OpEx savings and then see the revenue come on the upside later. Microsoft and Salesforce just announced their pricing for their AI enhanced offerings. What that means for startups is it's a time of choosing. They're trying to choose who to partner with and whether they're going to partner with Microsoft

who is clearly in the lead right now, which is a turnabout from history in cloud where previously Amazon was in the lead. And Google, who is really hustling, you saw a little bit of signs even in these numbers that just came out, that Google Cloud is getting more aggressive. They're investing dollars into startup companies. They're partnering with startup companies. They're just more energized to work with the startup ecosystem than I've candidly ever seen them. Dan, I see you nodding your head. We saw cloud revenue climb 28 percent for Alphabet. Your thoughts? I mean, I think this is an inflection point in that story. I think when you look at

cloud for many years, no one really took them seriously. And now they have a they have a seat at the big table. And I think you look at Jazzy and Amazon, they're watching these and he sees what's happened with the Crosstown 206 rival Nadella gaining more and more share. You got Alphabet gaining share. And I believe this is a fourth industrial revolution

playing out. And you look at AI, this is a gold rush. This is, in my opinion, it's a 1995 moment. Unlike anything we've seen since the internet in 1995. And you look at where Google sits, you look at where Microsoft sits, they sit at the top of the mountain. Amazon right now, they're back against the wall when it comes to cloud. I guess we'll see in their numbers. But, Matt, I wonder how much of a read-through there really is here at all, especially when I contrast Alphabet's results with Snap's results. I mean,

we've had in these major indices the story of the big tech companies and everybody else, and that seems to be playing out in these earnings as well. Do you disagree? I agree with you, John. Again, because this AI windfall is coming, all these big tech companies know how to leverage it, not only to save costs themselves, and I think that's helping them in terms of this has been the year of everybody getting fit, but they've been using AI for over a decade. And whether it's Google with search historically, or even what they do within their Google mail applications, Microsoft, Amazon, Meta, you just go right down the list. They have been working with not only building models,

but deploying models and deploying them at scale with lots of different companies. So what I think what's going to be interesting is to see is which ones can adapt to this true AI moment. You know, Amazon and AWS in particular, I think is the most challenged they've ever been. It is a hard time for them to figure out how to clearly tell their story. They actually have a lot of great substance underneath it, but they don't have the right story yet.

In the meantime, Amazon's innovating. You'll see their advertising numbers. I expect they'll be very good again. You see what they're doing in terms of improving the customer experience in terms of the core site. There's a NOAA project underway,, projects underway with Alexa as well. So AWS is really the one that's got to figure it out. And their two big challenges is they are historically not great at partnering, and they really don't have an application presence. And we think more of the value is going to move up the stack from the large language model layer to the middleware to the generative applications, and that's where Amazon's got to figure out their strategy.

Dan, we got a test on how much of a read-through there is in enterprise software when we get ServiceNow tomorrow as well. They've been growing pretty strongly, but the valuations here are not cheap with the big names. They had already been running more. So how careful do investors have to be about just how well they have to continue to perform and just how sensitive they might be to overall macro headlines? Because maybe they're not as safe, you know, valuation wise as they once were. I think you start to see with Arvin and IBM. I think you'll see with McDermott Service now. I think ultimately it's software. It's going to lead the rally. It might be in software and chips. This is a golden age

for software in terms of what we've seen with the second, third, fourth derivative. Also, I had cybersecurity in there as well. That's why you look at NVIDIA and Microsoft. Now, look at the second, third, fourth derivatives. I think you're going to see that the next few weeks in terms of earnings. And in my opinion, that's why there's a bright green light to own tech. I'm not saying that there is not the losers on the other side of this. Snap's a good example. Dog ate the homework, blamed the weather, whatever the excuse. But ultimately, the winners, I believe this is really, in my opinion, the star of a new tech bull market. Matt, balancing investment when it comes to AI and some of these new possibilities against what it's going to take to actually see monetization and the realization of those investments.

