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This is Bloomberg Business Week Insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Masser and Tim Stenoveek on Bloomberg Radio.

This is Bloomberg Business Week Insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Masser and Tim Stenoveek on Bloomberg Radio.

We've just seen, certainly, you know, Stock's struggle. We're at the tail end of earnings. Although we've got a couple of earnings that certainly we're key in today's trade, and a couple of big ones that we continue to get to fill in the earnings picture. But this is so important, and we're getting stories of concerns about or i should say the c suite talking about uncertainty, economic uncertainty in terms of the outlook, you know, pointing to things like trade, sentiment. These are things that you know, especially sentiment.

We've just seen, certainly, you know, Stock's struggle. We're at the tail end of earnings. Although we've got a couple of earnings that certainly we're key in today's trade, and a couple of big ones that we continue to get to fill in the earnings picture. But this is so important, and we're getting stories of concerns about or i should say the c suite talking about uncertainty, economic uncertainty in terms of the outlook, you know, pointing to things like trade, sentiment. These are things that you know, especially sentiment.

It's just a.

It's just a.

Way people feel, whether it's about shopping, spending, or what they feel about the market. But sentiment can turn into reality, and so that's why we pay so close attention to it, especially when we think about what might happen. I mean, we're almost halfway through this year. I know, we still have a couple of months.

Way people feel, whether it's about shopping, spending, or what they feel about the market. But sentiment can turn into reality, and so that's why we pay so close attention to it, especially when we think about what might happen. I mean, we're almost halfway through this year. I know, we still have a couple of months.

But I know, no, but it's kind of.

But I know, no, but it's kind of.

Let's say we're almost a quarter the way through this year.

Let's say we're almost a quarter the way through this year.

Let's say that, all right, a quarter a quarter technically correct, but it feels like a lot more.

Let's say that, all right, a quarter a quarter technically correct, but it feels like a lot more.

It does feel like a lot.

It does feel like a lot.

Look.

Look.

I talked to some market observers this week who repeated this idea that once we do get regulatory clarity on tariffs, which supposedly is coming April second the President keeps reminding us, then we will see things settle down a bit. I don't know, Carol, I'm not so sure.

I talked to some market observers this week who repeated this idea that once we do get regulatory clarity on tariffs, which supposedly is coming April second the President keeps reminding us, then we will see things settle down a bit. I don't know, Carol, I'm not so sure.

I got to say, if that's it, yes, if more tariffs possibly come, or we continue to hear it in the narrative out of the White House, that could be problematic. Hey, listen, another great bell Weather economic, bell Weather Market, Bellweather is FedEx.

I got to say, if that's it, yes, if more tariffs possibly come, or we continue to hear it in the narrative out of the White House, that could be problematic. Hey, listen, another great bell Weather economic, bell Weather Market, Bellweather is FedEx.

We got their earnings last night. Stock at it's lows.

We got their earnings last night. Stock at it's lows.

Today down almost twelve percent right now down about six point three percent. Company did lower its full year guidance for our third consecutive quarter, citing inflation and citing uncertain demand for shipment. So let's get back to Lee Klascow. He was with us as we were breaking down those earnings last night. He Bloomberg Intelligence senior Transport, Logistics and shipping analysts. He joins US from BI headquarters in Princeton, New Jersey. So, Lee, did we get more from the company following earnings about that cut in its full year guidance for the third quarter?

Today down almost twelve percent right now down about six point three percent. Company did lower its full year guidance for our third consecutive quarter, citing inflation and citing uncertain demand for shipment. So let's get back to Lee Klascow. He was with us as we were breaking down those earnings last night. He Bloomberg Intelligence senior Transport, Logistics and shipping analysts. He joins US from BI headquarters in Princeton, New Jersey. So, Lee, did we get more from the company following earnings about that cut in its full year guidance for the third quarter?

Yeah, I think you know, what it pointed to is a weaker industrial economy and a weaker B to B demand or business to business demand. So obviously not the home deliveries, it's just parcels between companies, so think of lawyers and things of that nature. That's been much weaker than I think they expected. And as you mentioned, we're mentioning, you know, the whole uncertainty that's swirling around the economy really is making it hard not only for people like me to kind of figure out, you know, where things are heading, but also the C suite to kind of give guidance that that's going to come in within range. So there's a lot of risks to guidance going forward for not only fed X, but for a lot of companies in the space because if the risk or if actual tariffs are going to hurt demand and be inflationary, that is going to really hurt the freight economy recovery, which is something we're really hoping for in twenty twenty five. But it seems that that recovery is getting pushed out further and further.

Yeah, I think you know, what it pointed to is a weaker industrial economy and a weaker B to B demand or business to business demand. So obviously not the home deliveries, it's just parcels between companies, so think of lawyers and things of that nature. That's been much weaker than I think they expected. And as you mentioned, we're mentioning, you know, the whole uncertainty that's swirling around the economy really is making it hard not only for people like me to kind of figure out, you know, where things are heading, but also the C suite to kind of give guidance that that's going to come in within range. So there's a lot of risks to guidance going forward for not only fed X, but for a lot of companies in the space because if the risk or if actual tariffs are going to hurt demand and be inflationary, that is going to really hurt the freight economy recovery, which is something we're really hoping for in twenty twenty five. But it seems that that recovery is getting pushed out further and further.

Lee, how much further do you think that recovery is getting pushed out.

Lee, how much further do you think that recovery is getting pushed out.

Well, we're seeing, like you know, certain aspects of the market. So like the rail industry. The rail industry is showing volume growth, which is good, but some might argue a lot of that growth is just pull forward demand less than truckload carriers, which FedEx is actually the largest provider of that kind of service LTL service and their FedEx freight business. You know that's been down. We've seen you know, tonnage down from FedEx from its competitors, down by mid to high single digits. And that business is really tied to the industrial economy, so that business will go as the ism goes, which is a good leading indicator. And while that's been positive for the last two months, it's been barely in expansion mode. So you know that recovery is extremely.

Well, we're seeing, like you know, certain aspects of the market. So like the rail industry. The rail industry is showing volume growth, which is good, but some might argue a lot of that growth is just pull forward demand less than truckload carriers, which FedEx is actually the largest provider of that kind of service LTL service and their FedEx freight business. You know that's been down. We've seen you know, tonnage down from FedEx from its competitors, down by mid to high single digits. And that business is really tied to the industrial economy, so that business will go as the ism goes, which is a good leading indicator. And while that's been positive for the last two months, it's been barely in expansion mode. So you know that recovery is extremely.

Fragile, is there. I mean, are you are you taking any signs from this report, from the commentary that we got on the call, Lee about this being an economic bell weather for how the economy is doing. You did say that, you know that B to B communication that typically happens with FedEx, less of that is happening. How are you reading into that?

Fragile, is there. I mean, are you are you taking any signs from this report, from the commentary that we got on the call, Lee about this being an economic bell weather for how the economy is doing. You did say that, you know that B to B communication that typically happens with FedEx, less of that is happening. How are you reading into that?

