Hardware, innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. I from New York and San francisco. This is Bloomberg Technology. Coming up, netflix out a record. The king of streaming surpasses Wall Street's expectations on every major financial metric. Plus, after iPhone sales stall in a major market overseas, a sign of success. And why Tesla is in the crosshairs of a
federal agencies investigation. And yeah, let's get right to Netflix. And this. This is the stock, right? You can see on the screen the story on track for its biggest jump since January of this year, trading at a record high overall.
And subscribers beat revenue beat. And we always talk about earnings in the context of beating expectations numerically on metrics. But I think we both agree right Karowe that the story was different to what we were expecting a slowdown in streaming? No, actually, things seem to be okay for Netflix. I think there's a lot to get into about what's happening with the consumer's attitude towards streaming platforms and how we're watching content right now. Yeah, the co-CEO and sounding upbeat.
Ted Sarandos really talking about how the company beat those expectations, but also what you can expect in 2025. Take a listen. Let's start with, you know, looking into 2025, we're feeling really good about the business. We had a plan to re accelerate growth and we delivered on that plan. You can see that in our 2024 financials, we expect to deliver 15% revenue growth and six percentage points of operating margin improvement and engagement, which we view as our best proxy for member happiness. Because when people watch more, they stick around longer. So that's retention.
Felix Gillette joins us. And Felix, it really was a case of even without the stellar slate they have coming up in fourth quarter. They managed to really build on that. 5 million subscribers for the third. Yeah, I think it was better than everyone expected. I think it's particularly impressive because you have to remember this is the year following the dual strikes in Hollywood.
So there's this huge production slowdown. At the time everyone was speculating like, well, there's not enough new things to watch. Why would people keep subscribing to these streaming services, including Netflix? There's going to be a lot of churn, a lot of cancellations. And yet, in spite of that, a year later, you know, Netflix adds another 5 million subscribers. This quarter is up to 282 plus million across the globe. So, yeah, it's a very strong order for Netflix. And like Sarandos said, they have an
even better slate, I think you could argue, coming up next quarter and next year. So he talks about this interesting metric, which is I think he called it engagement, right? Felix And misdirect. So let's bring Felix's shot back up because I don't think he's had much time to watch Netflix. He's been too busy reading the piles of books either side of his shoulder.
But there was a time when Netflix said, Stop judging us on subscriber growth. Just look at our financial metrics. Now they say, don't judge us on financial metrics. We really want to talk about this engagement number. What does it mean and where is it going? I think when you look at the engagement number, part of that is where is their future growth going to come from? And a lot of that is advertising, right? They said yesterday, you know, we're not where we're at, where we want to be at in terms of advertising revenue, but we're investing in technology and we're investing in better inventory. And what that means is investing in better live programming. And they just have a ton of stuff coming
down the pipeline. Wrestling, 3 hours of live wrestling a week. They're going to have NFL games. They're doing more comedy live specials. Last week at our conference in L.A., they announced they're going to do this live variety show. And I think that's going to be very appealing to advertisers once they get a certain crucial number of viewers there. And I think that's where the engagement
comes from. And I think that's what they're really excited about now. But I think you can't separate that from their ambitions in advertising. Well, maybe he's kind of excited about
the next edition of Wednesday because I can spot thing lurking behind your right shoulder at the moment. Yes. Amazing. Felix to that we thank you so much at. Let's get some more data from Brandon Katz. He's the senior entertainment industry strategist at Parrot Analytics. And there's actually a data point that you point to which I find fascinating, and that is Netflix's share in corporate demand.
Explain that metric and why you think it makes Netflix a leader. So corporate demand share really looks at all the original programming that a company creates, and it helps value their viability in the current media market and potentially the value of that content on the opening market should they ever want to license it for the first time ever. Netflix has leapfrogged a legacy media company by beating NBCUniversal, and we have to remember NBC Universal's programming dates back to the 1940s with NBC, whereas Netflix has only been an original programmer for about 12 years. So the fact that their library has grown this significantly this quickly is a major testament to the amassed content that they have built. They have had to spend a lot on that content. And the point is now whether they have to spend a lot on live content on sports to really drum up this advertising prowess that actually Amazon seems to have nailed in many ways. Yeah.
