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Wall Street Poised for Bonus Increases in ‘Year of the Bank’ · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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  Speaker 2: The most widely read stories on.
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  Speaker 3: The Bloomberg always about Wall Street bonus.
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  Speaker 4: Absolutely need readership.
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  Speaker 3: Oh my god, I need readership this month or this
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  Speaker 3: quarter or this year. Write a story on Wall Street bonuses.
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  Speaker 2: Yeah, while we have one today. It's a Wall Street
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  Speaker 2: poise for bonus increases in year of the bank. So
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  Speaker 2: you can bet a lot of people are clicking on
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  Speaker 2: that story. Catherine Doherty is the author of that story.
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  Speaker 2: She's our Bloomberg News finance reporter, Catherine. It is only May,
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  Speaker 2: but the folks you talk to say that there's been
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  Speaker 2: some banner deals in the first part of the year
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  Speaker 2: that has led them to conclude already that it's going
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  Speaker 2: to be a big, big year for bonuses.
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  Speaker 5: Right And we should covey up by saying it's still
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  Speaker 5: early in the year, so things could change. But right
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  Speaker 5: now the projections are looking pretty rosy. And that's because
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  Speaker 5: the long awaited comeback of deals. You've started to see
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  Speaker 5: that come through. We do have the big banks, they
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  Speaker 5: have just reported their first quarter.
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  Speaker 6: The second quarter looks to be pretty steady.
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  Speaker 5: So if the second half of the year takes a
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  Speaker 5: turn for the worse, that could change these projections. But
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  Speaker 5: right now, it looks like the payout, especially for M
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  Speaker 5: and A advisory equity underwriting quite strong.
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  Speaker 6: And as we've been talking about.
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  Speaker 5: The volumes that you've been seeing across equities and fixed
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  Speaker 5: income as far as trading goes, those traders that are
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  Speaker 5: facilitating the buying and selling are also poised to see
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  Speaker 5: a pretty hefty payout if things continue as they as
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  Speaker 5: they've been going.
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  Speaker 3: Yeah, we've just seen so much underwriting of public debt
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  Speaker 3: for the technology companies ipel market kicking up, and that
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  Speaker 3: we're I guess still on the docket for some time,
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  Speaker 3: maybe towards ented the second half of this year for
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  Speaker 3: some mega IPOs.
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  Speaker 4: Yes, SpaceX and Think so.
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  Speaker 3: I mean, you can certainly if you wanted to project
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  Speaker 3: out some pretty big fees for these guys, Yes.
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  Speaker 5: But that is also with the assumption that those IPOs
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  Speaker 5: come through. I think that that's if all things continue
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  Speaker 5: in these deals. Actually see the light of day, then yes,
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  Speaker 5: these bankers who are facilitating them will see their pay
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  Speaker 5: bump increase. But if they don't, then we could see
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  Speaker 5: a reversal. Don't expect any huge declines, but in terms
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  Speaker 5: of the ten to twenty percent plus year over year
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  Speaker 5: increase that is projected right now, that is considering that
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  Speaker 5: all of these things kind of fall into place in
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  Speaker 5: the way that everyone would hope.
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  Speaker 3: Because the way we used to do it when I
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  Speaker 3: worked on the street was used around December. You'd have
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  Speaker 3: the really, really big discussion about how much the bonus
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  Speaker 3: pool actually was going to be. And he used November
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  Speaker 3: actuals and December projected, and that's what you use.
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  Speaker 4: To set up your bonus pool. You're crewing for it
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  Speaker 4: all year, but to say who gets what.
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  Speaker 6: So that's right, and there's a lot of months between
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  Speaker 6: now and December.
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  Speaker 3: I've been sitting on the wrong side of the seat
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  Speaker 3: where my boss will come in and say, yeah, we
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  Speaker 3: had a great year, but we had a terrible month
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  Speaker 3: last month, so we're going to be cautious here.
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  Speaker 4: Like what there's.
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  Speaker 2: Always a reason for the managers to say that to
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  Speaker 2: come up at some angle. If you click on m
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  Speaker 2: a go on. The Bloomberg terminal gives you a snapshot
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  Speaker 2: of mergers and acquisitions and one point eight trillion dollars
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  Speaker 2: of announced deals so far this year. That's up almost
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  Speaker 2: thirty six percent from the same time a year ago.
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  Speaker 2: So I'm guessing, Catherine that in terms of bonuses, projected payouts,
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  Speaker 2: investment banking advisories top of the list.
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  Speaker 5: Yes, I think that right now, and that's from a
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  Speaker 5: year ago. That is not the discussion that we would
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  Speaker 5: have been having. I think that again. So there were
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  Speaker 5: so many months and quarters that the narrative was the
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  Speaker 5: long awaited comeback of deals. Now actually starting to see
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  Speaker 5: that come through, but it hasn't been quarter after quarter.
