Bloomberg TechBloomberg's Ed Ludlow and Caroline Hyde break down earnings results from Walmart and focus in on e-commerce. Plus, Cisco outlines plans to push into AI and security technology. And, Dutch payment processing company Adyen plunges after posting the slowest revenue growth since its IPO.
From Marhart.
We're Innovation, Money and Power Collie in Silicon Valley, NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
I'm Caroline Heidet Bloomberg's Weld head quarters in.
New York, and I'm Ed Ludlow in San Francisco. This is Bloomberg Technology.
Coming up.
We'll get the read on the state of the e commerce consumer as we break down the early from Walmart for strong online.
Growth plus the largest maker of computer networking equipment making headway in AI and security technology.
We break down Cisco's results.
Meanwhile, Adien eraising twenty billion dollars of market value in one day alone after posting the slowest revenue growth since that European payments giants IPO.
Here in the US, two names that we're watching in the yearnings context. The first the AI story Cisco benefiting booking five hundred million dollars of sales already on its AI products. Growth slowing, but the street seems to light the forecast. We're going to get details from our editors in the next block. Walmart now down one point six percent second consecutive quarter where the outlook's been raised. But here's the one for me. E Commerce sales in the quarter jumped twenty four percent. This is an e commerce story of Walmart. So let's get more details. Bringing Bloomberg's Brendan Case, who covers Walmart for US out of Dallas. Brendan just run us through the top line of these earnings.
Yeah, so the big picture for Walmart is that they easily surpassed Wall Streets estimates for the second quarter. Little bit light on the third quarter forecast, so I think that's probably why shares are down. Another reason is that there's just been so much enthusiasm about Walmart this year that anything less than perfect is going to hurt their share. Dropping down to e commerce though, that was a real bright spot, up twenty four percent, and that's the second grade quarter of really strong.
Growth in that regard.
So definitely a big, a big point of pride for Walmart there.
Yeah, Brandon just talked to us about what they're doing right here. Is it that they're gaining market share, Is it they're able to claw more e commerce box of their own customer already, or they're peeling it away from Amazon.
So there's a couple a couple of different things to sort of unpack there, and one of them is something that doesn't have anything to do with with placing orders for groceries. It's advertising, which is included in their e commerce business. Walmart has a big, multi billion dollar advertising business that in all respects except for one, is you know, big and successful. The one way in which it isn't is that it still dramatically trails Amazon. So, you know, boosting that business is a big priority for Walmart. They're doing it, but they still have a long way to go. And then if you sort of twitch to the shopper side, what you're seeing a couple interesting trends there. You're seeing strong growth in drive up, you know, people going to the store to pick up online orders. But you're also seeing growth which actually surpassed driver up this quarter, in delivery, So you're getting more and more customers who are tapping into the delivery options that Walmart offers.
Brendan, you and I wrote a story almost a year ago now together about how Walmart does have nearly as many shelf pickers for online orders as it does you know people working in physical stores. Do we get any sense from the call about structurally how Walmart's adjusting its business for this kind of surge and e commerce demand that you outline twenty four percent jump in the quarter.
Yeah, they give a bit of an update on their supply chain efforts, and so what they're trying to do is they've got a lot more automation going to their big distribution centers. The other thing they're doing is they're starting to build out what they call fulfillment centers, which are inside stores but not visible to customers. And what they're designed to do is get a lot of the product pickers out of the aisles and have a dedicated part of the store that is designed to send stuff out to customers. What you're going to see in the coming years as that ramps up is just a bigger and bigger capability.
To do that delivery.
It looks based on the second quarter results like there is a lot of demand for that, but time will tell.
Brendan great analysis. We thank you so much, Brendan, case of course of Bloomberg. Meanwhile, we want to dig into some of the advertising flare that Brendan was just outlining there and ultimately how Walmart is digging up its e commerce proess. Alistair Macleanforman's with a CEO of Tigametrics is the leading optimization platform for marketplace brands ten million dollars plus in total annual ad sales optimized. And I know, you know Walmart intimately Alistair what in the playbook.