Well, I think we're through this get fit era for a lot of these companies. And the thing that's going to show up, I think, when we look underneath in the numbers is they've had to put a lot of CapEx up so they can build the products that can be differentiated and monetized. And the big players, like the ones we've just been talking about, are going to enhance their existing services. You know, it's Microsoft 365 Copilot, it's GitHub Copilot. And then there's going to be a whole wave of startups that are truly gen-native, building from first principles, companies like RunwayML and Typeface and Jasper.ai. And the interesting battle that will take a little bit more time to emerge is can those companies, without the customers and the context and the data of the big tech companies,

be able to go win on better true gen-native offerings? And I think that's going to be battle zone number two. Battle zone number one is this winning the hearts and minds of the startups, winning the hearts and minds of the partners, winning the hearts and minds of the partners, winning the hearts and minds of the enterprises that Microsoft, again, is clearly in the lead right now in the early days of the AI windfall race. Okay. Matt McElwain from Madrona and Dan Ives from Wedbush. Thank you. Thanks for having me. Texas Instruments earnings call is just getting started.

Up next, a top analyst is going to tell us what he wants to hear on it. We'll be right back. Welcome back. The conference call for Texas Instruments is underway right now. That stock is down a couple percent after hours right now. And joining us, John Vinn from KeyBank Capital Markets. John, let's see, Q2 revenue for Texas Instruments came in above your estimate, as did gross margin. You expected the guide to be about as weak as it was, maybe even a little weaker. The stock is down here. What should investors do? Yeah, I think, you- you know long term investors should stick with the name- I think what you're seeing here play through is. You know you've got a weak China market that's really kind of weighing on- kind of expectations for kind of a second half rebound

here- guidance was flat on terms of revenues. Which is six hundred basis points below normal seasonal and the commentary kind of suggests that everything with the exception of automotive is still pretty weak right now. So what, if any, read-throughs are there? I've been thinking there aren't that many. I do think about Qualcomm, though, which hasn't been performing that well as a stock because people know that handsets are weak. They do have an automotive business, which is a growth area for them, which you might expect to go well. But what does this say about the state of demand for electronics overall, which TI tends to be a good bellwether for? Yeah, I would say it's a pretty kind of muted kind of outlook for the broader analog group. You bring up Qualcomm,

you know, their automotive franchises is a very small percentage of their business. So it's really not going to move the needle for them in the near term. Long term, it could become more significant. And that continues, obviously, to be the standout sector within semis right now. Also, in addition to AI, which we've all been talking about. But right now, I think the broader semiconductor market is really still waiting for any signs of life in the China market, despite that country coming out of COVID protocol. Why do you think it's been from a semiconductor and a demand supply chain demand story. Why do you think it has been so sluggish for this sector in China with a reopening?

I think their economy is struggling. I think a lot of consumption is really consumer driven. You know, China, from a semiconductor consumption perspective, accounts for 30 percent of global semiconductor demand. And consumer electronics is a big component of it. Consumer IoT, PCs, smartphones, I mean, these are all very consumer-centric, you know, and markets. And if the China consumer is not spending like we've seen in the rest of the world coming out of COVID. That's just going to kind of weigh on the broader base markets here. So key question you have going into the earnings call, which I know it just kicked off a couple minutes ago, but what do you want to hear to remain convinced that this is a buy? One, we want to see and hear about any sort of

indications of China recovering and at what pace and what time frame China is going to recover. And then longer term, you know, TI strategy is, you know, their inherent implicit advantage is they've got a manufacturing advantage with 300 millimeter manufacturing. Gross margins looks like it did miss street numbers. The guidance does imply that gross margins is a little bit weak. So potentially they've got a lot of that depreciation expense hitting the numbers here as they ramp capacity. But over the longer term, I think we want to hear that they still remain convicted, that that's going to give them a competitive advantage versus their peers out there. All right. John Venn, thanks for joining us.

Shares are under pressure in after hours. They did hit a fresh 52-week high in trading earlier today, though, ahead of this report. Snap shares, ooh, sinking after this quarterly report. Up next, the top analyst reacts to those results and what that could mean for Meta's earnings tomorrow. Shares are down 18.5% right now. Yeah, that's a lot. And Alphabet CFO for now, Ruth Porat, just speaking with our dear Drabosa, highlights of that call when Overtime returns. Get back to our dear Drabosa, who just spoke with Google's chief financial officer for now, Ruth Porat.