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  Speaker 5: This has only been really the end of last year
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  Speaker 5: and the beginning of this year that we have actually
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  Speaker 5: seen the numbers. And if the rest of the year
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  Speaker 5: falls into place again as projected, the pipeline is healthy,
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  Speaker 5: is what executives have been saying, then yes, we might
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  Speaker 5: see that these numbers do follow actually the numbers that
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  Speaker 5: you're pointing out on the terminal, which is the actual
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  Speaker 5: deal flow that the bankers are working on, and that's
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  Speaker 5: why and how they get paid.
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  Speaker 3: What's going on with headcount on global Wall Street is
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  Speaker 3: this I'm thinking that there's AI could be a negative
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  Speaker 3: impact for headcount and Wall Street what are we seeing
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  Speaker 3: so far?
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  Speaker 5: So executives were asked about this during first quarter earnings
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  Speaker 5: and a lot of them echoed this same sentiment, which
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  Speaker 5: is that right now headcount is flat and AI is
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  Speaker 5: helping and making bankers more efficient, but right now, also
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  Speaker 5: it hasn't led to that next step that everyone is expecting,
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  Speaker 5: which is headcount reduction. A lot of the executives are saying, yes,
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  Speaker 5: are are, and it's not just their bankers, just across
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  Speaker 5: the entire company. Their executives are getting more efficient, but
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  Speaker 5: that's allowing them to work on more deals. It's allowing
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  Speaker 5: them to increase revenue, but not hire as much as
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  Speaker 5: they might.
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  Speaker 6: So instead of cutting folks right.
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  Speaker 5: Now, I think the narrative is more talking about keeping
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  Speaker 5: things flat.
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  Speaker 2: We look at the markets and record hize for the
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  Speaker 2: S and P five hundred the NASA. Can we come
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  Speaker 2: back to this theme over and over again of there's
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  Speaker 2: so many headwinds, yet stocks just continue to move north.
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  Speaker 2: So far, the volatility that we've seen has not been
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  Speaker 2: negative for trading desks. During those earnings calls, Did anyone
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  Speaker 2: talk about the turn and volatility, how it can go
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  Speaker 2: from good to bad quickly?
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  Speaker 5: Good to bad volatility is kind of what you need
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  Speaker 5: to narrow in on, right because at the end of
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  Speaker 5: the day, if you are on one of these bank
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  Speaker 5: trading desks and you're just facilitating and helping your clients reposition,
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  Speaker 5: volatility is a good thing. So as up until now
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  Speaker 5: it's been good volatility if we are distinguishing between good
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  Speaker 5: and bad, and it's the same for the market making
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  Speaker 5: firms outside of the banks, they've really been setting topping
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  Speaker 5: their own records year after year, and so I don't
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  Speaker 5: believe and it really if you go into different asset classes,
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  Speaker 5: Equities has been kind of the strongest across the board,
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  Speaker 5: but fixed income follows close behind.
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  Speaker 2: Stay with us more from Bloomberg Intelligence coming.
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  Speaker 6: Up after this.
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  Speaker 3: You got some earnings coming out of some of the
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  Speaker 3: restaurants here McDonald's Shakechack I mean, my McDonald's or been
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  Speaker 3: the same since like nineteen seventy eight. It's a number
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  Speaker 3: two with a coke, quote a pound of with GE's
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  Speaker 3: and a coke. I mean, that's been the same way since.
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  Speaker 2: You don't extra size it or notthing.
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  Speaker 3: You know, if I have to do, say anything other
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  Speaker 3: than number two with a coke, then I'm inconvenienced, you know,
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  Speaker 3: And I've been doing that way since nineteen seventy eight,
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  Speaker 3: I think.
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  Speaker 4: So let's go to Mike Kaylin.
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  Speaker 3: He knows what he's talking about here about these restaurants
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  Speaker 3: senior restaurant and food service analysts.
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  Speaker 4: Hey, Mike, let's start with McDonald's. How are they doing
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  Speaker 4: with their business?
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  Speaker 7: Yeah, so, you know, what we wrote today was that
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  Speaker 7: they're trying to walk a tight rope right now. They're
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  Speaker 7: copping some very strong results, you know, over the last
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  Speaker 7: over a year ago starting in two Q, but they're
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  Speaker 7: trying to do that with value, which which risks a
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  Speaker 7: trade down from some of your consumers that are doing
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  Speaker 7: a little bit better. So you know, sequentially, samestar sales
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  Speaker 7: and growth rates are gonna are gonna decelerate starting in
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  Speaker 7: the second quarter. They become very aggressive on value and
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  Speaker 7: I think that's a big part of the reason why
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  Speaker 7: all of the restaurant stocks, not all, but most restaurant
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  Speaker 7: stocks are down and down significantly.