Yeah, So I think with FedEx, it's two things. So some things are very FedEx specific in terms of their earnings announcement and their lower expectations, and some things are just the just the macro for the FedEx specific stuff.

Yeah, So I think with FedEx, it's two things. So some things are very FedEx specific in terms of their earnings announcement and their lower expectations, and some things are just the just the macro for the FedEx specific stuff.

You know.

You know.

There they are walked away from their contract with the US postal business because it was low margin business and they wanted to restructure their networks. They didn't have as many planes in the air because that's very expensive to operate. So they're they're kind of decided not to renew that business. Uh, and they're restructuring their business. And FedEx is also a company that was extremely bloated, uh you know, call it five six years ago and it's uh, you know now they're really doing the hard work of the productivity improvements that we're seeing within whether it's their driving initiative or some of their other initiatives that are really good to drive margin improvement. The problem is is that you know, you need more growth on the volume side to really see those margins improve, and a lot of that growth has to be on the B to B side. And so to answer your question, you know, yes, it is. They are telling us that the the industrial economy is a lot weaker. The consumer is, you know, somewhat resilient. But that resiliency again, you know, I think the two words that we're playing a drinking game would be fragile and uncertainty. Uh, you know, every time someone said that you have to take a drink. I think that, you know, depending on how inflationary tarists are, you know, could have a really big packed on consumers. And as you noted earlier before I came on that, you know, the consumer confidence is kind of like, you know, stumbling along and it's been moderating since the beginning of the year.

There they are walked away from their contract with the US postal business because it was low margin business and they wanted to restructure their networks. They didn't have as many planes in the air because that's very expensive to operate. So they're they're kind of decided not to renew that business. Uh, and they're restructuring their business. And FedEx is also a company that was extremely bloated, uh you know, call it five six years ago and it's uh, you know now they're really doing the hard work of the productivity improvements that we're seeing within whether it's their driving initiative or some of their other initiatives that are really good to drive margin improvement. The problem is is that you know, you need more growth on the volume side to really see those margins improve, and a lot of that growth has to be on the B to B side. And so to answer your question, you know, yes, it is. They are telling us that the the industrial economy is a lot weaker. The consumer is, you know, somewhat resilient. But that resiliency again, you know, I think the two words that we're playing a drinking game would be fragile and uncertainty. Uh, you know, every time someone said that you have to take a drink. I think that, you know, depending on how inflationary tarists are, you know, could have a really big packed on consumers. And as you noted earlier before I came on that, you know, the consumer confidence is kind of like, you know, stumbling along and it's been moderating since the beginning of the year.

Well, that drinking game made its way to our makeup room, where they actually said tariffs would be another one where it would put you on the floor because we say it so much.

Well, that drinking game made its way to our makeup room, where they actually said tariffs would be another one where it would put you on the floor because we say it so much.

Hey, one thing I want to ask you.

Hey, one thing I want to ask you.

We had a couple of analysts cut their price targets on FedEx today.

We had a couple of analysts cut their price targets on FedEx today.

One downgrade.

One downgrade.

I'm looking at MarketWatch, who actually noted that Loop Capital downgrade the stock to sell from hold due to the company's vulnerability to an economic downtur What they said is with economists wratching up US recession risk, be aware that FedEx is a really bad recession stock because thin express margins amplify the earnings hit whenever there's pressure on the top line. It's not when you want to own if things go south your own analysis. If things go south, you know, there's uncertainty, and then there's recession, which is a recession problematic for FedEx.

I'm looking at MarketWatch, who actually noted that Loop Capital downgrade the stock to sell from hold due to the company's vulnerability to an economic downtur What they said is with economists wratching up US recession risk, be aware that FedEx is a really bad recession stock because thin express margins amplify the earnings hit whenever there's pressure on the top line. It's not when you want to own if things go south your own analysis. If things go south, you know, there's uncertainty, and then there's recession, which is a recession problematic for FedEx.

If indeed that happens, well.

If indeed that happens, well.

We don't do bihole cell now I know, I know, So just just sit that. You know, the probability of a recession I think on the Bloomberg terminals twenty five percent, and that's up from a low of twenty percent, So the probability has increased, but it's still extremely low. The US consumer has been resilient. I tend not to bet against the US consumer. I am concerned that they maybe they'll spend less, but I would never really bet against them. And when you're looking at FedEx as a company, they are finally in the midst of a transformation that was well overdue, and I think once they come out of this, and there's a better backdrop the benefits to the transformation and the cost cutting that they've been doing is really going to create a more flexible, more productive, and more profitable network. So I think I think, you know, FedEx is a very interesting name, not in the near term because they're still trying to figure things out, but looking past the noise of tariffs.

We don't do bihole cell now I know, I know, So just just sit that. You know, the probability of a recession I think on the Bloomberg terminals twenty five percent, and that's up from a low of twenty percent, So the probability has increased, but it's still extremely low. The US consumer has been resilient. I tend not to bet against the US consumer. I am concerned that they maybe they'll spend less, but I would never really bet against them. And when you're looking at FedEx as a company, they are finally in the midst of a transformation that was well overdue, and I think once they come out of this, and there's a better backdrop the benefits to the transformation and the cost cutting that they've been doing is really going to create a more flexible, more productive, and more profitable network. So I think I think, you know, FedEx is a very interesting name, not in the near term because they're still trying to figure things out, but looking past the noise of tariffs.

Lee, we'd be remissed not to ask you about UPS. Just quickly twenty seven seconds. UPS is also down about two point two percent today. I know they're different models, different companies, but they do all work in the delivery space. What does it say about UPS or does it say nothing in terms of what we got from FedEx?

Lee, we'd be remissed not to ask you about UPS. Just quickly twenty seven seconds. UPS is also down about two point two percent today. I know they're different models, different companies, but they do all work in the delivery space. What does it say about UPS or does it say nothing in terms of what we got from FedEx?

So UPS sold their less than truckload business in twenty twenty one, so they don't have that that that larger exposure to the industrial economy that's that FedEx does. And then also I would say that you know, UPS is.

So UPS sold their less than truckload business in twenty twenty one, so they don't have that that that larger exposure to the industrial economy that's that FedEx does. And then also I would say that you know, UPS is.

B to B.

B to B.

Exposure is around thirty to thirty five percent. Don't quote me on that. It was around that in their US domestic business. So it's a it's not a huge portion of their overall business. You know, B two C is more important for them right now. And I would say UPS is probably like two or three years ahead of FedEx in terms of restructuring itself to deal with the fact that, you know, R e commerce growth is really going to drive their growth, not.

Exposure is around thirty to thirty five percent. Don't quote me on that. It was around that in their US domestic business. So it's a it's not a huge portion of their overall business. You know, B two C is more important for them right now. And I would say UPS is probably like two or three years ahead of FedEx in terms of restructuring itself to deal with the fact that, you know, R e commerce growth is really going to drive their growth, not.

