Latest / Bloomberg Intelligence / Zuckerberg Pledges ‘Aggressive’ Pricing With Meta’s First Pay-to-Use AI

Transcript

Zuckerberg Pledges ‘Aggressive’ Pricing With Meta’s First Pay-to-Use AI · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the
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• 0:24
  Speaker 2: So news from Meta Meta Platforms unveiled a version of
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  Speaker 2: its AI model dubbed muse Spark one point one that
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  Speaker 2: includes a new paid here for developers, marking the first
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  Speaker 2: time Meta has charged businesses for access to its models.
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  Speaker 2: Let's get the more details from Kurt Wagner, senior reporter
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  Speaker 2: covering social media for Bloomberg News, who just sat down
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  Speaker 2: with Mark Zuckerberg's Meta CEO and had a wine ranging interview. Kurt,
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  Speaker 2: thanks so much for joining us here. Talk to us
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  Speaker 2: about what you and mister Zuckerberg discuss regarding Meta's AI
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  Speaker 2: strategy here.
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  Speaker 3: Yeah, well, I mean the mode behind the interview was
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  Speaker 3: this release that you just mentioned, the muse Spark one
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  Speaker 3: point one, and we spend a good tunk of time
• 1:07
  Speaker 3: talking about where Meta stands in the AI race right now.
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  Speaker 3: I think the prior models that the company has released
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  Speaker 3: have really been seeing as sort of second tier behind
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  Speaker 3: the open ais, the anthropics, and even the Googles of
• 1:20
  Speaker 3: the world. I think Mark Zuckerberg admitted to me in
• 1:24
  Speaker 3: our conversation that they're still trailing anthropic and open AI
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  Speaker 3: in a lot of ways. But he was very proud
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  Speaker 3: that this new model benchmarked better than the Google models,
• 1:34
  Speaker 3: and he said this was sort of a milestone for
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  Speaker 3: them to, you know, in his words, kind of deliver
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  Speaker 3: something that's a higher quality than what Google's doing. And
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  Speaker 3: you know, they are racing to try and develop superintelligence.
• 1:46
  Speaker 3: They're racing to have the best model on the planet.
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  Speaker 3: They have another one coming, it's called Watermelon. I don't
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  Speaker 3: know exactly when that's going to be, but he talked
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  Speaker 3: openly about how that is going to, in his mind,
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  Speaker 3: push the frontier of AI development and progress. So, you know,
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  Speaker 3: a big part of the conversation was muse spark one
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  Speaker 3: point one and what that means for the business, But
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  Speaker 3: a big part of it was just where do they
• 2:06
  Speaker 3: stand and does they feel like things are moving in
• 2:07
  Speaker 3: the right direction, And he feels very confident about where
• 2:10
  Speaker 3: they are.
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  Speaker 4: Thank Kurt. Looking at metas stock, Meta's the ticker, it's
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  Speaker 4: marginally higher now about four tenths of a percent, but
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  Speaker 4: it had been lowered this morning on the back of
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  Speaker 4: some of that news. Why do you think that is?
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  Speaker 4: Obviously the stock is down this year, but of course
• 2:25
  Speaker 4: it was on such a tear in recent years after
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  Speaker 4: a lot of those job tranches, and obviously it's moved
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  Speaker 4: into AI and other vehicles there. What do you think
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  Speaker 4: is going on as far as how shareholders are viewing this?
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  Speaker 3: Well, the narrative around Meta's AI business for the last
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  Speaker 3: six months or so has been that they're spending a
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  Speaker 3: ton without a clear path for recovery, like where's all
• 2:47
  Speaker 3: this money going to come back into the business, And
• 2:50
  Speaker 3: in the last couple months, they've tried to answer that
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  Speaker 3: in several ways. They have a consumer chatbot subscription that
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  Speaker 3: they announced they're going to be selling access to AI
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  Speaker 3: agent for businesses. Of course, there's today's news where they're
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  Speaker 3: going to be selling their model to developers via this API.