Is really working for them?
How are they managing to lure over new brands for example.
Well, they're brilliant results.
Walmart's certainly gaining share and taken metrics, we're using AI to optimize for the largest share of brands selling on.
Walmart dot com.
We've got billions of dollars of data, so we knew these results would be good. The marketplace seller volume is accelerating. They're building a flywheel of selection of thousands of brands, and they're turning into a technology powerhouse. They're investing in the APIs building a lot of tech to enable AI companies just like us to go even faster. And I think that's a big part of it, the technology.
You know, we kick off the show, right Carrie Bloomberg Technology, and we start talking about Walmart and some of the audience out there going Walmart, what are you talking about? But e commerce advertising? And Alistairs just brought in AI. Alistair, what's your read on how competent Walmart is in those fields relative to Amazon, because in the context of ADS or AI, we've been talking about Amazon for a while. Walmart, it's a newer conversation.
Well, are doing very very well. They're investing a ton.
Seth de Laire is the cro over at Walmart and the Walmart Connects segment, that's the Walmart ADS business is really growing leaps and bounds in terms of the technology and the investment, and you know, they're really moving very quickly, very very quickly.
It's interesting as well, Carrie, consumers in this equation, why e commerce jump in the corrider twenty four percent is a big move?
Yeah, and I mean tell us the read on data there alistair as to whether, well some of your underlying thoughts on whether the consumer is resilient at this moment, whether it's just Walmart has got all the right price points for any type of consumer in this moment, because all of us are trying to read these tea leaves. Yes, the numbers look great, but both Target and Walmart sounded pretty conservative and indeed a little cautious about the consumer right now.
Yeah.
I think one of the most interesting things of the data we see is the change in the Walmart consumer. I think there's this stigma that maybe Walmart is all about older shoppers or traditional shoppers, but the growth in the modern, younger consumer that's opening up their wallets. They've got one of the fastest growing apps on the mobile side of things, and there's a really really big play around omni channel. The fact that Walmart dot Com can really do things that other marketplaces cannot is really really powerful, and they can connect the dots between.
Online and offline, and that's what every brand wants. That omni channel player.
Just remind us how international allmarts as well, because for me, it's a purely American name, but no, it's in India, it's in Mexico. Were seeing strength. I mean, we will as UK three voices here. We all knew it for having had Asda at one point.
Yes, absolutely.
You know.
There's of course the flip cart asset they have in India.
I think what is very very interesting from an international perspective is their focus.
On recruiting and acquiring those marketplace sellers from overseas to sell into Warmlot dot com. That was one of the biggest drive of Amazon's success in its marketplace the flywheel of sellers. So we're seeing Walmart doing a lot globally attracting brands from overseas, very very similar to the Amazon playbook, and it is suddenly working.
Alista, if you're an advertiser, why is Walmart an attractive option relative to any other e commerce name?
Well, I can tell you.
The data that we have is the return on ad spend or row ASS, which is the primary metric that advertisers use to determine their ROI. Those results on Walmart and the Walmart Connect platform are fantastic. It is very very profitable to sell and advertise on Walmart dot com and really that's what's attracting.
More and more of sellers coming over.
It's less competitive, it's more of a greenfield. And as I said, the ROI, the row as on ads fund is really fasting class and we expect that to continue.
All right, Alistair MacLean Foreman have taken metrics new name to the show. Thank you for joining us here on Bloomberg Technology and our Speaking of Walmart, China's Internet regulator are reaching out to foreign firms, including the retail giant. They plan to discuss ways to navigate Beijing's new data security rules in an effort to reassure multinationals worried about their ability to operate in China under these latest regulations.
Earning still thinking fast setstick into Cisco now shares moving higher after delivering results that actually pointed to some resiliency there and demand. CEO Chuck Robins really focusing on the company's AI potential. Who'd have thought it, saying, quote, this is a huge opportunity for Cisco. We are laser focused on leading and winning in this space.
Let's get more on the results. Nick Turner's with us, and Nick, I.