B to B.

B to B.

All right, good stuff as always, Thanks again for that doing double duty with us over the last twenty four hours. Lea Clascow Isloomberg Intelligence Senior Transport, Logistics and Shipping Alice joining us from BI headquarters in Princeton, New Jersey.

All right, good stuff as always, Thanks again for that doing double duty with us over the last twenty four hours. Lea Clascow Isloomberg Intelligence Senior Transport, Logistics and Shipping Alice joining us from BI headquarters in Princeton, New Jersey.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.

There was one story that caught our attention today.

There was one story that caught our attention today.

Actually, one of our producers, Elizabeth, pointed it out because it just seemed to tie in so well with our next guest, Astra. Zeneca will invest two and a half billion dollars in a new research center in Beijing in a major show of commitment to China, just months after that company's top executive there was detained by authorities. We know it is so complicated doing business globally. Today, our next guest has separate supply chains for China and Asia and their Western clients, which safe to say comes in pretty handy right now. Here to talk about that and more is Siemens Healthenier's chief financial officer Jahan Schmidts, who is featured in this Sunday's Bloomberg CFO Briefing newsletter. Jahan joins us from Munich along with our own in a treatment. She's here in our studio. She's senior editor at Bloomberg News, author of the CFO Briefing newsletter, which you can sign up for at Bloomberg dot com slash CFO Briefing.

Actually, one of our producers, Elizabeth, pointed it out because it just seemed to tie in so well with our next guest, Astra. Zeneca will invest two and a half billion dollars in a new research center in Beijing in a major show of commitment to China, just months after that company's top executive there was detained by authorities. We know it is so complicated doing business globally. Today, our next guest has separate supply chains for China and Asia and their Western clients, which safe to say comes in pretty handy right now. Here to talk about that and more is Siemens Healthenier's chief financial officer Jahan Schmidts, who is featured in this Sunday's Bloomberg CFO Briefing newsletter. Jahan joins us from Munich along with our own in a treatment. She's here in our studio. She's senior editor at Bloomberg News, author of the CFO Briefing newsletter, which you can sign up for at Bloomberg dot com slash CFO Briefing.

Johan. Great to have you here with us. There's a lot to talk about.

Johan. Great to have you here with us. There's a lot to talk about.

I do want to start with supply chains because I feel like that and tariffs and globalization is so much front and center right now. Talk to us about how you manage it, build it, think about it, and how what you have today came together.

I do want to start with supply chains because I feel like that and tariffs and globalization is so much front and center right now. Talk to us about how you manage it, build it, think about it, and how what you have today came together.

Yeah, thank you very much first for having me. I'm when I think about our global value add footprint. We have as you right for you said in the beginning, we have so we say a two site so to say, two side strategy. We manufacture and develop everything for China and for the China block out of China, and we manufacture and develop everything else in the also in the Western world. That means we have relatively detached two value chains in place. Now, this is a Karlie I would say, for the current situation, kind of a comfortable setup because we are not affected, so to say, too much by the geopolitical or teriff discussion between so far between the United States and China. And when we look at our global footprint in the Western world, twenty five percent of our employees are in the United States. We have four segments. Two of the segments are headquartered or the United States, or seventeen thousand total employees seventeen thousand. As I said, twenty five percent are in the United States. So we are well spread across the world. And this gives us a decent resilience. Yeah, but it does not make us immune against global trade wars. And I would to say this.

Yeah, thank you very much first for having me. I'm when I think about our global value add footprint. We have as you right for you said in the beginning, we have so we say a two site so to say, two side strategy. We manufacture and develop everything for China and for the China block out of China, and we manufacture and develop everything else in the also in the Western world. That means we have relatively detached two value chains in place. Now, this is a Karlie I would say, for the current situation, kind of a comfortable setup because we are not affected, so to say, too much by the geopolitical or teriff discussion between so far between the United States and China. And when we look at our global footprint in the Western world, twenty five percent of our employees are in the United States. We have four segments. Two of the segments are headquartered or the United States, or seventeen thousand total employees seventeen thousand. As I said, twenty five percent are in the United States. So we are well spread across the world. And this gives us a decent resilience. Yeah, but it does not make us immune against global trade wars. And I would to say this.

Yeah, to follow up on that, Johan, thanks for for joining us talk to us about the Trump terraffs. Of course, a lot of moving parts, but how do you think about those and could there be an impact on your business given that you have a strong US footprint.

Yeah, to follow up on that, Johan, thanks for for joining us talk to us about the Trump terraffs. Of course, a lot of moving parts, but how do you think about those and could there be an impact on your business given that you have a strong US footprint.

First of all, let me look at what is currently in place the Mexico, Canada, and China additional terrorists. As I said, China is not a major topic for US because the latest since Trump one or zero, we change our supply chains so that they are detached from each other. We have i would say, some impact from some sub supply from Mexico into the United States for one of our two headquartered business in the United States or wear in business at the West Coast. This is I would say, the major impact. But it's not a huge topic. It's a so far small topic Canada, US so far not a big topic for US.

First of all, let me look at what is currently in place the Mexico, Canada, and China additional terrorists. As I said, China is not a major topic for US because the latest since Trump one or zero, we change our supply chains so that they are detached from each other. We have i would say, some impact from some sub supply from Mexico into the United States for one of our two headquartered business in the United States or wear in business at the West Coast. This is I would say, the major impact. But it's not a huge topic. It's a so far small topic Canada, US so far not a big topic for US.

And to follow up on that, have you had any sort of conversations with the administration to see if if you could be exempt from any tariffs? I know that sort of. Beijing, for example, in its retaliatory tariffs on US goods, has excluded healthcare.

And to follow up on that, have you had any sort of conversations with the administration to see if if you could be exempt from any tariffs? I know that sort of. Beijing, for example, in its retaliatory tariffs on US goods, has excluded healthcare.

Yeah, and obviously we are trying to get healthcare and together with other companies in the healthcare sector out of exempt from from terraffs. I think that makes a lot of things sense because when you think about terraffs, what do they do? They will limit the flow of products and services across across the world on the one hand, but they're also will will limit the flow of knowledge and that is to the detment of patience.

Yeah, and obviously we are trying to get healthcare and together with other companies in the healthcare sector out of exempt from from terraffs. I think that makes a lot of things sense because when you think about terraffs, what do they do? They will limit the flow of products and services across across the world on the one hand, but they're also will will limit the flow of knowledge and that is to the detment of patience.

Yeah.

Yeah.

Therefore, when you look at comparable situations like sanctions or others, normally healthcare gets exclude it over time. And I'm I'm hopeful that this will also get into into play in terror, hopefully sooner than later.

Therefore, when you look at comparable situations like sanctions or others, normally healthcare gets exclude it over time. And I'm I'm hopeful that this will also get into into play in terror, hopefully sooner than later.

Jagom, How do you think about this administration as president versus other world leaders that you've dealt with? How is he different to deal with? How is this administration different to deal with?