• 3:09
  Speaker 3: And then we had a great story last week on
• 3:11
  Speaker 3: Bloomberg about the fact that they're also exploring a cloud business,
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  Speaker 3: taking some of that compute capacity that they've acquired and
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  Speaker 3: maybe reselling it or using it in other ways that
• 3:21
  Speaker 3: aren't just for its own products, and so I really
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  Speaker 3: think we've started to see a potential business shape up
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  Speaker 3: for them on the AI front in the last two
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  Speaker 3: three months that didn't exist before. And I think you're
• 3:30
  Speaker 3: starting to see the stocks slowly, you know, reflect that
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  Speaker 3: that people are saying, Okay, they're spending a ton, but
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  Speaker 3: now we have a better sense of how they're trying
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  Speaker 3: to make money from this that we didn't necessarily know
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  Speaker 3: a few months ago.
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  Speaker 2: So is there this seems to be this whole AI
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  Speaker 2: chase if you will buy the technology space in general,
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  Speaker 2: it's just iteration after iteration after iteration. Where does mister
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  Speaker 2: Zuckerberg think a meta isn't in that game? Here? Is
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  Speaker 2: this something that they can continue to invest in, continue
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  Speaker 2: to proven.
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  Speaker 3: One of the things that I asked him about was
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  Speaker 3: why do this right? Like, there's so many companies, There
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  Speaker 3: are several companies that are kind of racing for this
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  Speaker 3: what you would call frontier AI model, This this tip
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  Speaker 3: of the Iceberg, tip of the spear, And I'm like,
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  Speaker 3: why spend all this money when you know you could
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  Speaker 3: essentially license some of this technology from someone else who
• 4:22
  Speaker 3: spends all the money right, maybe make it cheaper. And
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  Speaker 3: his answer was, look, if we don't control the technology,
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  Speaker 3: we're at a disadvantage because their goal. Meta's goal is
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  Speaker 3: to build personalized assistance for everyone in the world. So
• 4:35
  Speaker 3: they want every single person to be able to open
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  Speaker 3: their phone or turn put on their smart glasses and
• 4:39
  Speaker 3: have that personal AI assistant there. And if you know
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  Speaker 3: they're relying on open a ice technology or anthropics technology,
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  Speaker 3: they just can't control what the priorities are. Mark Zuckerberg
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  Speaker 3: is big on that. He's big on making sure that
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  Speaker 3: no other companies have leverage over Meta, and so I
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  Speaker 3: think for him, he's saying, it's worth the spend because
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  Speaker 3: we can then, you know, bid the model that's going
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  Speaker 3: to do exactly what we want. We don't have to
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  Speaker 3: hope that someone else does it for us. And so
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  Speaker 3: for him, it's worth throwing all this money at that problem,
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  Speaker 3: even if there are going to be several competing models,
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  Speaker 3: simply because he wants that control. Moving forward.
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  Speaker 4: Of course, to your point, critics have questioned whether or
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  Speaker 4: not the pivot will end up paying off. What did
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  Speaker 4: he tell you as to why he thinks it will.
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  Speaker 3: Well, he thinks that this is the most exciting technology
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  Speaker 3: that has ever showed up in his lifetime, and so
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  Speaker 3: he imagines this world. You know, what they did with
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  Speaker 3: social media in some ways is a similar strategy. They
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  Speaker 3: made it free, right, Facebook and Instagram and WhatsApp, those
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  Speaker 3: are free tools. Obviously there's advertising you do sort of
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  Speaker 3: pay if you will by giving meta access to your
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  Speaker 3: attention and time with your data. But ultimately he's saying, hey,
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  Speaker 3: we're trying to make a tool free, give it to
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  Speaker 3: as many people as possible, and figure out how to
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  Speaker 3: make money from it later. And I think that's sort
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  Speaker 3: of what he sees here is he goes, hey, everyone's
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  Speaker 3: going to everyone's life will benefit from me. I this
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  Speaker 3: is his perspective, of course, and you know, let's make
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  Speaker 3: this as cheap and widely accessible as possible and we'll
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  Speaker 3: kind of figure out some of the business a little
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  Speaker 3: bit down the road. And so for him, I think
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  Speaker 3: that's the motivation is you want his product in as
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  Speaker 3: many hands as possible, and so that's why he's willing
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  Speaker 3: to sort of undercut on price with a lot of
• 6:15
  Speaker 3: the stuff they've announced.