Mean, how do they profit, how do they capitalize on this AI moment?
Well, it's still pretty early days.
I mean they did point to five hundred million dollars in sales from AI products. I mean we're talking about stuff that sort of helps things speed through the process of training large language models and general of AI. So just we've been focused a lot on the kind of chips that people need to run that from Nvidia and others.
But obviously network's part of that.
Networking is part of that equation as well, and they expect to sort of be a big player in the space.
Let's geek out for a moment, because Ed, you're a manner gets excited about networking gear, aren't you.
Yeah, Like you know, Cisco's like the old school name is so they can Valley write down in San Jose. But the logic's really clear, as all of the hyperscalers cloud providers want to offer more compute, they need more networking gear for the data centers, and so Cisco like sweeps in, like we got it, guys, We're the biggest networking gear player.
No worries.
And what was interesting though, Nick, is that you look at the forecast for the rest of the year, it didn't really have much to do with AI. They're kind of coming out of a period they were playing catch up anyway from the pandemic.
No, yeah, I mean if you look at their sales forecast itself, it looks pretty bad. It's a really terrible comparison with the last year of the year they just ended because they had this huge backlog that built up when there was no supplies available, so sales surged eleven percent and now this year they're only going to grow at two percent or so. So it's obviously a big comdown. But the executives have been like, look, we knew kind of this was going to happen, and if you look at sort of growth in a more longer term perspective, it's not a huge issue.
We're just entering the first quarter of FIS school twenty twenty four, so we just finished FIST school twenty twenty three.
To a point, Chuck.
Robbins talks a lot about recurring revenue. Just explain of recurring revenue and what Cisco's doing to make money elsewhere.
Well, so, traditionally, as you said, this was the massive networking gear company that could kind of do no wrong in the old days of Silicon value, and they would sell these systems everybody needed them, you know, big hardware, expensive hardware, and maybe they would sell you some software with that. The problem is is that it does tend to be lumpy, as they say, in terms of the sales, like you'll have a lot of sales one quarter and then less the next. They're trying to get people more on a subscription model, so you're paying a certain amount each quarter, and it's just it's more reliable.
Where are analysts on the view of Cisco. Where is a sentiment more broadly on this particular name.
What's the run up been like.
Well, I think people have been pretty excited about sort of the last year or so and just you know, optimistic that this is a you know, if you look at a year or a year or you know, the past five years or so, it's been a little bit inconsistent in general in terms of growth. I think they obviously Cisco had this moment in the last year where they really were able to you know, turn the engines on full throttle, and I think people are more optimistic than might be expected about the coming year, even though sales are decelerating.
The final component we wrote about was security as a sort of standalone mark of Cisco. Really quick, Nick, what did they say about security?
It was one of those you know, there's three things they sort of called out AI, data center security, and obviously those are all three huge buzzy things that people want to see you growing in, and they said they've kind of made progress in all of them. I you know, I mean, I don't know if they were quite as specific on security in terms of how much progress lately, but it's definitely going to be a key thing for them.
Nick. Great to catch up with you.
Thank you one of their shunning lights today in terms of earnings, all things Cisco mean while coming.
Up look good all things lobal.
Smartphone market there is heading for the worst year in a decade.
We'll discuss why. Next to speaking of smartphones.
Look Apple a big tug on the broader NASDAC and as that one hundred today, it's really pulling.
Down from a points perspective. Disappointing earnings report.
Goes back a week or so, but really the pressure is off this company now to liver it's latest version of the iPhone. There's plenty of juicy content on the Bloomberg about this about how well in about six weeks time, we've got to be eyeing up what the tech gine is going to be doing, having reported its third straightcord declining sales. We've got some analyst expectations out there, shares expected to rise ahead of the event.
Citing historical data.
But look tell you what's also not rising ed check out what's happening in the world of crypto. I just want to shine a light and that really just before the show, we took another leg lower on the world of bitcoin. And this is more about market sentiment. This is more about bomb markets, selling off yields, driving higher the dollar in focus.
Yeah, rate concerns the top story. This is Bloomberg.