And with Amazon expanding its ad tier next year to five additional markets, the pressure is on Netflix to grow this advertising tier. It's been a slow but steady first two years. But what's really concerning is that Netflix is you can average revenue per user has dropped for two straight quarters because of that ad tier growth. So it's a little bit of a give and take. I would not be surprised if with the
addition of WWE and NFL games, we see a increase in the price for the ad supported tier in 2025 some time. What about price point of the service more broadly, many anticipating that we could get some price hikes. In fact, they just enacted some today. Absolutely. We're getting international price hikes. I would not be surprised if another youcan't price hike is around the corner, particularly off the back of their extremely strong anticipated Q4 content slate. And as they mentioned, the production logjam is starting to normalize following the strike. So we could probably expect a little bit
more volume in terms of new originals in 2025, which also bolsters their case in raising prices yet again. So consumers maybe watch that wallet a little bit more. Okay. If you're just joining us here on Bloomberg Technology, Netflix shares are up more than 10%, the biggest jump since January, but they're trading at their highest level ever on record. And I think a big part of that is, is there is still subscriber growth and brand. And that was the story we were kind of considering with this slowdown.
You mentioned a moment ago the live events. I want to go deeper into that. How much of a feature this will be of the platform going forward? Yeah. Live events has not worked seamlessly for any streaming platform consistently. It's always been simulcast on these legacy media distribution networks and their streaming services. So Netflix is really trying to break new ground by making live entertainment on a streaming only service work.
And it is certainly a huge point of focus for them moving forward to supercharge their ad tier. And I think then focusing the first ten years of their kind of original content development around building out the back end by licensing other content and building up a massive library is the right way to go about it. I think they're well positioned to dive deeper into sports because of it now. Nice. We got some bridgerton up on the screen. That's a household favor for us.
What do you make of management? We're kind of in deeper into this period where you have the co-CEO structure. You think they're doing a good job? I think they're doing a fantastic job. And I think Greg Peters is one of the only Hollywood media executives with actual coding and software experience.
And I think as we dive into an even more digital future, trying to capture Gen Z retention and Gen Alpha's attention, who are digital natives, it's going to be very, very, very important to understand how the tech works and what the consumer experience on that tech is actually like, and Netflix is taking a step forward with that. Yeah, I mean, they've really beefed out the ability to carry live events. I mean, we all think back to the Love is Blind disaster. When they tried to carry that live and
we saw the demand just to get down. But from that, just reflect a little bit on ultimately where else Gen Z millennials are going because yes, you cite the old school that they've overtaken in terms of just sheer volume of content, but people are spending that time on Tik Tok on YouTube. How are they matching up in terms of addiction there? The concern with Netflix is that it's a pure play, traditional entertainment service that is focused on film and TV and yet video games, short form media via the creator economy and other new media are driving growth in the entertainment ecosystem as film and TV endure a painful contract contraction. Yes, Netflix is building out a suite of video games, but we've had no material updates on its impact as they try to build an added value in-house bundle that goes beyond just traditional film and TV. So that's why I think perhaps Netflix is slightly overvalued at the moment, even as they clearly dominate in the traditional entertainment lane. I've got we got to jump in on that. That gaming side of the equation and the
lackluster, I mean, are they going to continue down the gaming path? Ed wants to know. The reports are that they are developing a triple-A game, which is what I think gamers most associate with those big classic console games. Now, the success or failure of that will certainly say a lot about the health and longevity of their video game efforts. Now, do they need it to succeed? Not in the interim, but moving forward? Long term, yes, I think they need to branch out beyond just film and television to create a stickier bundle that solves for multiple consumer pain points. Brendon Katz, senior entertainment
industry strategist at Paradigm. It's great to have you back here on Bloomberg Technology. Thank you so much. Coming up, Apple sees unexpected demand in China. We speak about that and the broader tech market with Angelo Cook-Off of Edward Jones. That conversation is coming up. This is Bloomberg Technology.
The renaissance of growth has begun for Apple with iPhone 16. I think China, look, that was the biggest issue. That was a headwind. Now it's a tailwind.