• 6:17
  Speaker 5: Stay with us more from Bloomberg Intelligence coming up after this.
• 6:23
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
• 6:27
  Speaker 1: weekdays at ten Am Eastern on Apple Cocklay and Android
• 6:30
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• 6:34
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:37
  Speaker 2: Pepska reported some earnings today. The company said consumers pulled
• 6:42
  Speaker 2: back into second quarter, slowing its efforts to revitalize it's
• 6:45
  Speaker 2: North American snack business. Stocks down four percent today, It's
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  Speaker 2: off almost five percent year today. Let's break it down
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  Speaker 2: some of those results. We can do that with Ken
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  Speaker 2: Shay analysts there at Bloomberg Intelligence. Ken, what you learned
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  Speaker 2: from Pepsi?
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  Speaker 6: Yeah, Hi, Paul, Well. PepsiCo today pretty much gave a
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  Speaker 6: report that was widely expected. Quite frankly. I mean, the
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  Speaker 6: hit their numbers, maybe a little bit above top and
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  Speaker 6: bottom line numbers. But what they said was that their
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  Speaker 6: game plan that they set out earlier this year to
• 7:20
  Speaker 6: revitalize their businesses from the top line and a margin
• 7:23
  Speaker 6: point of view, are still in place, even though they
• 7:26
  Speaker 6: hit a speed bump in the second quarter, and that
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  Speaker 6: speedbump is higher gas prices. No shocker there. People kind
• 7:32
  Speaker 6: of knew, you know, it was going to be a
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  Speaker 6: tough quarter for them to make, you know, a really
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  Speaker 6: good progress. They're big businesses Pepsi Food. That's about a
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  Speaker 6: further sales, about forty percent of the profits. It's it's
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  Speaker 6: the big enterprise to have there. It basically was a
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  Speaker 6: little short of expectations, you know, consumers pulled back a
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  Speaker 6: little bit, as you mentioned, despite the company's innovation efforts,
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  Speaker 6: and the company basically have to make up some of
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  Speaker 6: this lost ground, they said in the second half, particularly
• 8:02
  Speaker 6: the fourth quarter, to hit their numbers, which they reiterated.
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  Speaker 4: He can talk to us about shrinkflation, because that's something
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  Speaker 4: that PepsiCo got knocked on a few years ago when
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  Speaker 4: they were having to boost some of the volumes in
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  Speaker 4: some of their chips, because of course it produces the
• 8:16
  Speaker 4: world's most popular chips through its subsidiary Freedom Lay. But
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  Speaker 4: what are you seeing with that and how does that
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  Speaker 4: translate to margins?
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  Speaker 6: Yeah, hi, Jess, Well, yeah, I agree, you know. Earlier
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  Speaker 6: in the year, and actually, let me take a step back.
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  Speaker 6: Since the pandemic, PepsiCo and many other big consumer companies had,
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  Speaker 6: because of supply chain disruptions and cost inflation in general
• 8:38
  Speaker 6: and so on, had been pretty aggressive on the price
• 8:41
  Speaker 6: increase of unit pricing was up really really sharply over
• 8:45
  Speaker 6: the over the last few years. So earlier this year,
• 8:48
  Speaker 6: with the help of an activist, they said, look, we
• 8:50
  Speaker 6: need a better balance between volume and unit pricing, and
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  Speaker 6: so we're going is going to roll back pricing a
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  Speaker 6: little bit and try to get volumes back in, you know,
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  Speaker 6: and by doing that, not only is it a better
• 9:02
  Speaker 6: balance and easier to manage quite frankly, but you're helping
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  Speaker 6: operating efficiencies. You know, you need to have volumes moving
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  Speaker 6: along in a positive way to get the you know
• 9:13
  Speaker 6: that fixed costs absorption kind of equation or work. So
• 9:17
  Speaker 6: what they're doing now basically is the getting back to
• 9:19
  Speaker 6: a more balanced approach. At the same time, though, when
• 9:23
  Speaker 6: they set that plan, that was before gas prices shot up.