Jagom, How do you think about this administration as president versus other world leaders that you've dealt with? How is he different to deal with? How is this administration different to deal with?

Yeah, I mean normally, to be honest, when we in the particular in the United States, we do not have a lot of business with government because the prior, the healthcare system in the United States is primarily a private a private system. Therefore, where we look at changes in the administration in the United States, the impact in general on our business on the healthcare markets are for us relatively limited. Yeah, and our current assumption as we see it is also with regard to the WES market, we don't see significant disruption at the horizon in this regard now. And obviously when we look at the Trump administration, it's from it. It's not a surprise what is happening. It was clear. It was also mentioned in the campaign that things like this might happen. From a strategic standpoint, we need to stay flexible edgile because we cannot plan for everything. Will there will be surprises, and we need to try to deal with this as as rapidly as possible.

Yeah, I mean normally, to be honest, when we in the particular in the United States, we do not have a lot of business with government because the prior, the healthcare system in the United States is primarily a private a private system. Therefore, where we look at changes in the administration in the United States, the impact in general on our business on the healthcare markets are for us relatively limited. Yeah, and our current assumption as we see it is also with regard to the WES market, we don't see significant disruption at the horizon in this regard now. And obviously when we look at the Trump administration, it's from it. It's not a surprise what is happening. It was clear. It was also mentioned in the campaign that things like this might happen. From a strategic standpoint, we need to stay flexible edgile because we cannot plan for everything. Will there will be surprises, and we need to try to deal with this as as rapidly as possible.

I am curious.

I am curious.

You know. There was a story out today actually from Dow Jones that talked about how you guys are setting up to cancer research centers in Alberta, Canada, focusing on oncology training and artificial intelligence and machine learning. And I guess what I want to ask you is do you see because it does feel like for so long or the last couple of months, we talked about American exceptionalism doing so well, growth and still investment coming in. But I do wonder do you think that the you, as a result of this administration and the policies that are coming out, is potentially putting an end to that exceptionalism and maybe cutting the US off from collaborations, whether it might be with your company or with healthcare in general, or research, whether it's AI, whether it's in healthcare, and so on.

You know. There was a story out today actually from Dow Jones that talked about how you guys are setting up to cancer research centers in Alberta, Canada, focusing on oncology training and artificial intelligence and machine learning. And I guess what I want to ask you is do you see because it does feel like for so long or the last couple of months, we talked about American exceptionalism doing so well, growth and still investment coming in. But I do wonder do you think that the you, as a result of this administration and the policies that are coming out, is potentially putting an end to that exceptionalism and maybe cutting the US off from collaborations, whether it might be with your company or with healthcare in general, or research, whether it's AI, whether it's in healthcare, and so on.

My personal opinion is basically answer is no, this will happen. From my standpoint, we also do not see this currently. First of all, we are a huge company in the United States. As I said, we have two or more segments in the United State States. We have more than seventeen thousand employees in the United States. We run here, of other United States, I would say, the by far most successful global variation therapy company in the world variant and we have a very very strong lab diagnostic business out of Tearytown, New York. So I think we are very us Ish also like we are very European, like we are very Chinese. We are really a global company with a very well spread global footprint. And I can't imagine that the United States will harm their people to that extent that they will cut off research in healthcare and and really do crazy things in this regard, because as I said in the beginning, this will all ultimately would go to the detriment of passions and that will on't.

My personal opinion is basically answer is no, this will happen. From my standpoint, we also do not see this currently. First of all, we are a huge company in the United States. As I said, we have two or more segments in the United State States. We have more than seventeen thousand employees in the United States. We run here, of other United States, I would say, the by far most successful global variation therapy company in the world variant and we have a very very strong lab diagnostic business out of Tearytown, New York. So I think we are very us Ish also like we are very European, like we are very Chinese. We are really a global company with a very well spread global footprint. And I can't imagine that the United States will harm their people to that extent that they will cut off research in healthcare and and really do crazy things in this regard, because as I said in the beginning, this will all ultimately would go to the detriment of passions and that will on't.

So just to clarify this idea of American exceptionalism being done being gone dead, if you will you don't agree with that.

So just to clarify this idea of American exceptionalism being done being gone dead, if you will you don't agree with that.

Yeah, I don't agree.

Yeah, I don't agree.

Will okay?

Will okay?

To follow up.

To follow up.

You're based in Germany, A fair amount of your value creation is there, but only only I think forty five percent of your revenue comes from there. Talk to us a little bit about the changing government that we're expecting and how far you're seeing that. Potentially improving competitiveness in Germany, a topic that you and I have talked about in the past.

You're based in Germany, A fair amount of your value creation is there, but only only I think forty five percent of your revenue comes from there. Talk to us a little bit about the changing government that we're expecting and how far you're seeing that. Potentially improving competitiveness in Germany, a topic that you and I have talked about in the past.

Yeah, as you right, for we said the German market persist for us is not unimportant, but it's not super super critically ivispot to five percent of revenue. When we look at Germany as a country, I think we need to have a change in how we administer this country. I think the first steps we have seen here are promising. There were at least decision making, pragmatic decision making. The supposed to be new government establish itself. I call it a very nice credit line of one thousand billion euros. But this is I would say, very comfortable to have. On the one hand, on the other hand, it does not release this government from making tough decisions on leaning on leaning up the bureaucracy in the country and reforma things, so to say that the social systems, because otherwise, also this nice investment program will not find its way or will not pave the way to sustainable growth.

Yeah, as you right, for we said the German market persist for us is not unimportant, but it's not super super critically ivispot to five percent of revenue. When we look at Germany as a country, I think we need to have a change in how we administer this country. I think the first steps we have seen here are promising. There were at least decision making, pragmatic decision making. The supposed to be new government establish itself. I call it a very nice credit line of one thousand billion euros. But this is I would say, very comfortable to have. On the one hand, on the other hand, it does not release this government from making tough decisions on leaning on leaning up the bureaucracy in the country and reforma things, so to say that the social systems, because otherwise, also this nice investment program will not find its way or will not pave the way to sustainable growth.

So that means you'll hold off for now with new investment decisions for Germany or sort of what's your take on that.

So that means you'll hold off for now with new investment decisions for Germany or sort of what's your take on that.

No, that's not the case. I mean for us, we have a significant value act in Germany. We see the circumstances for us in Germany as as a value at the location still very positive. We have maybe also because of the industry we get very good people. The education system is still attractive to to what we for what we need, and I think we are ongoing well. We will continue to invest. We have invested in the last three to four years, about three to five years, about six and fifty million euros a billion euros in Germany and this is a significant investment a million euros.

No, that's not the case. I mean for us, we have a significant value act in Germany. We see the circumstances for us in Germany as as a value at the location still very positive. We have maybe also because of the industry we get very good people. The education system is still attractive to to what we for what we need, and I think we are ongoing well. We will continue to invest. We have invested in the last three to four years, about three to five years, about six and fifty million euros a billion euros in Germany and this is a significant investment a million euros.