They have mojo going into the next, I think, 6 to 9 months. And that's why I look why the bears, if you fire in a crowded theater for the last month, but I think they go back into hibernation mode in our opinion. I was a very colorful Dan Ives of Wedbush Securities. On Apple's China turnaround. Does the data provide a counterpoint?
Research says iPhone 16 sales so 20% in the country in its first three weeks. For more, let's bring in Bloomberg's Mark Gurman. Now, when we've discussed some third party data, it's usually been negative. And then Apple with actual data in the earnings context has proven it wrong.
This is counterpoint research data. That is a surprise and it's a positive surprise. What does it tell us about iPhone six in that market? Barely think it tells us anything new. I think it tells us that the first three weeks of iPhone sales, as they usually are, were pretty hot. Right. The issue was never the opening month of the device. The issue was over the long term. Right.
Three, six, nine months to 12 months for the full cycle of that device. I think some analysts have been a little irrational or irresponsible in their commentary on the iPhone 16 over the last several months. Some analysts have gone as far as claiming that this is going to create a supercycle, something we haven't seen since the iPhone first launched on China mobile with bigger screens a decade ago. Right.
They've been saying that Apple intelligence is something that is going to drive a supercycle, despite the fact that Apple intelligence is not available in China. Right. So you can't necessarily have it both ways. You can't say that it's going to create a supercycle in China. Well, A.I. is not available in China, right?
I'm not entirely surprised. The iPhone 16 is doing well in the region. There's a lot of pent up demand. There's a lot of people in China who didn't upgrade the prior two years, the iPhone 14 Pro and the iPhone 15 pro. The iPhone six has some nice improvements. Right. I think the camera control interface is excellent.
Right. I think the speed improvements in the battery life improvements are really nice touches. I've enjoyed those personally. So I think it's a good upgrade for people who haven't bought a new iPhone in the past few years, so I'm not entirely surprised. And typically, even when the data is negative, right, I typically come on here and say is we're not going to know the truth until Apple earnings. Right. That's the case even when it's positive. And so at the end of this month, we'll
get a better idea of how accurate this information is. Mark, next time we are bringing you and Dan, I've supercycle man on together for some fighting talk. We love it today but more broadly, what do you think that there is not bits to love with an iPhone six. The bit that I'm just so questioning is the key element. You've told this story again and again on your own X platform in particular.
Why? Who are they going to partner with in China? How are they going to really reap the benefits of the artificial intelligence? Yeah. So there's two components really to the API push in the iPhone, right? There's the in-house large language models and generative A.I. features. Those are using an Apple model. Those are running on Apple servers. And then there is the third party component that's integrated into Siri and other parts of the operating system in the U.S. They're using so far starting in
December. And they're also planning to integrate Google Gemini and to open it up to other LMS in the future. So you have an array of choices in China. Most of those providers in the U.S. are not available, so they're going to
have to partner with local entities. Baidu being one option. Obviously, you have Tencent, obviously you have different bespoke labs in the region. But the other component is how is Apple going to get approval from the Chinese government to use their server infrastructure to power their in-house generative A.I. models, which are in fact the bigger deal, right, for Apple intelligence notification summaries, writing tools, image Generation Z emojis to create your own emojis, right? At least for iCloud, they have to use a partner right in China with government affiliation. And so they may end up having to do something similar if they want to get Apple intelligence working in China. Right.
And China is one of two major markets, the other being the European Union, where the A.I. features are not available on the iPhone. And there's no clear release date for when that will happen. And I don't anticipate that happening for at least a year. Nice. Bloomberg's Mark Gurman. Keep your eyes peeled for his power on
news that this weekend in Korea as we're showing, clearly Apple and its gains are a factor in the market this Friday. They are. Let's talk about that, about the broader market with Angelo Cephas, his senior investment strategist over at Edward Jones. And just let's dwell on Apple for a moment and what it signals that we got UK retail data out today that said it was buoyed by things like the Apple iPhone but also Google's pixel as well. How important is consumer to Apple right now and how resilient is it? Yeah, I think today's strength in Mega-cap tech, including Apple, is really a reminder not to dismiss technology. Technology actually remains a bright
spot. The consumer clearly has been the main driver for not only some of these technology names, but for really the broader economy and the bull markets thesis. And we keep getting good news on that front. Economic surprises are turning positive. Just retail sales this week expressed some strength and resilience. So the economy is nowhere near recession, especially in the U.S. The same applies to abroad.