Dee, first of all, did she say what a chief investment officer means at Google? Is it life of chief operating officer along with president or kind of what role she's transitioning into? She focused a little bit more on the president side, and she did make a point to say that she was going to be working closely with policymakers. I did ask her what a CIO means for that huge cash pile that they have, which is cash and cash equivalents and market securities of nearly $120 billion. She didn't give much there, but she said that she would be, you know, managing that. I also asked her, you know, why this was happening now. And she said she made the point that she has been a CFO for 14 years, eight years at Google and before that, Morgan Stanley, for six years. So it was time for a new challenge with which CEO Senator Pichai was on board for. So she will remain CFO while looking for a new one. We also chatted a little

bit about CapEx because it was less than the street expected. She said that it was helped by the moderating pace of office and headcount expansion. And it comes as a little bit of a surprise because we've been talking about how expensive this generative AI shift has been. And to this point, she says that there was a delay in data center construction projects. So maybe that's moved out a little bit on the horizon. In terms of the core business, she talked about continued resilience in search. And finally, guys, I did try to push her on AI monetization. It said any plans to start charging for these products. And she wouldn't

say anything to me, but she said there would be more on the analyst call, which I will also be on. And that kicks off in about 15 minutes. All right. That's a cliffhanger right there. Shares are up 7 percent. Deirdre Bosa, thank you. Really quickly, that was interesting. The emphasis on president, when you think about like a Nick Clegg at a Meta or you think about a Brad Smith at a Microsoft, these are all names that are under regulatory scrutiny and have to interact more and more on a policy standpoint with not only the U.S. government, but governments around the world. Sounds like she's raising her hand for that. If she's going to be interacting with policymakers, maybe, you know, she's who they send to Congress.

I don't know. But that's definitely a more high profile role. All right. Well, Snap shares are falling sharply after reporting results. The social media giant beating expectations, but issuing weaker than expected guidance. Joining us now is Angela Zeno of CFRA. This stock, I mean, I would say this was a wild move for Snap, but it kind of isn't. I mean, it tends to be a big mover in both directions post earnings and lately, at least over the last couple of years, more so to the downside.

Are you surprised by these numbers? What is your reaction? Yeah, I mean, I'd almost say it's not an earning season for Snap unless you saw at least a 15 percent decline in the stock. Right. But as far as the quarter is concerned, I think the actual results were actually okay i mean we saw our sales fall about you know four to five percent daily active users down about you know a grew about 14 so those were in line with our expectations um the guidance was a bit light but i think as far as you know our concern you know our biggest concern out there is it's the actual cost here the infrastructure cost cost per daily active user that they got into, 79 cents to 84 cents. If you kind of look at that relative to where they were at the

end of Q1, that would represent about a 35 to 40 percent increase over a two-quarter span. So the cost to kind of invest in AI are significant here, and you're not necessarily seeing kind of the fruits of their labor right now going into the second half. So I think that's the biggest concern out there right now for investors. Is that a reflection of how competitive the broader social media landscape is right now, whether it's TikTok or whether it's Meta or others that have deeper pockets to make bigger, more sizable investments? Yeah, listen, I think this is an environment right now where it pays to be big. I think the bigger getting bigger. I think if you're a company like Meta, clearly you can kind of invest at any price.

And whether it be on the Metaverse or in AI or what have you, there's clearly a benefit there. And when you're one of these smaller players out there like a snap um you do need to invest and you need to invest significantly or you kind of you know you're left behind so um this is a very tough situation for a company like snap in this environment um where you know budgets are still relatively tight you're not necessarily seeing an acceleration out there in terms of the advertising space and um you you know, it's going to take time for Snap to really kind of see some sort of notable improvement as far as the top line is concerned. But that said, engagement remains very high and daily active users continue to grow much better than many of its peers out there. Yeah. And so that's where I was going to go, because there is a bullish argument here. Right.

And not too long ago, people were saying, oh, Facebook's over, Meta's over, Facebook's dead, blah, blah, blah. That stock popped back. Meta was trading here five years ago, and it went higher at some point. They've got experience in augmented reality and artificial intelligence. I don't know. Would you argue that this is an expensive stock? And unless you think that Snap is going to die, not even get bought, but just die, why would an investor take a risk here? Well, I think it all depends on the investor. You are, right? I mean, if you're an investor out there that kind of has a longer term time horizon and

someone that's kind of willing to kind of, you know, take the contrarian side of things, I absolutely think this is potentially a good opportunity to buy the shares and um you know you kind of again look at kind of where the daily active users are out there you're potentially talking about you know a a billion in terms of monthly active users here over the next two to three years eventually the advertisers we think will come back to um you know the snap platform and you're already seeing that when you start looking at the numbers on a year-over-year basis. The issue they've had, you know, continuously here has been on monetizing that platform. And if you are a believer that over time they can find ways to monetize it, and we are believers of that, I think it pays to be patient at this point in time, given we've seen the stock drop, you know, 80 to 85 percent from peak levels. We'll see who gets there first, Threads or Snap. Angelo, thank you. Thank you.