Thirty seconds, very quickly, John, Yeah, I wonder what's the biggest kind of interesting trend disruption that's going on in your industry right now?

Thirty seconds, very quickly, John, Yeah, I wonder what's the biggest kind of interesting trend disruption that's going on in your industry right now?

And I do have to ask you to be very quick mhm.

And I do have to ask you to be very quick mhm.

I think our industry is not an industry which is driven by disruption, because it's about the I would say the health of patients. Obviously, AI will play a constantly more important role, and those who do not build their case on AI will not succeed.

I think our industry is not an industry which is driven by disruption, because it's about the I would say the health of patients. Obviously, AI will play a constantly more important role, and those who do not build their case on AI will not succeed.

Important well, super interesting and so appreciate your time. We coverage so much ground Johann Schmidtz, CFO of Semen's Healtheneers, and of course our Nina Trentman, Senior editor at Bloomberg News. Be sure to check out the CFO Briefing newsletter. A new one comes out on Sunday.

Important well, super interesting and so appreciate your time. We coverage so much ground Johann Schmidtz, CFO of Semen's Healtheneers, and of course our Nina Trentman, Senior editor at Bloomberg News. Be sure to check out the CFO Briefing newsletter. A new one comes out on Sunday.

This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on applecar Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty Well, Carnival.

This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on applecar Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa played Bloomberg eleven thirty Well, Carnival.

Reported earnings, and the stock at one point sold off more than six percent on the news. This after a key quarterly earnings forecast trailed estimates, adding to worries that a travel slowdown has spread to even the most robust corner of the market. However, Carnival did boost full year profit expectations, beating Wall Streets view, suggesting any slow down may prove transitory. Do you want to point out too? The stock is down about fifteen percent so far here in twenty twenty five. Let's get some context and more detail around at the company's quarterly update. Great to have back with us, Josh Weinstein. He's president, CEO, and Chief Climate Officer of Carnival Corporation, and he joins us from Carnival's headquarters in Miami.

Reported earnings, and the stock at one point sold off more than six percent on the news. This after a key quarterly earnings forecast trailed estimates, adding to worries that a travel slowdown has spread to even the most robust corner of the market. However, Carnival did boost full year profit expectations, beating Wall Streets view, suggesting any slow down may prove transitory. Do you want to point out too? The stock is down about fifteen percent so far here in twenty twenty five. Let's get some context and more detail around at the company's quarterly update. Great to have back with us, Josh Weinstein. He's president, CEO, and Chief Climate Officer of Carnival Corporation, and he joins us from Carnival's headquarters in Miami.

Josh, great to be talking with you. How are you very well?

Josh, great to be talking with you. How are you very well?

Thank you? How are you doing?

Thank you? How are you doing?

Doing okay?

Doing okay?

Trying to keep up with everything that's coming at us on a daily basis, And I kind of want to start there because there is a lot coming at anyone who's running a big company like yours today, whether it's out of Washington, whether it's out of how the consumer is feeling. How would you describe the crew's business and how it compares from your last quarterly update?

Trying to keep up with everything that's coming at us on a daily basis, And I kind of want to start there because there is a lot coming at anyone who's running a big company like yours today, whether it's out of Washington, whether it's out of how the consumer is feeling. How would you describe the crew's business and how it compares from your last quarterly update?

What has changed at all?

What has changed at all?

Because I know you have been very optimistic and it seems like you're still optimistic about the business based on the releases.

Because I know you have been very optimistic and it seems like you're still optimistic about the business based on the releases.

Yeah, yeah, absolutely, So the thing that's changed from December to today is, well, we just completed our first quarter and instead of yields being up four point seven percent, which is what we guided to, they were up seven point three percent, and so clearly things went very very well in the first quarter. Consumers love to and we've got eight brands that are purposely tied to particular demographics, particular national markets, and it serves us very very well. And so what we see is enough strength in that first quarter that we can raise our yields for the year for our full year guidance, and that's basically saying that we're we're content to keep four percent plus yields for the remaining three quarters of the year, despite the fact that there is you know, geopolitical macroeconomic uncertainty, which certainly wasn't on the radar when we came up with our guidance to begin with in December.

Yeah, yeah, absolutely, So the thing that's changed from December to today is, well, we just completed our first quarter and instead of yields being up four point seven percent, which is what we guided to, they were up seven point three percent, and so clearly things went very very well in the first quarter. Consumers love to and we've got eight brands that are purposely tied to particular demographics, particular national markets, and it serves us very very well. And so what we see is enough strength in that first quarter that we can raise our yields for the year for our full year guidance, and that's basically saying that we're we're content to keep four percent plus yields for the remaining three quarters of the year, despite the fact that there is you know, geopolitical macroeconomic uncertainty, which certainly wasn't on the radar when we came up with our guidance to begin with in December.

And yet investors seem to be at least initially disappointed over your second quarter even a forecast. Your forecast was one point three to two billion in the second quarter, as it expected one point three.

And yet investors seem to be at least initially disappointed over your second quarter even a forecast. Your forecast was one point three to two billion in the second quarter, as it expected one point three.

To five billion. Should they be disappointed?

To five billion. Should they be disappointed?

You know what, I guess I'll answer by saying, our December guidance was basically saying we're going to be about was it a buck seventy give or take for the year on EPs. We just came out with guidance, said Buck eighty three. We all performed on revenue yields on board. On board trends are really really healthy with our consumers. So I would argue that we should be higher than where we were in December since our results are better than where we were in December.

You know what, I guess I'll answer by saying, our December guidance was basically saying we're going to be about was it a buck seventy give or take for the year on EPs. We just came out with guidance, said Buck eighty three. We all performed on revenue yields on board. On board trends are really really healthy with our consumers. So I would argue that we should be higher than where we were in December since our results are better than where we were in December.

But that's really up to up to the street.

But that's really up to up to the street.

Our job is to deliver and hopefully over deliver, which is what we did in the first quarter.

Our job is to deliver and hopefully over deliver, which is what we did in the first quarter.

So Josh, let's talk a little bit more about that consumer because in the press release you noted that Carnival's not completely immune from heightened macroeconomic and geopolitical volatility, and you're still taking up earnings expectations for the year. You remain on track to have another stellar year across the entire brand of cruises. Why are we hearing, then from airlines that consumers are pulling back? Why are we not seeing that in your business?

So Josh, let's talk a little bit more about that consumer because in the press release you noted that Carnival's not completely immune from heightened macroeconomic and geopolitical volatility, and you're still taking up earnings expectations for the year. You remain on track to have another stellar year across the entire brand of cruises. Why are we hearing, then from airlines that consumers are pulling back? Why are we not seeing that in your business?

Well, I think there's a couple of things to differentiate. First of all, airlines aren't just for holidays. Airlines are business. It is holidays, it's conferences, it's government travel. We are really holidays, we are vacations. So we're in a different bucket than than where Airlines are.