Now, China is a complicated story, to say the least. But at the same time, there's some signs of bottom in that also feeds into the Apple story. We've had pledges from policymakers to support growth. Many questions remain. What's going to actually be the lever? But at least from a sentiment investor sentiment perspective seems like the worst is behind us. Angelo, when you talk about profitable tack, historically, it's like in the context of having amazing balance sheet entrenched market position.
But here on Bloomberg Technology, we talk about innovation. That's what Mark was reporting on, which is the more important factor to the investor. I think it's both. But you have that long, long term secular thesis. There's a long runway for growth, especially on artificial intelligence. But also you have the reality of market swings and rotations have happened because of the industry backdrop in the more near-term and both moderate based on your time horizon. Think about the current backdrop.
We have an economy that is still growing at a very solid pace. Corporate profits are on the rise and at the same time, interest rates are moving lower. And that backdrop provides a little more tailwinds for areas of the market that have been really left behind over the past 18 months. The big cap technology companies,
they're in a net cash position. They have more cash than debt. So they've been benefiting from the rise in interest rates. Right. And other areas have been hit.
On the flip side, as interest rates move lower. You are seeing really that broadening start to play out. Angela, it's been great having some time with you. Thank you very much indeed. Talking all through the valuation story,
Angelo Krakoff is senior investment strategist at Edward Jones. Now we just want to keep a close eye on some other stocks that are on the move at the moment. And we're looking at American Express coming up by 3.8% have been off by more than 5%. We are getting a refocusing in terms of its revenue forecast, maybe its 9% growth for the year rather than up to 9 to 11%. But we did speak to the CEO, Stephen Squeri, and he's been telling us something by television that we've had ten consecutive quarters of record revenue. And really good quarter. We beat our own expectations. The Street to we're raising guidance
when it comes to earnings per share. We'll see how the stock continues perform. Remember, it has been Nair's records as well. Coming up, why some strategists are urging caution for those investing billions into volatile Chinese stock ETFs. This is Bloomberg Technology.
Let's turn to China now. Investors are learning that Chinese stock ETFs and now among the most risky, the performance over the long haul has made some of the biggest wealth destroyers among US ETFs. It's about to be reported on this. And time and time again, you've come on to tell us about how China is faring in the macro context.
And we're looking at K Webb in particular. It's got all of our Chinese tech names that are listed here. It's been painful, very painful. So this is a story about how market timing is tough, but especially tougher for other sectors, especially China. So we looked at all ETF set an aim of above 1 billion and we basically subtracted assets and net inflows because net inflows is less than the assets. It means investors lost money over their lifetime. And among that list, Chinese ETFs were
at the top, and Cathie Wood's ARK funds a couple of them. So back to Chinese ETF, you mentioned Quip over its inception since 2013, investors ploughed in 12 billion, but its assets right now is just 6.9 billion. So that's a valuation gap of 5 billion. And after K12, it is Cathie Wood's flagship ARK fund that also lost investors money. For context, you look at SPI, which is
the biggest and most liquid ETF investors pulled in 160 billion. Right now it's around 700 billion. So you see that investors were rewarded there. So it's really hard for the Chinese ETFs. Is about. You said timing The market is hard. But more recently, China stimulus.
And then on the regulatory side, take video games, for example, signals that policy might support some of those names. So now you're asking, okay, well, what's the trajectory from here? Exactly. So I want to bring it back to 2021. So Caleb saw fantastic inflows, then 7.4 billion.
That's when investors were kind of optimistic that China will see a rebound from the doldrums of the pandemic. But also that year to year point, we saw a deepening housing crisis. We saw some industries being really cracked down on and we saw that ETF tumble 52%. Fast forward to today. We saw a massive stimulus blitz in three weeks. We saw a lot of indexes tracking Chinese
stocks rise 40%. And we saw investors also plowing billions into the Chinese ETFs, including Kay Webb. But they're now taking a step back. Chinese shares are kind of faltering.