• 9:27
  Speaker 6: So the challenge they're going to have in the second
• 9:28
  Speaker 6: half is they want to stick to the game plan
• 9:32
  Speaker 6: of being more balanced with vuyuing and pricing. But you know,
• 9:35
  Speaker 6: but they're going to be challenged by having an environment
• 9:38
  Speaker 6: where costs are back up again. You see the news
• 9:40
  Speaker 6: today and gas prices you're backed up. You know, the
• 9:43
  Speaker 6: company is going to have some cost issues. How they
• 9:46
  Speaker 6: reconcile that, it's a good question. We're gonna have to
• 9:48
  Speaker 6: wait and see.
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  Speaker 2: Ken what does PEPSI say about its portfolio of brands.
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  Speaker 2: Are they comfortable where they are? Are they linking to
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  Speaker 2: add brands, are looking to pair back on some of
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  Speaker 2: their brands? How are they fixed?
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  Speaker 6: Well? I think PepsiCo was pretty comfortable. I mean, they
• 10:03
  Speaker 6: made some acquisitions in recent years, you know, Skeet Day Chips,
• 10:06
  Speaker 6: they had the Poppy probiotic SODA's last year. They spent
• 10:11
  Speaker 6: quite a bit of money on them. So I think
• 10:13
  Speaker 6: their game plan really is three prong pull to answer
• 10:15
  Speaker 6: your question. First, they set are setting out to have
• 10:17
  Speaker 6: their products be more affordable, and that was the prior question.
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  Speaker 6: That is, you know, pull back a little bit on
• 10:23
  Speaker 6: either pricing smaller packaging sizes, maybe nture inflation, but also
• 10:28
  Speaker 6: on the list price side as well. Second, let's be
• 10:31
  Speaker 6: more in tune with where the consumers going in terms
• 10:34
  Speaker 6: of their diets, and so they're making bigger bets on protein, fiber,
• 10:39
  Speaker 6: what they call an enhanced fight, enhanced hydration, and they're
• 10:43
  Speaker 6: doing that with a lot of new products featuring all three.
• 10:47
  Speaker 6: And then finally, they're very well known to be in
• 10:50
  Speaker 6: the consumer in the grocery aisle and the convenience store,
• 10:53
  Speaker 6: and they want to be better known as an ingredient
• 10:56
  Speaker 6: in home preparation. So they want to bring Doritos into
• 11:01
  Speaker 6: the kitchen. Somebody's making tacos at home, Well, what about Dorito's.
• 11:05
  Speaker 6: That's only going to help. They've come out with something
• 11:08
  Speaker 6: called the walking Taco. When you take a bag of
• 11:10
  Speaker 6: Dorito's and you can make your you know, you know,
• 11:14
  Speaker 6: ground beef and put in your tomatoes and other cheese
• 11:17
  Speaker 6: and ingredients and you can you have a taco which
• 11:19
  Speaker 6: you can walk around with that's a portable one. You know,
• 11:23
  Speaker 6: it sounds kind of gimmicky, but it's doing well. They
• 11:25
  Speaker 6: promoting it, and you know, it's getting consumers to recognize
• 11:29
  Speaker 6: these brands to be more than just something they picked
• 11:32
  Speaker 6: up at the convenience store and grocery store.
• 11:35
  Speaker 4: So, Kain, are Americans buying back goods in large volumes?
• 11:38
  Speaker 4: To your point, how does that translate when it comes
• 11:40
  Speaker 4: to a lot of these consumer package good companies and
• 11:43
  Speaker 4: their ability to raise prices.
• 11:45
  Speaker 6: Well, they're gonna be They're going to be challenged to
• 11:47
  Speaker 6: hold prices. Like I said, in the second half, I mean,
• 11:50
  Speaker 6: Tisago did say, you know, we're seeing cost inflation picking up,
• 11:54
  Speaker 6: you know, in the second half, and didn't say whatthing
• 11:57
  Speaker 6: can do about it, but I would suspect you're going
• 12:01
  Speaker 6: to see some more price increases in the second half.