Let's get your daily dose of talking tech. First up, Global smartphone shipments ahead for their worst year in over a decade. Shipments expected to drop six percent year over year, according to the latest Counterpoint Research estimate. That's due to a disappointing demand, particularly in the US, but a deteriorating Chinese economy plus a smartphone sales dwindle. The top three US wireless carrier carriers have lost billions in revenue. AT and T, T Mobile, and Verizon have collectively lost nearly five billion dollars in equipment sales over the past twelve months compared to the previous year.
And it's not just smartphones.
The world's biggest PC maker, Lenovo, missed profit estimates for the second quarter, underscoring the depth of the global electronics market downturn.
Caroline, I mean, let's just talk about missing expectations for a moment. Ed We're going to pivot away to Europe because Adian wiping out more than thirteen billion, in fact, I think it's twenty in the end market value falling over as you'll see thirty almost forty percent in a training day after missing first half revenue estimates. For more on the Dutch payment processing company and on the competition that's probably rife over here in the US, bloombergs Henry Wren is joining us as well as Sarah Jacob is brilliant to have you both with us, And I mean, first and foremost, Sarah, you cover the company from a real focal point over there in Amsterdam.
What did you make of these numbers?
Why was it such a shock this sort of focus for growth instead of profitability and obvious with everyone else.
Yes, that's right.
So Adune reported earnings for the first half that bes testaments on both revenue and margins. It boasted its slowest net revenue growth since it was listed, and the company attributed this to a weaker economic climate with higher interest rates, inflation, and particularly increased price competition in North America. The other thing with Adian is that they continue to hire, and they had about five hundred and fifty employees or so in the first half, and that too has weighed on margins the first half.
Henry, let's bring the shares up and talk about this big drop. What's the Street saying because forty percent drop essentially biggest drop on record.
Yeah, definitely.
So when you think about a growth stock like and the scariest moment that you can have is when the three things that it's no longer a growth stock. So we saw these kind of things happening with Mata before the Facebook parent when it's flagship at Apps hit the bump, and we see this kind of thing is happening with Alien for sure as well, because we saw North American revenue the growth actually halved during the first half. Now, so the issue is because we have seen several quotas so adding and missed earnings sessments, but it's the first time that we've seen seen its IPO that it missed processing revenue estimates, processing volume estimate as well. And it's not just a myss, it's a miss of eight percent. So the question is whether the company can revive its growth. We know the company has reiterated its medium term guidance, but there is now some concerns on whether the company can achieve it's growth trajectory anymore given the competition, especially in the US.
And Sarah dwell on that for a moment, they have spoken out about this being this hiring, this focus on growth still, which is at honest with basically everyone else in the market. It's the longer term potential here. But is this a cultural focus that they've got at the moment, the fact they want to be hiring in this market. How do you think they managed to convince investors?
Well, Adian has been very vocal about the fact that they are in an investment mode. They're preparing the company for the next growth phase. I mean they are. They listed only a few years back. So they hired about two hundred employees last year and they expect to hire a similar amount this year. So as I said, about five hundred and fifty fifty one employees in the first half itself. So the company has has said that this is their focus, although they did mention that they will slow down hiring from next year.
So yes, it is.
It is in contrast with a lot of their peers who have announced job cuts in the past year or so.
All right, Bloomberg's Henry Rahn and Sarah Jacobut in Amsterdam, thank you so much, carry team coverage. But the reason I love this story is we're talking about a European tech name that's quite big.
You read Henry's street rap.
What they're worried about is that it's not competing against the big US names for merchants attention.
And whether or not they're just not willing to fight on a price perspective at the moment, whether or not it's there, are they actually losing customers, customers that just are using them a little bit less, they're not, of course, in this economic environment, as willing to be.
Paying up for their higher priced products.
It's really interesting as to also how the competition coalesces, of course, all eyes and what is the still private juggernaut that is Stripe and how much they managed to take in terms of market share.
Yeah, but a commitment to hiring while the US peers are trimming jobs was quite interesting. Welcome back to Bloomberg Technology, Ed love loow here in San Francisco.