We're seeing that rally kind of fizzle. So it raises the question, will we see something like that again? And China is really just it's a very vulnerable vehicle. It's very volatile. So it's really one thing that investors should think about when they invest in those kind of ETFs. Bloomberg's Isabel is one of the best read stories today on the Bloomberg terminal and dot com and that's why we wanted you on the program. Thank you very much indeed. Now coming up here on Bloomberg Technology, the future of American made semiconductor chips. Michelle Guida from the Crack Institute
of Tech Diplomacy at Purdue University is here. We also have Bloomberg's best and brightest on the week that was in semis. This is Bloomberg Technology. Welcome back to Bloomberg Technology. I'm Caroline Hyde in New York and I met Ivo in San Francisco to check on these markets because we had a volatile one. Let's put it because the Nasdaq has been pushed around by those chip names that we're going to dig into in a moment. We're currently still holding on ground
for 10% for the last five trading days, telling us had a nice little five day performance. Crypto. Move it on and have a look at what's happened with MicroStrategy Benchmark. Also the analyst they're raising the price target but MicroStrategy, one of the biggest points contributors to the Nasdaq 100 today.
Netflix I mean the standout of the day up 10%. Record high, 5 million subscribers being added in the previous quarter, and they're going to eclipse that in the fiscal fourth quarter and last year. Look at ASML. This is a recovery, maybe a buy the dip
story on this particular day. We're up just 3% on the US listed and and European listed. I'm currently looking at the dnb one's up some 3%. It has been sold off 14% over the course
of the week. We know why the war is on orders. The war is on everything else. Bar, A.I. chip equipment. Basically what we got in the chip sector. Let me take you on a journey over just five days. There's been seismic shifts in
semiconductor sentiment. It all started with chip equipment maker ASML, surprising with early release of results, cutting its outlook and injecting growth concerns. But by week's end, TSMC CHIP contract manufacturers the world settled nerves, boosting sales growth predictions and spending plans, signaling the air investment cycle might be okay.
And Vedere is flirting with some new record highs. Bloomberg's Ian King, who leads semiconductor coverage, is here with us. And that's the point. The eye of the semiconductor industry is okay. Everything else, I think we're still a
little bit worried about. Yeah, no, that's absolutely right. The biggest concern, because that's where all the money has been poured into is is this high demand that we've seen all these huge orders for Nvidia supported. Is this something that can continue? And we got evidence that yes, that's the case, at least for now. What investors turn their attention to is that other areas, automotive, industrial PC, maybe not so good. Let's dwell on the automotive part though, in because you had a great story with Mackenzie Hawkins talking about how wall speed is going to be getting money from the likes of Apollo, going to be expanding its manufacturing for EV chips. So why that? Yeah, I mean, this this is the little tech company that apparently now can. And there were existential concerns
about this company. Literally, it was running out of money. It's had a lot of problems bringing online some new manufacturing. And, you know, there were a lot of notes out there, a lot of analysts saying maybe this company needs to be bought, it needs to go away, needs something. Now, it got this, you know, massive injection into its balance sheet, which should allow it to emerge from this dark place that it's been in. Huge share reaction to that that that we've obviously seen this week.
But still, the stock market does not love this company. The funny thing is, is the earnings season is kind of back again. And to go to your first point on the everything else part, Texas Instruments is kind of up first. It's the everything Chip's name. Just to explain that and why you'll be paying close attention.
Yeah, we're going to have them reporting on Tuesday. And like you said, they are everything else, automotive, industrial, of their two biggest markets. They make analog and embedded processors. These markets haven't been great. You know, a lot of the typical sort of everybody in everybody out cycle of PC and smartphone, that kind of trend has kind of gone away. And we've seen all of these individual markets moving in different ways.
Texas Instruments has been really struggling. And how they might change the narrative is is if they give us any hope. I'm kind of comments about what's coming in the future that says maybe we're through the worst.