Well, I think there's a couple of things to differentiate. First of all, airlines aren't just for holidays. Airlines are business. It is holidays, it's conferences, it's government travel. We are really holidays, we are vacations. So we're in a different bucket than than where Airlines are.

You know, we came in to twenty twenty.

You know, we came in to twenty twenty.

Five, the best book position we've ever been in at higher prices. We came out at the end of the first quarter still being in line with record occupancy percentage and price is still nicely higher. We're eighty percent book for the year, and so we have relatively limited inventory to sell when it comes to twenty twenty five. At the same time, our guests and our brands aren't just focused on in year. You know, we just came out of the first quarter of the wave period, which is considered the traditional big push for selling, and we set a record for the most volume we've ever done during wave for future years out. So people aren't just thinking about the short term, they're thinking about the long term, which is exactly what we're doing as a company.

Five, the best book position we've ever been in at higher prices. We came out at the end of the first quarter still being in line with record occupancy percentage and price is still nicely higher. We're eighty percent book for the year, and so we have relatively limited inventory to sell when it comes to twenty twenty five. At the same time, our guests and our brands aren't just focused on in year. You know, we just came out of the first quarter of the wave period, which is considered the traditional big push for selling, and we set a record for the most volume we've ever done during wave for future years out. So people aren't just thinking about the short term, they're thinking about the long term, which is exactly what we're doing as a company.

But are you noticing any change in the tone of the bookings, of the bookings or perhaps even people canceling because of their own uncertainty. I understand there's this difference between discretionary spend and business spend, but after all, discretionary is discretionary, and that's often the first thing to go if people are feeling uncertain.

But are you noticing any change in the tone of the bookings, of the bookings or perhaps even people canceling because of their own uncertainty. I understand there's this difference between discretionary spend and business spend, but after all, discretionary is discretionary, and that's often the first thing to go if people are feeling uncertain.

Yeah, you know, we haven't seen any noticeable change in trends on cancelations, certainly, as we mentioned on the call, you know, there were ups and downs over the first quarter. There's ups and downs all the time, but we got through our period exactly at pretty much the highest point that you can get at at least for us in our history, and we feel good about.

Yeah, you know, we haven't seen any noticeable change in trends on cancelations, certainly, as we mentioned on the call, you know, there were ups and downs over the first quarter. There's ups and downs all the time, but we got through our period exactly at pretty much the highest point that you can get at at least for us in our history, and we feel good about.

The position that puts us in.

The position that puts us in.

Like I said, onboard spending, you know, it's up about ten percent year over year in the first quarter. That's an acceleration of year over year performance versus where we were in the fourth quarter, and at least into the first couple of weeks of March. With cruises that have ended, we really haven't seen a slowdown in that consumer behavior that onboard spending. And so you know, at the end of the day, people in good times and bad times, they take holiday, they take a break.

Like I said, onboard spending, you know, it's up about ten percent year over year in the first quarter. That's an acceleration of year over year performance versus where we were in the fourth quarter, and at least into the first couple of weeks of March. With cruises that have ended, we really haven't seen a slowdown in that consumer behavior that onboard spending. And so you know, at the end of the day, people in good times and bad times, they take holiday, they take a break.

They need a break.

They need a break.

You could argue in bad times they need that break even more than they do in the good times.

You could argue in bad times they need that break even more than they do in the good times.

And that's what cruising is. It's a break.

And that's what cruising is. It's a break.

It's a way to relax, to get away from things, enjoy time with friends and family. That's what people pay for now and when you line up cruise versus other vacation alternatives frustrating as it is for me as the CEO of a cruise company. We're a great value and the fact is, if people are getting concerned, if there's uncertainty, if there's noise in the background, people are searching for more value for their money. And that's exactly what we do. So it plays very well into our strength.

It's a way to relax, to get away from things, enjoy time with friends and family. That's what people pay for now and when you line up cruise versus other vacation alternatives frustrating as it is for me as the CEO of a cruise company. We're a great value and the fact is, if people are getting concerned, if there's uncertainty, if there's noise in the background, people are searching for more value for their money. And that's exactly what we do. So it plays very well into our strength.

So just for the record, I could go on a cruise for about a month right now because I need a break, but.

So just for the record, I could go on a cruise for about a month right now because I need a break, but.

I'd love to have you.

I'd love to have you.

We'd love to have you.

We'd love to have you.

Having said that, what about in terms of pricing, are you guys able to maintain pricing? Nothing changing in that regard either for the first quarter or even for the outlook for the second quarter.

Having said that, what about in terms of pricing, are you guys able to maintain pricing? Nothing changing in that regard either for the first quarter or even for the outlook for the second quarter.

Yeah, you know, so, like I said, the first quarter, you know, are you year over year we're up over seven percent and over a two year period, we're talking about twenty four percent higher yields.

Yeah, you know, so, like I said, the first quarter, you know, are you year over year we're up over seven percent and over a two year period, we're talking about twenty four percent higher yields.

Yeah, for the first quarter.

Yeah, for the first quarter.

When we look at the rest of the year Ques two through four, we're projecting a little bit over four percent yield improvement year over year for that nine month period remainder of the year. So you know, look, it's hard going right it's not like anything is easy, and we got to work hard.

When we look at the rest of the year Ques two through four, we're projecting a little bit over four percent yield improvement year over year for that nine month period remainder of the year. So you know, look, it's hard going right it's not like anything is easy, and we got to work hard.

Our brands work hard.

Our brands work hard.

To make that become a reality, and they do it through good revenue management techniques, through the great advertising that they're doing, and then ultimately delivering onboard experiences that people want to pay for. And then they get off of our ships and they tell their friends and family how amazing it is, and we get more.

To make that become a reality, and they do it through good revenue management techniques, through the great advertising that they're doing, and then ultimately delivering onboard experiences that people want to pay for. And then they get off of our ships and they tell their friends and family how amazing it is, and we get more.

Hey, one of the things we wanted to ask you is something that in late February, the US Commerce Secretary of Howard Lutnik, he made some comments about how US based cruise companies Josh should be paying taxes even on ships that are registered abroad. We saw your stock, along with everybody in the major crew space, sell off on his words, even though analysts indicated the worry may be overblown. They said, we've heard this before over the years. Is it overblown? Are you talking with a Trump administration about this? And if there was a US registration change, what would that mean for you guys.

Hey, one of the things we wanted to ask you is something that in late February, the US Commerce Secretary of Howard Lutnik, he made some comments about how US based cruise companies Josh should be paying taxes even on ships that are registered abroad. We saw your stock, along with everybody in the major crew space, sell off on his words, even though analysts indicated the worry may be overblown. They said, we've heard this before over the years. Is it overblown? Are you talking with a Trump administration about this? And if there was a US registration change, what would that mean for you guys.

So clearly we're operating in the confines of US laws as well we should shipping. International shipping is based on very specific tax regimes that are set up in the US and all over the world, and effectively it's based on reciprocity, So we feel like we're in a good place.