• 12:04
  Speaker 5: Now.
• 12:04
  Speaker 6: Having said that, one of the one of the silver
• 12:07
  Speaker 6: linings to the story for a lot of these consumer companies,
• 12:09
  Speaker 6: including Petsico, is that they're getting refunds from the tariffs.
• 12:13
  Speaker 6: You got to remember back in April they were deemed
• 12:17
  Speaker 6: to be illegal, and these companies are getting nice refunds.
• 12:19
  Speaker 6: What Pettico is doing about it if they're going to
• 12:22
  Speaker 6: apply a lot of these proceeds to help them reduce costs,
• 12:26
  Speaker 6: and you know, it may help them reduce the incentive
• 12:31
  Speaker 6: to take price increases.
• 12:33
  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:40
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 12:43
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:46
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• 12:50
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:54
  Speaker 2: Let's get back that Levi Strauss. They reported some earnings here.
• 12:58
  Speaker 2: Mary Ross, Gilbert je'sus senior Anol's covering all the retail
• 13:00
  Speaker 2: stuff from for Bloomberg Intelligence joins us. Talk to us
• 13:04
  Speaker 2: about Levi's what did they disclose on their earnings release.
• 13:09
  Speaker 7: So yesterday they had great numbers. Right, their organic growth
• 13:14
  Speaker 7: was up six percent. That was about two hundred basis
• 13:17
  Speaker 7: points better than what analysts were looking for. They were
• 13:20
  Speaker 7: looking for four percent. And their guidance they raise their
• 13:23
  Speaker 7: guidance and it's really due to the first half performance.
• 13:26
  Speaker 7: So their guidance now for organic growth is five and
• 13:29
  Speaker 7: a half to six percent. It was previously four and
• 13:31
  Speaker 7: a half to five and a half percent. They are
• 13:33
  Speaker 7: seeing strength across women's. Women's was up eleven percent in
• 13:38
  Speaker 7: the quarter. Beyond Yoga, which is their small brand but
• 13:42
  Speaker 7: growing fast was up sixteen percent, Asia up twelve percent.
• 13:48
  Speaker 7: In Europe, DTC up seven percent. But wholesale is the
• 13:53
  Speaker 7: biggest part of the business and so you have to
• 13:55
  Speaker 7: really look at the first half because you will have
• 13:56
  Speaker 7: fluctuations in the quarter based on shipping that was up
• 14:00
  Speaker 7: nine percent in the first half. So with all the
• 14:03
  Speaker 7: strength that they're seeing raising guidance, they're still upside to
• 14:07
  Speaker 7: their guidance because it's really based on the first half performance.
• 14:11
  Speaker 7: So what they're guiding into the second half is really
• 14:14
  Speaker 7: conservative and that's their objective they really want to be.
• 14:18
  Speaker 7: But what this says, is that the brand is relevant
• 14:21
  Speaker 7: around the globe across income groups. So for example, they
• 14:26
  Speaker 7: have the Levi's Levi's signature brand label which is in Walmart,
• 14:33
  Speaker 7: and that was up in the first half of high
• 14:35
  Speaker 7: single digits right right around you know, eight to nine percent,
• 14:39
  Speaker 7: and they're seeing that, you know, being high single digits
• 14:43
  Speaker 7: to low double digits in the second half. So again
• 14:47
  Speaker 7: no weakness anywhere with the consumer, even having you know,
• 14:51
  Speaker 7: at the low end and then at the high end
• 14:53
  Speaker 7: they're blue tab premium denim doing very very well, but
• 14:57
  Speaker 7: also non denim, they're non denim bottoms, which really allows
• 15:00
  Speaker 7: them to increase their addressable market was also up strong
• 15:05
  Speaker 7: in the quarter, so they're really gaining traction and there's
• 15:10
  Speaker 7: just more to go well.