And I'm Karenine hiding New York.
Let'stig into the mark it halfway through this trading day and actually, well then as that one hundred, the bigger benchmark of the mighty powers of technology, actually you sort of trading flat. We've seen the Nasdaq more broadly, the benchmark under pressure today. Sentiment has been changing. We're worrying about, well, the backup in yeals, the tenure yield is up six call it five to six basis points at the moment on the ten uere we really have seen this sudden shift higher in terms of longer term rates.
How far they're going much higher? And indeed, well.
That signals about the Federal Reserve because well, this resilient US economy means perhaps they have to keep those rates higher for longer.
What does that mean for risk assets?
Well, what it means so this risk asset, which is bitcoin, is down for the day. In fact, we're breaking through that level that we've sustained for the last couple of weeks. The fact that we're now sub twenty eight thousand, we've really been in this trading range and now we break to the lowest in two months for bitcoin overall. Moving on to some individual names, because the reason the NASA one hundred is perhaps just managing to poke into the green is one individual mover that I'll finish on. But first, Apple a tug lower in terms of points on some of the main benchmarks by a percentage point.
Ok.
We're all worrying about really how they can stimulate and drive forward growth, particularly of iPhone sales after their recent earnings disappointed. New Bank China light on well this particular player, of course, over in Latin America a key fintech focus on new banking, of course, were by five percent. Why will the founder, the co founder and the CEO is actually selling out some of his steak about three percent, So we dive lower on this particular company. Cisco up more than four percent. Ed this we outlined already the numbers looking good. AI already half a billion dollars worth of sales ed.
Yeah, Cisco really a story about the corporate world down the chain investing in AI.
But what about the labor market? Let me bring you this one.
A new survey finds that many Americans say automation could easily replace their jobs. Younger workers, particularly black people and Hispanic Americans, feel most threatened by AI in the workplace compared to white counterparts. Some three quarters of those polled expect increased use of automation and AI to lead to more unemployment, with women more inclined to see that than men. That said, the pole also found that most Americans believe the increased use of the technology will generally be a good thing for workers. So some slight contradiction in that data set.
Yeah, wow, I mean it just outlines though, doesn't it end that there are anxieties deep but there are also so many opportunities.
When it comes to artificial intelligence.
And in fact, we've got the perfect guest to talk around that anun mentionals with us.
The CEO of Arthur.
It's a company that focuses on ensuring that these AI systems that many people are worrying about are actually well managed, that they're deployed responsibly. And you've got this new tool right that's helped and compare the plethora or large language models that are out there and see whether they fit your business case in particular, and just talk us through well, ultimately this anxiety that lays deep that we're just talking about, whether you think it's well vindicated, Well, I.
Think you know, it's very understandable, the anxiety, and when you interact with chat, GPT or some of these other systems, you really kind of it's breathtaking, right, how human like the responses are.
But fortunately, look, AI has.
Been being deployed and you know, just a lot in the last five years and accelerating every year and unemployments still historically low, and there's like, there's very very little evidence that AI is taking jobs. It is evolving jobs, it's evolving jobs quickly, but there's not mass job loss coming from it that's been observed anywhere.
So we go back to the Cisco story.
What we know is that companies are investing either way, they're thinking about the use of large language models. The way that I see Arthur bench your product is like when I'm buying a new laptop, right, I go into a grid side by side, I compare processing power, I compare the memory, I compare operating system. You're basically offering the equivalent for companies to choose the best LM for them.
Yeah. Absolutely.
I think the important thing is that you're allowed you can you can test it on exactly what you want to do with it, right, And so the way you use your laptop is different from maybe the way you know, the way my high schooler does or the way my father does, and so you want to know how this is going to perform for me.
And so I have like my own kind of proprietary data.
That I want to feed into the LM, and I want to ask it certain types of questions, put certain types of prompts in that, and there's a lot of really nuanced differences that can't be reduced down to just a single number on a leaderboard.
And so that's where Arthur Bench comes in. Allows people to really test.