That could be a positive. But if you actually look at the numbers, we're still struggling. The index in King Reste, up we go again next week. Thank you very much, Kara.
Look, we've got to talk now about how politics plays its role as well, the intersection of technology and politics, a major decision facing whoever, of course, wins the White House next month, how to regulate US chip industry in particular, to stay ahead of global competition. Let's dig into that. Michelle Greta, she's the CEO of Hatch Institute for Tech Diplomacy at Purdue University.
Michel, the context with which we talk about Invidious and some of the other key players is the limitations of selling into China. That was a key story for small, for example, going forward. Is that going to perpetuate itself? Caroline, You're right.
Context is really important here. And when you think about it, it's just reflective of the new paradigm that we're in, in which tech has to do very much with the future of American prosperity and American national security. So just as we have to scrutinize which countries we're sending F-35s to. We also have to scrutinize where we're sending our most advanced chips to which also power our F-35s. And these aren't hairdryers that we're talking about.
And why we have to look at this is ultimately it comes down to trust. Do we trust the companies? Do we trust the countries that we're going to be sending our in video chips and our most advanced critical technology to with the understanding that it's not going to end up in the hands of some of our adversaries, like Russia, like China and the People's Liberation Army. Do you have a clear sense of any benefit being derived from current and existing policy on semiconductors for the United States? Look, we've taken measures over the course of a couple of administrations now to make sure that we're preventing our most critical technology from going to our adversaries and specifically China. But this is why tech diplomacy is also
really important. When I was assistant secretary of state, I was traveling all across the world. And the number one thing that you hear from our allies and partners is that they want U.S. private sector investment. Well, it's really hard to do that when you have Chinese technology, untrusted technology embedded into your government infrastructure and across your country. And so you want to make sure that you're
using trusted technology. If you look at the U.S. and 12 of our closest Democratic partners, we make up 12 at almost two thirds of global GDP. China, Russia, Iran. Venezuela is less than 20% of GDP. So you want to be a part of the big network. There's a lot of financial opportunity, diplomatic opportunity in that. And so we've started to, through
American policy, implement the right policies around semiconductors to make sure that we are helping the partners in that trusted network and not in the untrusted network. Michel. Earlier this week, Bloomberg's editor in chief, John Micklethwait, spoke to former President Trump and very directly tried to get a sense of what his policy will be with regards to China. Let's listen to his comments. But the reason they're doing it now is they're not going to do it afterwards.
Okay. Since, you know, so they're doing it now. They want to do it. And I look at it now. I had a very good relationship with president. She had a very good relationship with
Putin and a very good relationship with Kim Jong un, who is a nuclear force that you won't even believe. President Trump discussed his good relationship with Xi, but I think many agree that we didn't get an understanding of whether he would continue with the existing stance of sort of export control on leading edge Chip. What is your expectation if President Trump were to take office in November or in January of next year? But remember, export controls on critical technology from China began under President Trump and specifically with Huawei. This is with regards to 5G. While we ultimately lost $30 billion in annual revenue because the United States under President Trump worked with 60 countries and 200 telecommunications companies to only use trusted vendors in 5G, and that did not include Huawei. We've seen those export controls continue now under the Biden administration. It's been on chips lately, but I think you can start to see this is American foreign policy.
Now, not only that, the Congress is very bipartisan. Just a couple of days ago, the China Select Committee called for putting more Chinese companies on the entity list. This is Huawei's network of clandestine companies, which American companies are sending semiconductor manufacturing equipment. So this is a very bipartisan thing, and we should expect it to continue. And yet, Michel, companies still want to access the Chinese consumer. Apple still wants to build its phones
there, still wants to access the consumer that NVIDIA still wants to sell its less sophisticated chips over to China, too. What is a CEO to do? What does Jensen Huang or Tim Cook to do in that situation? Well, it's really interesting, actually. It was a Bloomberg reporter just a couple of weeks ago, had asked Jensen Huang his take on the China export controls, and he said he had to defer policymaking to the United States. Unfortunately, in the world that we live
in when it comes to American national security, that's not anything that any CEO of a critical tech company can defer. We all have to be in this together and in what's ultimately a technology race. American CEOs and tech CEOs in particular need to make sure that we are advancing our tech competitiveness. At the same time, we're not giving that technology to our adversaries who are dedicated to our demise. So there's a very big leadership role for CEOs.