• 15:12
  Speaker 4: Looking at its stock, LVI the ticker up about two
• 15:15
  Speaker 4: percent to date. Even on a year to date basis,
• 15:18
  Speaker 4: that stock is of about twenty percent if you pull
• 15:21
  Speaker 4: it back the last five years down about ten percent,
• 15:25
  Speaker 4: so obviously trailing broader benchmarks in that span of time.
• 15:29
  Speaker 4: What do you think moving forward is the biggest thing
• 15:31
  Speaker 4: that obviously shareholders want to hear from them as far
• 15:34
  Speaker 4: as improving When it comes to the outlook, for that
• 15:36
  Speaker 4: kind of growth in their margins.
• 15:39
  Speaker 7: Yeah, so it's a good question. I mean, first of all,
• 15:41
  Speaker 7: when you look at the margin expansion that they're looking
• 15:44
  Speaker 7: for for the full year, they did raise estimates a
• 15:48
  Speaker 7: tad bit, but it was actually below what consensus is
• 15:51
  Speaker 7: looking for on the margin side, so that could sort
• 15:55
  Speaker 7: of explain there was a little bit of volatility after
• 15:57
  Speaker 7: their earnings. Other than that, once again, you know, if
• 16:00
  Speaker 7: you look at the margin expansion they're experiencing in Europe,
• 16:04
  Speaker 7: they have a global Enterprise Resource program that they're expanding
• 16:10
  Speaker 7: throughout the globe that they're going to complete that in
• 16:12
  Speaker 7: twenty twenty seven, So in Europe where they sort of
• 16:15
  Speaker 7: started it, it's complete, and we saw their operating margin
• 16:19
  Speaker 7: expand four hundred basis points. That was partly due to
• 16:22
  Speaker 7: lower distribution center costs too, So I think that you're
• 16:26
  Speaker 7: really going to see margin expansion grow and again fast,
• 16:32
  Speaker 7: potentially faster than the top line. So I think there's
• 16:36
  Speaker 7: really a lot of traction here because women's is still
• 16:39
  Speaker 7: a smaller part of the business UNI versus men's, so
• 16:43
  Speaker 7: that's why you're seeing double digit growth there, but also
• 16:46
  Speaker 7: across categories and tops and wovens and outerwear, and then
• 16:51
  Speaker 7: with the campaigns that they have going with the World
• 16:54
  Speaker 7: Cup and the logo that they had to cover up
• 16:58
  Speaker 7: at Levi Stadium in San Francisco. That gave them a
• 17:02
  Speaker 7: great opportunity from a media campaign that actually drew over
• 17:09
  Speaker 7: a billion of impressions. So all of that is really
• 17:12
  Speaker 7: resonating with consumers and I really see upside and I
• 17:18
  Speaker 7: think that could really shift the performance and the shares
• 17:23
  Speaker 7: over time.
• 17:25
  Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
• 17:32
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 17:35
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  Speaker 2: Interesting story on the Bloomberg terminal today, more good friends
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  Speaker 2: at Starbucks. Starbucks is developing in house tools with the
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  Speaker 2: help of artificial intelligence that could replace some software applications
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  Speaker 2: and now buy some companies such as Microsoft and International
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  Speaker 2: Business machines. Let's get some details here at Daniellis ort
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  Speaker 2: Tory Joints is here. A restaurant reporter for Bloomberg News
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  Speaker 2: based in Chicago. Danielle talk to us about Starbucks and
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  Speaker 2: kind of what they're trying to do from a software
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  Speaker 2: and AI perspective.
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  Speaker 8: Sure, so really what they're doing is instead of reflexibly
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  Speaker 8: by now you know, going out and buying software, now
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  Speaker 8: what they're trying to do is look at, okay, does
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  Speaker 8: it make sense for us to actually build some of
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  Speaker 8: these applications in the house. You know, they customize a
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  Speaker 8: lot of this software anyway. Just imagine what it takes
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  Speaker 8: to really you know, personalize or order at Starbucks. Well,
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  Speaker 8: for example, the pos the point of sales system has
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  Speaker 8: to be able to reflect that, so barisis can actually
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  Speaker 8: ring up your order. And so they're like, okay, we're
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  Speaker 8: going to customize the software anyway, does it make sense
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  Speaker 8: to build it? And we're in an age which you
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  Speaker 8: know with artificial intelligence, it's just that conversation just gets
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  Speaker 8: a little easier because AI can help.