This wild hour of earnings. Well, it's not over yet. We're going to highlight some of the other earnings movers that need to be on your radar as we count down to the calls from Alphabet, Microsoft, Visa and Snap and another stock moving lower as we head to break. Robert Half sinking after a miss on earnings and revenue. See it down there 11.5%. Staffing and recruitment firms says its results were impacted by slower client hiring cycles as a result of ongoing macroeconomic uncertainty. We'll be right back. Welcome back to Overtime.

Leaders in the sports industry gathering today at Game Plan, an event hosted by CNBC and Boardroom moments ago. ESPN's chairman, James Pataro, spoke with our very own Julia Borsten about the future of live sports. He responded to a CNBC report that the sports channel has held talks with the NBA, NFL, and MLB about forming a strategic partnership. Here's what he said. Can't comment on who we're talking to. I will emphasize the fact that we believe that there are parties out there that can help us on the content side. And so you can draw whatever conclusions you want from that. But, you know, my priority is when we do launch flagship channels directly to the consumer a la carte, that the content proposition is as compelling as it can be. All right.

You can read between the lines there a little bit. Little. If you want to catch more of Game Plan, check out the QR code that is on your screen right now. And if you want more on Texas Instruments earnings, the CEO is making headlines on the call. Christina Parts-Nevelis can tell you what they are. Christina. Yeah, I'm just listening to the call right now. Texas Instruments Management is warning that in Q3, which is this current quarter right now, they are, quote, not expecting to see any significant change in our end markets compared

to this last quarter. In other words, there continues to be weakness across all end markets, with, of course, the exception of automotive and likely limited signs of recovery in China. That negative reasoning contributed to the weaker quarterly guide that we saw for Q3 and why the stock is down almost 4 percent. I'm going to get back on that call. John? All right. Yeah, a little bit lower even than when the numbers first crossed. Christina, thanks. Thanks. Well, it's not just about earnings. We're also focused on tomorrow's Fed decision. Up next, J.P. Morgan, Chief U.S. Economist Mike Ferroli on what he wants to hear from Fed Chair Powell tomorrow. We'll be right back. Some breaking news. Wells Fargo announcing a new $30 billion buyback.

CEO Charlie Scharf saying its capital levels are strong, allowing the bank to return excess capital to shareholders. The bank had previously announced a 35-cent dividend as well. Well, we're checking out some big overtime movers as well. Alphabet up nearly 7 percent, almost 8 percent right now. CFO Ruth Porat saying there is stabilization in the ad market and continued resilience in search while announcing her own move to a new position of CIO and president for Alphabet. Shares of CoStar moving lower. Full year revenue guidance coming in lighter than prior guidance to reflect lower property transaction volume. Expectations in the second half of the year, those shares are down

two and a half percent as well. Yeah. And the Federal Reserve expected to hike 25 basis points tomorrow to its highest level in 22 years. But what does Wall Street want to hear from Powell at the news conference? Let's bring in J.P. Morgan, chief U.S. economist, Mike Ferroli. Mike, it's a question, I guess, of whether there's any indication that inflation is going down enough, right, so that the Fed can stop hiking. And what Powell is likely to signal about that either way. Is there any upside in him suggesting that this is the last hike? Not really. I think it's probably, you know, a fair bit too early to declare a victory. And also, we got to keep in mind, there are two more CPI reports between now and the September meeting, the next meeting. So it probably makes sense for him to, you know, be mildly pleased with what we saw in the most recent CPI report.

But we're still very far from the Fed's goal. And there's really no point in kind of pre-committing to either a pause or another hike at the next meeting when you're going to learn so much between now and then. Yeah, I mean, along those lines, it does seem like disinflation is gaining traction here. But meantime, you've had labor negotiations look no further than UPS and Teamsters today. You've had home price reacceleration in recent months look no further than Kay Schiller this morning. And then you're starting to see things like wheat prices spike higher because of the tensions between Russia and Ukraine. How sticky are we? I realize it's come down from the highs dramatically, but are we in a sticky situation here in terms of where inflation is right now?