So clearly we're operating in the confines of US laws as well we should shipping. International shipping is based on very specific tax regimes that are set up in the US and all over the world, and effectively it's based on reciprocity, So we feel like we're in a good place.

We're doing what we should be doing.

We're doing what we should be doing.

Having said that, anything out of the administration, including Secretary Lutnik, we certainly take seriously, and we're working hard to understand what the concerns are and how we can address them. If any there's really nothing, there's nothing to report on from my perspective as far as you know what that means or where things could be going. But we'll stay on our guard and do whatever we need to do to make sure we're staying on the right side of policy.

Having said that, anything out of the administration, including Secretary Lutnik, we certainly take seriously, and we're working hard to understand what the concerns are and how we can address them. If any there's really nothing, there's nothing to report on from my perspective as far as you know what that means or where things could be going. But we'll stay on our guard and do whatever we need to do to make sure we're staying on the right side of policy.

Josh, why don't you register in the US? Is it regulatory reasons? Is it tax reasons? Is it labor reasons? Is it all of the above? Why don't you register in the US?

Josh, why don't you register in the US? Is it regulatory reasons? Is it tax reasons? Is it labor reasons? Is it all of the above? Why don't you register in the US?

Yeah, it's just not that simple.

Yeah, it's just not that simple.

You don't just take a ship and all of a sudden, ship you can't just switch to US registry.

You don't just take a ship and all of a sudden, ship you can't just switch to US registry.

It's it's just not that simple. And and really it's.

It's it's just not that simple. And and really it's.

A it's a it's a people to go to school for classes for this right about international shipping and what what it means, how it works. Uh, And it's been in place for much longer than I've been alive. Uh and and so you know, we could we could do a separate session on that. But but suffice it to say, it's a regime that is that is well founded and and it's where we are.

A it's a it's a people to go to school for classes for this right about international shipping and what what it means, how it works. Uh, And it's been in place for much longer than I've been alive. Uh and and so you know, we could we could do a separate session on that. But but suffice it to say, it's a regime that is that is well founded and and it's where we are.

Right now, all right, So it's not something that we should think about. I mean, it can be done, though.

Right now, all right, So it's not something that we should think about. I mean, it can be done, though.

Right.

Right.

What what is the it in terms of registering in the United States?

What what is the it in terms of registering in the United States?

It's honestly not that simple based on how US law works.

It's honestly not that simple based on how US law works.

It's it's just not that simple.

It's it's just not that simple.

Okay.

Okay.

Would that be a conversation though, then to have with the Trump administration Josh and say, listen, guys, if it was simpler, I mean, they're all about making things simpler, right efficient. Is there a conversation to be had?

Would that be a conversation though, then to have with the Trump administration Josh and say, listen, guys, if it was simpler, I mean, they're all about making things simpler, right efficient. Is there a conversation to be had?

Oh, We're happy to talk to the administration truly.

Oh, We're happy to talk to the administration truly.

Okay, Okay, hey, listen.

Okay, Okay, hey, listen.

One of the things we wanted to talk to you about in a big way, and I've seen it firsthand, is the island destinations that you guys have and it seems to be a continued, you know, move for you guys and expansion. You open celebration key this July. This is in Grand Bahama Island. How do these island destinations. We've talked to you about it, but it continues to be something we find really interesting. How does it fit into the North American crew strategy and how important it is I always think about to the top line, the profitability picture.

One of the things we wanted to talk to you about in a big way, and I've seen it firsthand, is the island destinations that you guys have and it seems to be a continued, you know, move for you guys and expansion. You open celebration key this July. This is in Grand Bahama Island. How do these island destinations. We've talked to you about it, but it continues to be something we find really interesting. How does it fit into the North American crew strategy and how important it is I always think about to the top line, the profitability picture.

Yeah, So for us, what we're doing with Celebration Key, which opens in July, it's a bit of a first for us. Even though we have a wonderful footprint around the Caribbean, we've really we've we've built and created these destinations really as a service to our brands and something that's supportive of and really supplemental to what brands are doing and leading with with a cruise experience that makes them so loved. What we're doing with Celebration Key, which doesn't even exist yet and yet it's captivated the audience and captivated the imagination of Carnival cruisers and others, is we want to also lead with destination as a driver of consideration, of a driver for people saying I need to go on Carnival Cruise Line because I'll get to go to Celebration Key, or because I'll get to go to relax Away Half Moon Key, because it's the only way to get there, and so We believe that there's a tremendous amount of untapped value there in revenue generation, as well as the fact that these destinations are built close to the United States. Hence we consume less fuel in order to get there, which saves money is obviously good for the planet.

Yeah, So for us, what we're doing with Celebration Key, which opens in July, it's a bit of a first for us. Even though we have a wonderful footprint around the Caribbean, we've really we've we've built and created these destinations really as a service to our brands and something that's supportive of and really supplemental to what brands are doing and leading with with a cruise experience that makes them so loved. What we're doing with Celebration Key, which doesn't even exist yet and yet it's captivated the audience and captivated the imagination of Carnival cruisers and others, is we want to also lead with destination as a driver of consideration, of a driver for people saying I need to go on Carnival Cruise Line because I'll get to go to Celebration Key, or because I'll get to go to relax Away Half Moon Key, because it's the only way to get there, and so We believe that there's a tremendous amount of untapped value there in revenue generation, as well as the fact that these destinations are built close to the United States. Hence we consume less fuel in order to get there, which saves money is obviously good for the planet.

Hey listen, twenty seconds left here. What is your most popular destination? Where do most people want to go and what kind of trip?

Hey listen, twenty seconds left here. What is your most popular destination? Where do most people want to go and what kind of trip?

Wow, we carryllion people last year. They want they want to go to a lot of places. I'd say, if you're going to ask me what's my top that I've ever been to, I got to say, you got to go on a cruise to Alaska, and you gotta go with Princess Hall in America or a carnival because they do it in an amazing way and qn R for those who are looking for the for the luxury end.

Wow, we carryllion people last year. They want they want to go to a lot of places. I'd say, if you're going to ask me what's my top that I've ever been to, I got to say, you got to go on a cruise to Alaska, and you gotta go with Princess Hall in America or a carnival because they do it in an amazing way and qn R for those who are looking for the for the luxury end.

But if you want to see the.

But if you want to see the.

Great State, the only way to do it is with a great brand that can take you on both c and with our land experiences. Because we've got hotels and motor coaches and Glasstone railcars and you name it.

Great State, the only way to do it is with a great brand that can take you on both c and with our land experiences. Because we've got hotels and motor coaches and Glasstone railcars and you name it.

We got it up in Alaska.

We got it up in Alaska.

I just want to go somewhere where I get a cocktail with like a little umbrella in it.

I just want to go somewhere where I get a cocktail with like a little umbrella in it.

I just I'm that we also serve cocktails with them when we go to Alaska.

I just I'm that we also serve cocktails with them when we go to Alaska.