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  Speaker 8: Today.
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  Speaker 7: They're being as aggressive as I've ever seen them on value.
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  Speaker 7: They have a dollar fifty sausage McMuffin right now at
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  Speaker 7: two point fifty mcdouble. They have three dollars breakfast meals,
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  Speaker 7: four dollars meals at other times of the day. This
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  Speaker 7: is as aggressive as i've ever seen them. I think
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  Speaker 7: that's much cheaper, and you know they're doing it. I
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  Speaker 7: think for two reasons. Number One, they see they smell
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  Speaker 7: blood in the water, Jack in the Box and Wendy's,
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  Speaker 7: you know, Same Star sales were down mid single digits
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  Speaker 7: last year. So those two chains, who they you know,
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  Speaker 7: obviously compete directly with, are struggling mightily. And also who's
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  Speaker 7: got more and better data than they do. And they
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  Speaker 7: see that low income consumers are which were really struggling
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  Speaker 7: last year, you know, could really feel it this year
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  Speaker 7: as inflation accelerates again.
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  Speaker 2: So what I also noticed, Michael, is that McDonald's has
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  Speaker 2: a new lineup of specialty drinks. What are the financials
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  Speaker 2: behind the beverage category versus the food category. I'm guessing
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  Speaker 2: higher margins, perhaps bringing in lower demographics as a benefit.
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  Speaker 7: Yeah, so a part of this, you know, beverages is big,
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  Speaker 7: and a big reason why it's big is that it's
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  Speaker 7: high margin. So yeah, McDonald's is hoping to increase drink
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  Speaker 7: attachment rates to the orders. They're hoping to get some
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  Speaker 7: business in the afternoon, people looking for a pick me up. Right,
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  Speaker 7: They're going to do some Red Bull drinks in the
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  Speaker 7: second half. So that's also part of their strategy to
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  Speaker 7: try to lap very strong same store of sales. You know,
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  Speaker 7: I don't think it's a bad idea, but you know,
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  Speaker 7: trying to lap very strong comps with value and low
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  Speaker 7: priced them items is just difficult to do. And you know,
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  Speaker 7: and I'm saying this about McDonald's and things are slowing there,
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  Speaker 7: but they're still best equipped to deal with, you know,
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  Speaker 7: a downturn in the consumer because you know, they have
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  Speaker 7: more scale than anyone. They can offer price points to,
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  Speaker 7: you know, like I've been mentioning, whereas their competitors just can't.
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  Speaker 3: Nobody buys I would think, not to me, entities out
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  Speaker 3: there by more beef than McDonald's does.
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  Speaker 4: What do they say about the cost.
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  Speaker 3: Trends of beef and is there any relief in sight here.
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  Speaker 7: Yeah, Shakesheck and McDonald's both talked about it. Beef inflate
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  Speaker 7: inflation is expected to moderate, right, It was I think
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  Speaker 7: mid teens in the first quarter, and it's more impactful
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  Speaker 7: to Shakeshack's bottom line because they own a majority of
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  Speaker 7: their restaurants. But yeah, it's expected to moderate through the year,
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  Speaker 7: maybe averaging you know, high single digit inflation four full
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  Speaker 7: year twenty twenty six, so still elevated, not as bad
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  Speaker 7: as we saw in the fourth quarter, which was you know,
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  Speaker 7: high teens or mid teens in the first quarter. It's
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  Speaker 7: going to moderate through year end, and we should should
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  Speaker 7: settle out around high synclepigets.
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  Speaker 2: How does Shakeshack counter rising beef costs? I mean, its
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  Speaker 2: entire business model is based on hammergers. Does it just
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  Speaker 2: kind of lean more into chicken burgers and build out
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  Speaker 2: that that offering.
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  Speaker 7: Well, they're leaning into ribs. They have the first baby
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  Speaker 7: back rib sandwich they've had on the menu. You know,
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  Speaker 7: it's two ways. First of all, you know, I think
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  Speaker 7: there was some low hanging fruit in this in this company.
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  Speaker 7: You know, I don't think it was the most efficiently
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  Speaker 7: run business for quite some time, and so management has
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  Speaker 7: done a good job over recent quarters being much more
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  Speaker 7: efficient with labor, so that's offset some of the costs.
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  Speaker 4: And then moving.
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  Speaker 7: Forward, it's going to be more out supply chain and
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  Speaker 7: productivity in the restaurants, right, So you know those are
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  Speaker 7: going to be the two areas that they're looking at,
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  Speaker 7: you know, but you know they're expecting some stam star
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  Speaker 7: sales growth and that's the best way to boost your margins, right,
• 12:15
  Speaker 7: is just driving more foot traffic through your stores. So
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  Speaker 7: they're still confident that they can drive at least some
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  Speaker 7: restaurant margin expansion here in twenty twenty six.