Michelle Wieder, fantastic to have some time with you. Thank you. CEO of the Institute for Tech Diplomacy at Purdue University. Coming up, why Tesla driverless car program is the target for federal investigators. This is Bloomberg Technology. That's optimistic goals. Okay. Last week's Tesla Robotaxi event was so
underwhelming that Wall Street is questioning the stock's premium valuation. The so-called ROBOTAXI has been crucial to keeping Tesla's stock at Lofty Heights. It's trading at around 75 times forward earnings on hopes that A.I. will recreate the auto industry through Musk's vision.
Here's a look at the stock since the event. The next catalyst to watch is, of course, third quarter results, for which I will be glued to my desk along with everyone else around the world. Karoline, will you be? Of course.
What brutal chore. Meanwhile, we've got to be glued to something else, said the National Highway Traffic Safety Administration. It's investigating Tesla's powerful automation system.
They market it as full self-driving and it's following concerns it is defective. After a series of crashes, one which resulted in a fatality. Bloomberg's Craig Trudel relentless on this. Craig This is to do with the weather, right? Yeah, this is at least sort of the grounds for the investigation that is sort of narrowly looking at the issue of of, you know, when Teslas are being operated on FSD and in in an environment where visibility isn't great.
So think of like foggy conditions. But I would point out that it's not necessarily the case that these investigations would sort of stay in that narrow scope where we've seen a precedent just with autopilot, this sort of standard driver assistance system that you get when you buy a Tesla that we saw in its open in an investigation after multiple crashes involving police cars or fire trucks. And that investigation led to a much broader recall where Tesla sort of, you know, came around to this idea that, you know, what next. You're right. We will sort of, you know, find that there's a defect with our system, that people aren't paying enough attention while they use it. And we'll we'll do a remedy to try and address that. Craig, as you note, because you're one of the editors of my reporting about Tesla, I'm an FSD user, and actually I've posted on quite a lot about using it in foggy conditions and some of the bizarre happenings when using the technology. One question that I have and many have
is about this probe and how it's different from prior probes and why actually this time around it may have teeth, so to speak. Whereas, you know, in the past we haven't seen much happen after the probe. Yeah, I think it's interesting. These these defect investigations tend to take quite a bit of time. I mentioned the autopilot one. It took, you know, I think several years really for for anything to really come of that.
And, you know, so so that is one thing to note, that it's a tends to move at a speed that is not sort of befitting of our, you know, modern sort of daily drumbeat of headlines. Age. I do think that what's interesting here is that, you know, just with that that autopilot investigation that precipitated a recall, Tesla was able to address that with an over-the-air software update, or at least they tried to do so. And it's has gone back and said, you know what, We're not sure that that went far enough. So I think when you ask about, you know, whether or not this could have teeth, I think the real question here, if you're a Tesla investor, is, you know, will Nitze get to the point where they say, you know what, Tesla, we think that you don't have sufficient hardware to for people to be able to use these systems safely. And do you need to do more for, you know, monitoring drivers better and install equipment to do that? Do you need to put in sensors to handle these these poor visibility conditions that would cost Tesla some real money? And does that question the pace, which is slower than rivals of a cyber cab or a fully independently driving car that we already see on the streets of Waymo? Yeah, I think it's key here that, you know, it's a I think this is going to have to, you know, have some say in Tesla following through on what Musk said last week about being able to offer a version of FSD that doesn't have to be supervised, at least in certain states. You know, Musk mentioned that in Texas and California.
You know, it's it just strikes me as hard to sort of take him at his word that that timeline can possibly be achieved when we're seeing evidence, you know, year after year of of crashes involving people using these systems and, you know, them not necessarily, you know, being safe enough to to regulator's liking. MUSK Ambitious timelines. Right now we thank you and. Yeah, plenty more news in today's talking tech. And first stop. What's the story? Japanese software developer Fuji Soft is sticking with taken off for its shares despite receiving a higher bid from Bain Capital. This is Fuji.