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  Speaker 4: I wanted to point out to you because software stocks
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  Speaker 4: are actually lower on the back of this announcements. If
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  Speaker 4: you're looking at IBM, that's down about two percent. The
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  Speaker 4: ticker symbols IBM, of course, and then service now is
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  Speaker 4: flat but marginally lower, and then salesforce down about two percent.
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  Speaker 4: CRM is the ticker on that. So why the dynamic
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  Speaker 4: there obviously is it more just because of the competitive landscape.
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  Speaker 8: So this moved by Starbucks feeds into this broader conversation
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  Speaker 8: and technology space about whether with AI, customers or maybe
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  Speaker 8: startups can just you know, build tools that can replace
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  Speaker 8: some of the software that are that is now sold
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  Speaker 8: by some companies like IBM and Microsoft. So basically, I
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  Speaker 8: think with Starbucks, what we're looking at is at a
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  Speaker 8: case study of this actually happening inside a company. So
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  Speaker 8: it's really fueling sort of this ongoing conversation in this space,
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  Speaker 8: if that makes sense.
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  Speaker 2: Yeah, this is this is what the market's been concerned about.
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  Speaker 2: And we've seen sell off in some of these software
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  Speaker 2: names and software service names because people are saying, boys,
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  Speaker 2: some of these things can be kind of done with
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  Speaker 2: AI and maybe cheaper and you know, and that's kind
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  Speaker 2: of what we're seeing in the story. So, I mean,
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  Speaker 2: in your story, Danielle, we see that Starbucks is spending
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  Speaker 2: they spend about four hundred million dollars a year on
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  Speaker 2: software alone. Are they thinking they can maturely reduce that?
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  Speaker 8: They can? I mean, their chief technology officer has outright said,
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  Speaker 8: as we reported that there are opportunities to cut spending
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  Speaker 8: in software. This one part of Starbucks technology organization called
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  Speaker 8: Enterprise Technology, is looking to cut their spending by about
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  Speaker 8: ten million dollars by the end of this fiscal year,
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  Speaker 8: which for Starbucks ends in September. So they're definitely basically okay,
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  Speaker 8: taking a step back and saying, all right, first of all,
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  Speaker 8: let's review every contract on service, make sure that we
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  Speaker 8: have the best price there and are there places in
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  Speaker 8: which it actually makes sense for us to be able
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  Speaker 8: to build our own product with the help of artificial intelligence.
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  Speaker 8: So it's definitely something that they're taking a second look at. Obviously,
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  Speaker 8: this is also part of something broader that Starbucks is doing,
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  Speaker 8: which is they are going through a turnaround and they
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  Speaker 8: are looking to costs, so this review is also part
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  Speaker 8: of that, and then we have AI helping make that
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  Speaker 8: a little bit easier.
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  Speaker 4: Of course, as you know the turnaround with Starbucks, this
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  Speaker 4: has been ongoing for the last few years. Now, what
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  Speaker 4: kind of timetable have they laid out to shareholders.
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  Speaker 8: In terms of the turnaround itself? So they did an
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  Speaker 8: issue for the first time some financial goals for twenty
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  Speaker 8: twenty seven twenty twenty eight. You know, if we recall
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  Speaker 8: when a Brian Nicol came in as CEO in twenty
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  Speaker 8: twenty four, he actually pulled guidance basically just like totally reset.
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  Speaker 8: And we actually have seen that the plan that he
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  Speaker 8: has implemented, generally speaking, has started to yield results. Their
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  Speaker 8: sales growth has picked back up, and he has really
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  Speaker 8: focused on things like customer service, on just having products
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  Speaker 8: that people really want to buy, and they also started
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  Speaker 8: to remodel stores. So basically, the tech is sort of
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  Speaker 8: the backdrop to all of this, right, Like a lot
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  Speaker 8: of the tools they use are just things that are
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  Speaker 8: behind the scenes to help them manage the business.
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