Like the kinds of prompts that their users are providing with their data and see how it performs.
No l l M Caroline Large language model, it's just become a blanket term. But there's such variation between so that the multiple billions of parameters large language model and something for everyone out there.
Yeah, and I mean, I'll go back to when you and I first started doing the show together as November and what came out the gate but chat GPT that really seemed to set the world alight. And and to that point, you know, when you're looking at the nuances within the large language models, how are we seeing them differentiated in particular? For example, it feels like anthrop make us on a bit of a role recently with Claude two.
Yeah, Cloud two has been been great in our testing.
It's doing a good job of not you know, not answering questions when it should be answering questions and not answering when it doesn't know the answer, and so there's you know, that can be very important.
Yeah. Cloud two definitely performs suppressively.
You know, there's also we see big differences in terms of the way they hedge, for instance, and so some of the models are much more likely to not want to answer a question and to to say, hey, I'm.
An ll M, I shouldn't be answering this, or it's not my place.
And so depending on the application, that may be appropriate or it may be a big drawback. And so that's that's why those are some of the differences that we that are testing our tool can tease out for people.
Adam, how do we democratize AI technology access to it so that we look like lower the threshold right where you don't need to have control of all the Nvidio H one, hundreds or billions of dollars for the training.
How does that happen?
Yeah, absolutely, it's a big concern right now access to that hardware, both the expense and just the availability of it. I think fortunately these systems will become more efficient over time, and you know there are other vendors who are starting to make hardware more capacity coming online it's going to take a little while until that happens. But the nice thing with open source models is you can get a pre trained model that you can either just use or modify. And so you know what Facebook's done with Lama V two and a number of other people have done with the open release of these models, that's really put them in the hands of a lot of people who might not have had access to them before.
Can often make money with this business model, particularly if we move towards an increasingly open sourced world.
Yeah.
Absolutely, Look, there are things that we do that are proprietary, like our ability to detect and block hallucinations, and so not everything we do is open source, but in this case, we just felt it was really important because this is sort of feeling confident that you're making the right choice about your system and that you that you're that you can put it out in production when trust that it goes well is a major impediment for a lot of people, and we really saw it slowing down people in the process of the point. And ultimately what's good for us is for as many people as possible to put these systems into production so that we can protect and monitor them and so Uh, the reason we open source this is just to sort of accelerate people's ability to deploy these these tools in a in a responsible way in an enterprise.
Ultimately, though your own business of Arthur is about making money and you're backed by what index ventures include Capital, gray Craft and the like. I'm interested is to the groundswell of hype and reality. How much are you seeing companies coming to you wanting to get your services, wanting to understand where they put their money to work in AI l LMS.
Yeah, it's been.
It's been unlike anything I've ever seen in my career, and I think it's because, you know, chat GPTD is.
Just so accessible. Anyone can go in and play a round and.
See the the just the power of it, and so it's become a bordit levelation to it and everything from fortun one hundreds down to every single startup where boards are asking the CEO and the CIO what is our generative AI strategy and how is it going to transform our business? And so that that that sense of urgency has cascaded through the organization and so we're seeing all sorts of project teams mobilizing and working on you know ways to transform some of the key leverage points in their business using l MS, and it's been it's just been breathtaking to see. And so that's what we you know, we we come in a lot of times they call us to help them.
Because it's you know, there is a lot of little details that are that collectively are a little bit daunting when you're trying to stand up one of these systems. Even though ultimately it's pretty accessible.
Technology, there's certainly a learning curve and we help a lot of our customers with that as well as solving some of the common deployment challenges around you know, hallucinations and prompt injection and leaking sensitive data, things like that.
Adam Winshew, author see thank you very much for joining us here on Bloomboat Technology Now. After his world tour to discus us the latest developments in artificial intelligence, open AI CEO Sam Altman reflected on the emotional powers of the technology and the need for global regulation. Bloomberger Regional's host and executive producer Emily Chang spoke to him for the latest episode of the circuit.
Was the goal more listening or explaining.