Soft Executives has shown doubt about the feasibility of Bain's goal of taking the company private. We'll track that one. Plus, Google's moving the team behind its Gemini AI assistant app to its DeepMind research lab. It's part of a plan to consolidate the company's sprawling AI structure. And Verizon will buy $1 billion worth of US cellular spectrum licenses for its core business.
US cellular controls, one of the largest tower businesses in the United States. All right. Coming up on the program, we've got a deeper look at what's next for Netflix. Plenty more to discuss after earnings. This is Bloomberg Technology.
Welcome back to Bloomberg Technology. Let's take a look at where Netflix is at right now. Earnings just beating investor expectations. The stock is up ten and a half percent. Biggest jump since January of this year and the stock is trading at all time highs. Let's go in-house.
Let's bring in geeta ranganathan, bloomberg intelligence and Geeta, your research you published this morning. We'll get right to it. You look at the subscriber gains, that was a surprise. But you also judging Netflix on its margins. And it's really interesting to me because Netflix for ages was like stop obsessing over subscribers. Judge us on our financial metrics.
Well, you are. Y yeah, absolutely. And so, you know, it was really a broad based very, very good report, as you just pointed out. And yes, this has shifted now from being just principally a subscriber story to now more of an all rounded kind of financial story as well. So good topline revenue growth, but more importantly, that topline revenue growth kind of translating into very, very solid bottom line growth, very solid profitability. And we saw that yesterday in Netflix, almost flirting with 30% operating margin in the third quarter.
And then look at their guidance. When we came into 2024, they were expecting or they were guiding margins at about 22%. Yesterday, they lifted it again from 24, 25, 26 and now 27% operating margins. And again, the target that they set for 2025 looks really, really conservative to us. But this is basically this goes back to
the age old question of us always asking, you know, does streaming economics really do they make sense? Can this model be as good as the original traditional TV model? And Netflix has proven to us that it can be done. What's interesting, though, is the previous chart we just showed is strong subscribers, but still a slowing growth trajectory. And I'm interested by perhaps Latin America seeing no growth in subscribers. Why is that happening? Where is it happening? Yes.
So, you know, it is a little bit of up and down. So they did talk about Latin America being a little bit of a timing issue. They're actually now continuing to see good growth starting in the in the calendar fourth quarter. But, you know, there are mature markets and there are markets where there is going to be a lot of growth.
So if you kind of just look at it as us versus rest of the world, 80% of subscriber growth comes from the rest of the world. So the US obviously is the most mature market, but there still are pockets across the world. Karoline, whether you're looking at Asia Pacific or India. India, for instance, last quarter for them was one of their most, you know, highest growing markets in terms of number of new subscribers as well as in terms of revenue growth.
So they do have pockets all across the world, whether it's in Eastern Europe, whether it's in Asia-Pacific, where they are going to try and reinvigorate subscriber growth. And those are going to be their biggest areas of opportunity going forward. Geyser Bloomberg Intelligence House Call Is Netflix still the number one streamer and will it always be the number one streamer? I think so, Ed. I mean, they definitely have one. The streaming wars right now as we as we kind of look at it way ahead of everybody else, way ahead of the competition, not just in terms of subscriber numbers, even if you look at them in terms of engagement. Remember, they are just a smidge behind
YouTube. And YouTube has over 2 billion viewers across the world. It's a free service, right? And you're looking at Netflix where, you know, it's a paying subscription service, a little bit of a different model, but they still have almost close to 10% of viewing time in the US, which is just a smidge, again, behind behind YouTube. So I think, you know, definitely the number one service globally and they will consolidate that lead over all of their rivals. Great research, great recap Geetha
Ranganathan, we thank you from Bloomberg Intelligence. And that's it for this edition of Bloomberg Technology. What a weekend. Yeah, it was an astonishing week. And now earnings season is back upon us. So much to recap. You know where to find the podcast. It is online on Apple Spotify and we
publish it to all the Bloomberg platforms. Thank you to the team in New York City. Thank you to the team in San Francisco. Happy weekend to all of you around the world. This is Bloomberg Technology.
2024-10-19