Josh, thank you so much. I always appreciate the time you give us.

Josh, thank you so much. I always appreciate the time you give us.

Be well.

Be well.

Be well.

Be well.

Josh Weinstein, President, CEO, and Chief Climate Office of Carnival Corporation, joining us from Carnival's headquarters in Miami.

Josh Weinstein, President, CEO, and Chief Climate Office of Carnival Corporation, joining us from Carnival's headquarters in Miami.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us live on YouTube.

You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us live on YouTube.

Where we spent a lot of time this week talking about Nvidia GtC. It's the annual developers event in San Jose. It's been dubbed the super Bowl of AI. Ironian King writes today that Nvidia CEO Jensen Wong's presentation there was all about how to get a return on the expensive gear being installed now, and he spent a good rest of the week reinforcing his message designed to counter increasing concerns that the sustainability of spending and encourage executives in the broader economy to join his vision for the future. One executive who was there was Antonio Neary, the president and CEO of HPE. Antonio joins us from HPE's headquarters in Spring Texas. Antonio, good to see you, Welcome back to the program. You spoke with Jensen earlier this week at the event. What was your big takeaway? What did you learn, because investors certainly weren't as impressed as they have been in the past couple of years.

Where we spent a lot of time this week talking about Nvidia GtC. It's the annual developers event in San Jose. It's been dubbed the super Bowl of AI. Ironian King writes today that Nvidia CEO Jensen Wong's presentation there was all about how to get a return on the expensive gear being installed now, and he spent a good rest of the week reinforcing his message designed to counter increasing concerns that the sustainability of spending and encourage executives in the broader economy to join his vision for the future. One executive who was there was Antonio Neary, the president and CEO of HPE. Antonio joins us from HPE's headquarters in Spring Texas. Antonio, good to see you, Welcome back to the program. You spoke with Jensen earlier this week at the event. What was your big takeaway? What did you learn, because investors certainly weren't as impressed as they have been in the past couple of years.

Well, good afternoon, and thank you for having me back. It was a fantastic event. Obviously, you can look at from many different perspective. Number one, the innovation front. I have to tell you, I've never seen such an innovation at the speed that we are all experiencing. You know, two years ago we were talking about the boom of generative AI. Now we're talking about physical AI, robotics and what can do for manufacturing in other industries. On the other hand, obviously you talk about what this can do for the enterprise and the enterprise. What I see, particularly in the last ninety days or one hundred and eighty days, is an accelerational deployment because they all realize that AI has a tremendous potential to improve productivity, to improve business processes and deliver value to each of the businesses and the last but a list obviously what they can do for society.

Well, good afternoon, and thank you for having me back. It was a fantastic event. Obviously, you can look at from many different perspective. Number one, the innovation front. I have to tell you, I've never seen such an innovation at the speed that we are all experiencing. You know, two years ago we were talking about the boom of generative AI. Now we're talking about physical AI, robotics and what can do for manufacturing in other industries. On the other hand, obviously you talk about what this can do for the enterprise and the enterprise. What I see, particularly in the last ninety days or one hundred and eighty days, is an accelerational deployment because they all realize that AI has a tremendous potential to improve productivity, to improve business processes and deliver value to each of the businesses and the last but a list obviously what they can do for society.

And if you think about the.

And if you think about the.

Opportunity to address some of the societal challenges, whether it's finding new cures through you know, molecular docking research or weather forecasting and any other type of use cases is all there. Now we have to see it, we have to build it, and we need to see it through the benefit of it over a period of time that people need to live with.

Opportunity to address some of the societal challenges, whether it's finding new cures through you know, molecular docking research or weather forecasting and any other type of use cases is all there. Now we have to see it, we have to build it, and we need to see it through the benefit of it over a period of time that people need to live with.

Well, we also heard Antonio this promise of physical AI. That was one of the big themes that emerged. And look, I'm in San Francisco right now, so I get to see the waymos driving around a little peek into the future. But from your perch at HPE, what's the future that you see? What's the future that you envision with physical AI?

Well, we also heard Antonio this promise of physical AI. That was one of the big themes that emerged. And look, I'm in San Francisco right now, so I get to see the waymos driving around a little peek into the future. But from your perch at HPE, what's the future that you see? What's the future that you envision with physical AI?

Well, I see a world where basically we can remove the humans that they are in the loop and be on the loop, where some of these physical AI, robotics and other type of applications can do the basic task that we are totally automated, where we can use ourselves the humans for other more interesting and value other tasks and that will drive a level of product activity we haven't seen before. And that applies to every industry. You talked about autonomous cars obviously that that includes a lot of artificial intelligence, machine learning, and other techniques. Well, when I think about the old industries, the potential is enormous. Now, not everything will be applicable, but I think, you know, we see a world where AI will be embedded in everything we do.

Well, I see a world where basically we can remove the humans that they are in the loop and be on the loop, where some of these physical AI, robotics and other type of applications can do the basic task that we are totally automated, where we can use ourselves the humans for other more interesting and value other tasks and that will drive a level of product activity we haven't seen before. And that applies to every industry. You talked about autonomous cars obviously that that includes a lot of artificial intelligence, machine learning, and other techniques. Well, when I think about the old industries, the potential is enormous. Now, not everything will be applicable, but I think, you know, we see a world where AI will be embedded in everything we do.

One of the things I wanted to follow up on, you know, and you guys made it actually an announcement kind of off of this event about you and video coming up with some new enterprise AI solutions working on this together. Antonio, what I wanted to follow up on, though you said we have to build it, we have to see it and to see what.

One of the things I wanted to follow up on, you know, and you guys made it actually an announcement kind of off of this event about you and video coming up with some new enterprise AI solutions working on this together. Antonio, what I wanted to follow up on, though you said we have to build it, we have to see it and to see what.

The payoff really is.

The payoff really is.

That's what like the last couple of years, right have been about this build out, this spend, and we continue to see partnerships to continue the spend. But how long do you think it will be until companies really have an idea of what payoff they get for their investment.

That's what like the last couple of years, right have been about this build out, this spend, and we continue to see partnerships to continue the spend. But how long do you think it will be until companies really have an idea of what payoff they get for their investment.

Well, look, I mean I see already today in our own company, we deploy AI in many of our business processes across finance, digital marketing, customer service, forecast planning and the like and even on they are in D side. You know, our level of productivity in our software development process has improved by thirty percent. So the learning hit is that first of all, it takes time to build infrastructure, but for enterprise is not a big of a lift from an infrastructure perspective. I can tell you in my own company, I have only a couple of hundred GPUs and it's plenty for what I need to do compared to the service providers, the model builders that many tens of thousands, of hundreds of thousands for the matter to bid these large language models which are very sophisticated from what I call generality to agentic to reasoning and eventually these models that will do the robotics side the physical AI. But inside the enterprise we really see the benefits. And I spent more than fifty percent of my time talking to customers and they are going from the experimentation phase to more deployment side.