The goal was more listening? It ended up with more explaining than we expected. We ended up meaning like many many war leaders and talked about the sort of the need for global regulation, and that was like more explaining the listen was provided. I came back with like one hundred handwritten pages of notes.
I heard that you do handwritten what happens to the hand written notes?
But in this case, like I distilled it into like here are the top fifty pieces of like feedback from our users and what we need to go off and do. But there's like a lot of things when you like get people in person, like face to face or over a drink or whatever what where people really would just like say, you know, here is like my very harsh feedback on what you're going wrong. And I don't want to be different.
You didn't go to China or Russia.
I spoke remotely in China, but not Russia.
Should we be worried about them.
And where they are on AD or what they're all doing.
I'd love to know more precisely where they are. That would be hopeful. We have I think very imperfect information there.
So how has chat gipt changed your own behavior?
There's like a lot of like little ways and then kind of like one big thought. The little ways are, you know, like on this trip for example, the translation.
Was like a lifesaver.
I also use it if I'm trying to like write something which I write a lot to never publish, just like for my own thinking, and I find that I like write faster and can think more somehow, So it's like a great unsticking tool.
But then the big ways I am, I am, I see the path.
Towards like this, just being like my super assistant for all of my cognitive.
Work super assistant. You know, we've talked about relationships with chatbots.
Did you see this as something people could.
Get emotionally attached to?
And how do you feel about that?
I think language models in general are something that people are getting emotionally attached to, And you know, I have like a complex set of thoughts about that. I personally find it strange. I don't want it for myself. I have a lot of concerns. I don't want to be like the kind of like people telling other people what they can do with tech. But it seems to me like something you need to be careful with.
Open Ai CEO some album with their own Emily Chang, you can watch the rest of the interview on the circuit with Emily Chang. She also sat down with Microsoft CEO sat In Adella on Bluembergo reginals.
I meanwhile coming up, look, we're going to be breaking down.
Synopsis is third quarter earnings the CEO after goose from New York, from San Francisco.
This is Broomberg Technology.
Let's get to snap.
This is the chip design software maker reporting third quarter results. The top testaments raised guidance AI a big part of performance, but also announcing that Sezin Ghazi will assume the role of president and CEO effective January first, twenty twenty more four for more, let's bring in Art to gus synopsis, current but outgoing CEO Art Welcome to Bloombog Technology. It was interesting, real growth in China. That's where I want to start, and I want to start there because no one asked you about it on the earnings call. Why and how are you growing in China?
Well, the other the growth was strongest quarter, partially also because it was the post COVID quarter and in general China has remained strong for US for the last ten years, while simultaneously, of course, having certain restrictions on what we can do there. But you know, design of chips continues everywhere in the world at a very high speed, and that's many different in China.
You booked so far in the year, I think I'm right in saying about five hundred million dollars of AI sales as well. What is the main driver of that, because you essentially create software that is used in the chip design process. What is it that's driving the AI specific growth.
Well, you know already for the last few years, if you look at the most advanced, most hard driving chips, AI is in the middle of that, right, And actually in your own reporting you have so much on AI, which is all driving the need for much faster, lower power, much higher capacity chips, and so the competitiveness of those is absolutely essential. That's another way of saying is they are the ones that use the most advanced silicon technologies and also the most complex architectures. And this is where Synopsis is the leader. We do the most advanced chips, or we I should say, we support our customers in doing the most advanced chips in the world for our entire existence. And here's a wave that is just continued to grow.
Caroline, I express surprise that no one asked about China because Art is talking about the cutting edge of chip technology in that context, which is in a very hard environment right now.
Yeah, that feels politically charged as well. Art, can you just talk us through sort of the restrictions, the concerns about allowing your very specific software to be used by China. When we're worried about the tensions and the AI races, it seems to be deemed.
