Earnings Roundup: Alphabet Beats on Cloud Sales, Tesla's Profit Disappoints

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**SPEAKER_2** (0:09)
This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world.

**Carol Massar** (0:20)
We really want to go all in on Alphabet and Tesla. We've got a great team effort to do just that. In the house with us is our Mandeep Singh. He is, of course, Bloomberg Intelligence, excuse me, head of global technology. We've also got our Keith Naughton, Bloomberg News auto reporter. He joins us here in our Bloomberg Interactive Broker Studio along with Mandeep. Then we've got Ed Ludlow, Bloomberg Tech host out there in our San Francisco Bureau. All right. Where to start? I do want to start with you Mandeep, only because I feel like the AI trade is so important.
What do you make of it?

**Mandeep Singh** (0:52)
I mean, great print. I think overall the results were great. Cloud, 82% growth. It's a $100 billion run rate business now, which is phenomenal for a company like Alphabet, which was really consumer focused. But backlog is probably very, I would say the whisper number was higher simply because when I look at Microsoft's backlog number, it's higher than Alphabet's and given it's growing 82% and it has got Anthropic as one of its main customers of Google Cloud, I would have expected that to go up. I mean, Anthropic is signing deals left and right. So why is it not showing up in the Google backlog number?

**Tim Stenovec** (1:34)
Gemini models now process 22 billion API tokens per minute and the Gemini app has 950 monthly active users. Contextualize that Mandeep for us compared to OpenAI and to Anthropic.

**Mandeep Singh** (1:46)
I mean, it's great, but look, Gemini has an attached rate because of all the other properties that Google has, the search, YouTube. So for me, until analysts, they talk about usage of Gemini really taking off relative to the last quarter. It's hard for me to extrapolate that into, you know, Gemini really taking share away from a ChatGPT. And all these companies are reporting very high MAU numbers, but it's really the usage that counts. And to my mind, the 950 million is a reflection of the high attach rate that Google has because of the distribution through search and the operating system and browser.

**Carol Massar** (2:26)
Ed, we're going to come to you in just a moment on both, but I want to bring Keith Naughton and Tesla.
It is a lot of technology in that one. So as we talk about all of this, what do you make of kind of some of the numbers that we got from Tesla?

**Ed Ludlow** (2:37)
That's a big mess.

**Keith Naughton** (2:38)
You know, $0.33 versus $0.51. And I get that Tesla is no longer really a car play.

**Ed Ludlow** (2:44)
It's an AI play.

**Keith Naughton** (2:45)
Well, here's the problem with that, Tim. The thing is, is that to fund that $25 billion in CapEx they have planned for this year, they need to sell a lot of cars. So they did sell well in the second quarter, but yet we're coming in low on, and you saw the gross margin is also lower expectations. So they need to make money. They went negative cash flow. We expected that they didn't go as negative as was expected. So that's good, but they did go negative cash flow.
So you gotta generate revenue and profit from the car side of the house in order to pay for the robotics and the AI and the cyber caps.

**Tim Stenovec** (3:21)
Yeah, Ed Ludlow, come on in on this conversation. Is Tesla, in your view, and based on the folks you talked to, is it still a car company?

**Ed Ludlow** (3:28)
Yeah, the street wanted to see Tesla spend a lot of money, more money than they are spending currently based on the trajectory of CapEx, to make some progress on robotaxis and robotics.
And looking back at the quote it was, the problem that they had is even though they had record vehicle deliveries, they are spending on R&D, that's an impact. Stock-based compensation is a big impact. Remember, talent and stock-based compensation in the Valley on the software and engineering side is a really important factor. They had lower average selling prices, so you have record vehicle deliveries, but lower ASP has not gone well for them. It's such a simple story. Capital expenditures came in in line with expectations, but on the buy side, just put your money where your mouth is, Elon Musk. Spend more money on the AI story, and it hasn't really translated. But again, it's just an earnings deck. The real meat of it probably comes in the cool.