So I think of all the things you mentioned, the one that's probably the most concerning for the Fed in terms of its stickiness and its importance is labor costs. Those have started to, you know, moderate in terms of their gains, but not as much as we've seen in, let's say, the headline CPI. So until, you know, we see softer wage gains, more sustainable wage gains, I don't think the Fed, you know, even if they pause or stop, that they're going to, you know, signal that they're comfortable with the situation if we have, you know, wage inflation running something like, you know, in the mid-fours as it is now. Michael, how much should we be concerned about the state of the consumer? We just heard

from Alaska Airlines CEO that domestic travel is a little weak, granted, because people are traveling internationally so much. LVMH saying that the aspirational luxury customer in the U.S. isn't doing as well. And we know that the student loans are going to kick in. You expect Powell to talk much about that. And even if he doesn't, how much should investors be considering it? Well, so I think some of the things you mentioned are just normalization from a really strong period of post-pandemic, you know, reopening spending. So that phase of the recovery looks like it's mostly behind us. That said, the most recent hard numbers we have, which was the June retail sales report, look pretty favorable on Thursday. I guess Friday, we'll see the real consumption numbers for June are expected to be pretty decent. So there's anecdotes one way or the other. I think the hard data is actually holding in pretty well.

I do agree with you. The student loan issue will be a, I think, a bit of a speed bump for the consumer, but that's not really going to hit us until October. Yeah, it's going to be interesting to see how AI plays into all of this, too, as it becomes realized as well from an economic standpoint. Mike Ferroli, thanks for joining us and previewing tomorrow with the Fed. In the meantime, John, meta shares are up after hours. I don't know if that's in sympathy with Google and this idea of an ad stabilization or whether it's sort of a knee jerk in response to how weak some of the Snap results were. And I say that with an asterisk. It's Google. I think Snap isn't big enough that stealing all that share, if it all went to meta,

would be good enough on its own if the overall ad market weren't stable. Thinking about the consumer also, because so many of these results that we're seeing are businesses spending money, trying in a difficult environment to get closer to the consumer. It doesn't necessarily mean that the consumer is responding. So as we continue to track these earnings, I don't know how much of that we're going to see, but it's worth asking. Yeah. And of course, it makes the visa results that we've gotten after the bell. Those shares are down fractionally right now, important as well along those lines. Well, it's been a busy hour.

That's going to do it for us here at Overtime. Fast money starts now. Welcome back to Overtime. Leaders in the sports industry gathering today at Game Plan, an event hosted by CNBC and Boardroom moments ago. ESPN's chairman, James Pataro, spoke with our very own Julia Borsten about the future of live sports. He responded to a CNBC report that the sports channel has held talks with the NBA, NFL and MLB about forming a strategic partnership. Here's what he said.

Can't comment on who we're talking to. I will. I will emphasize the fact that we believe that there are parties out there that can help us on the content side. And so you can draw whatever conclusions you want from that. But, you know, my priority is when we do launch flagship channels directly to the consumer a la carte, that the content proposition is as compelling as it can be. All right. Can read between the lines there a little bit. Little. a la carte that the content proposition is as compelling as it can be. All right. Can read between the lines there a little bit. Little. If you want to catch more of Game Plan, check out the QR code that is on your screen right now.

And if you want more on Texas Instruments earnings, the CEO is making headlines on the call. Christina Parts-Nevelis can tell you what they are. Christina. Yeah, I'm just listening to the call right now. Texas Instruments Management is warning that in Q3, which is this current quarter right now, they are, quote, not expecting to see any significant change in our end markets compared to this last quarter. In other words, there continues to be weakness across all end markets with, of course, the exception of automotive and likely limited signs of recovery in China. That negative reasoning contributed to the weaker quarterly guide that we saw for Q3 and why the stock is down almost 4%.

I'm going to get back on that call. John? All right. Yeah, a little bit lower even than when the numbers first crossed. Christina, thanks. Thanks. Well, it's not just about earnings. We're also focused on tomorrow's Fed decision.

Up next, J.P. Morgan Chief U.S. Economist Mike Ferroli on what he wants to hear from Fed Chair Powell tomorrow.P. Morgan Chief U.S. Economist Mike Faroah and what he wants to hear from Fed Chair Powell tomorrow. We'll be right back.