Yeah, I didn't say that the most advanced AI chips come from China. There are many companies that are investing in that. Some of the very large semicroductor companies are absolutely driving the state of the art, and some of the most advanced startups in the world are driving the state of the art. And those are the customers that first come to us because they very much rely on the ability to differentiate. And you know, if there's one word I would put on that, the speed of the chip determines everything. And if you look at at the wave of opportunity that's now coming in via gen AI, all of these algorithms initially take a lot of computation, and the faster you can make those, the more opportunities there are there and so it's one of those those wonderful situations where the demand continually exceeds what our customers can deliver. I either race is on, and in that race, we are key ingredients to the success.
But many of your I'm sure peers over in Silicon Valley are really nervous about that race, and boys the administration worried about that race. What sort of contracts do you have with China and are you getting any pushback in terms of your ability to.
Sell that Well, you know, it's actually fairly straightforward. The rules of engagement are very clear. We follow those absolutely to a t. And the issue is more for China itself than for us. It's a certain percentage of our business that is growing well over time. But notice also that we had a very strong quarter in Korea for example. We over the year have done well in all parts of the world, and so yeah, if there were no restrictions, we could probably sell more to China, but we live up to those restrictions. What I want to highlight though, is every nation today is investing in chip design. And I'm sure you're familiar with the US Chips Act, but really what's happening is all other nations have followed up with their own Chips Act, and while we're not counting at all on these, what is clear is the whole world now understand chips are absolutely central to this whole new wave of what we call smart everything in the world.
You've been at this company since the late nineties. I know that you're stepping down at the beginning of next year. I wanted to get your reaction to the Hour Semi and Intel news this week and how you think it will impact the m and a landscape in tech and in chips in particular.
Well, I actually have been there since the mid eighties because I started the County in mid eighties. No, no problem. But it gives a very interesting perspective, right because many of these companies that you're reporting on, some of them existing existed already at that time, and they all have had the same passway, which is how to stay close to the leading edge. And Intel is a great example of that. Right now, they're substantially investing in their next edge. And you may have seen the agreement that we did earlier this week, which is very important, where we provide many of the building blocks that are necessary for them to be successful in the foundry world, and these building blocks get specifically designed for their most advanced technology. And in general, part of our role is to support all the founderies to go to market. And what they need is they need the design tools to be ready for them, and they need the IP blocks to be ready from them, and we provide both of those. We provide those for a broad set of foundries, and that race is on too. And so this notion of the race forward is actually a big positive. You're certainly familiar with fifty years of More's law that was an exponential of unseen magnitude. We've entered a new one of these, and the new one is that multiple chips are going to get together in very high proximity, including or stacking them. It's almost like moving from building houses to moving hotel to building hotels now. And this is all driven by smart everything.
The focus focus for you, the focus for the person who picks up from you in January twenty and twenty four. You found in the business co found and back in nineteen eighty six, and an amazing time to be handing over to secceine me.
Thank you so much. Ardgius is synopsist CEO.
So let's add New York City to the list of places TikTok access will be banned on government owned This comes well in California moves ahead a stronger language in its own TikTok van bill. In Meg's technology Alex Birinka is ever a busy woman, so it tooks through it.
Yeah.
In New York City, that security threat that a lot of legislators have talked about has come to the forefront. The New York City Cyber Command called it a quote threat to the city's technical networks and made the decision this week to give the city thirty days to get it off of government phones. The state of California that was taking a little bit of a longer approach. There's a bill that was authored by Senator Bill Dodd, that's California SB seventy four. That bill has been approved by the Assembly Committee to basically ban it on all government phones as well.
That bill still.
Has to go to the Appropriations Committee and then to Governor Gavin Newsom's desk. But there was one point in our reporting from that passage and Assembly committee today that I thought was interesting. Dodd said that TikTok has been running interference, so while this app is getting banned on government devices and states and municipalities more than thirty five states in the US, it's still running quote unquote interference and trying to convince lawmakers to not just ban TikTok, but to widen up the band to all entertainment devices. It hasn't quite worked that argument. In TikTok's defense. We're still seeing these bands roll on, but California is probably the next one that we'll be watching closely.
All the inside track, Alister, and can we thank you meanwhile?
That does it?
From this edition of Bluebog Technology.
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