• 12:24
  Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
• 12:31
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 12:45
  Speaker 3: All right, we got some learnings out there and including
• 12:48
  Speaker 3: some media companies, Warner Brothers, Discovery, Pelothons, out there etha
• 12:51
  Speaker 3: wrong and nothing. She covers all the media stuff or
• 12:54
  Speaker 3: Bloomberg Intelligence. She's not into this silly wellness stuff.
• 12:57
  Speaker 7: She's a player.
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  Speaker 3: Warner Brothers Discovery getha. They reported numbers that they're just
• 13:01
  Speaker 3: about to get acquired by Paramount Skuidance.
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  Speaker 4: What do we learn about Warner Brothers Discovery's business.
• 13:07
  Speaker 9: Yeah, things are going along pretty nicely, Paul. For Warner
• 13:11
  Speaker 9: Brothers Discovery, as expected, we did the plenty of weakness
• 13:14
  Speaker 9: in the linear TV network division. I mean this was
• 13:17
  Speaker 9: well telegraphed by the company. Part of this is, of course,
• 13:21
  Speaker 9: just the structural weakness in TV advertising, but more importantly
• 13:24
  Speaker 9: and specifically for Warner it was the lack of NBA
• 13:29
  Speaker 9: and so we saw TV advertising fall about eleven percent,
• 13:32
  Speaker 9: but it's going to get far worse in the second quarter,
• 13:35
  Speaker 9: where they've guided to about a twenty percent decline. But
• 13:38
  Speaker 9: the other parts of the business, the parts of the
• 13:40
  Speaker 9: business that investors are most excited about, and especially Paramount
• 13:44
  Speaker 9: Skuidance is most excited about, which is the studios in
• 13:46
  Speaker 9: the streaming business is actually doing really, really well. So
• 13:49
  Speaker 9: the good thing that we saw with streaming was that
• 13:51
  Speaker 9: they added a lot of subscribers for HBO Max as
• 13:55
  Speaker 9: part of their international expansion efforts. So they've expanded into
• 13:58
  Speaker 9: a lot of European markets, and more importantly, it's not
• 14:02
  Speaker 9: just subscriber growth, it's it's that they're tracking really well
• 14:06
  Speaker 9: ahead of expectations in terms of praftability. So they already
• 14:10
  Speaker 9: achieved fairly strong craftability last year with one point three
• 14:13
  Speaker 9: billion for their streaming unit. Looks like they'll get maybe
• 14:16
  Speaker 9: close to even two billion this year. You know, the
• 14:19
  Speaker 9: estimates came up really nicely, and then Studio again doing
• 14:22
  Speaker 9: pretty well as well.
• 14:24
  Speaker 2: Has there ever been any discussion at Warner Brothers about
• 14:28
  Speaker 2: maybe creating tiers within HBO, you know, where you might
• 14:32
  Speaker 2: have advertising and the shows might be broken up with commercials,
• 14:37
  Speaker 2: So that is already there.
• 14:38
  Speaker 9: We do have an ad tier for you know, the
• 14:42
  Speaker 9: HBO Max product. I mean, this was part of this
• 14:44
  Speaker 9: whole wave of all of these different streaming platforms introducing ads,
• 14:48
  Speaker 9: started out with you know, Netflix and Disney Plus and
• 14:51
  Speaker 9: then Max. So it is slightly cheaper, but EAHBO show.
• 14:56
  Speaker 2: Is like broken up, the sopranos will be interrupted by commercials.
• 14:59
  Speaker 9: Ah yeah, okay, they do license it out that way,
• 15:04
  Speaker 9: So I think again, I'm not really sure what exactly
• 15:09
  Speaker 9: the Warner Brothers team is going to do. I think
• 15:11
  Speaker 9: at this point Scarlator, it might be a little bit immaterial.
• 15:13
  Speaker 9: I think the big focus right now is what Paramount
• 15:17
  Speaker 9: is going to do with this asset, because they are
• 15:19
  Speaker 9: pretty much on the verge of closing the deals supposed
• 15:22
  Speaker 9: to happen sometime in third quarter, and we're still unclear
• 15:25
  Speaker 9: whether they're going to operate this as two separate platforms,
• 15:28
  Speaker 9: Paramount plus an HBO Max, or whether they're kind of
• 15:31
  Speaker 9: going to consolidate it. What they're going to name the
• 15:33
  Speaker 9: new product. All of that is still kind of a
• 15:35
  Speaker 9: little bit unclear. But the one thing that we are
• 15:38
  Speaker 9: clear about is Paramount is acquiring a very strong asset,
• 15:41
  Speaker 9: and an asset that has really delivered a whole string
• 15:44
  Speaker 9: of hits this year for HBO Max. And remember the
• 15:47
  Speaker 9: big thing coming a little bit later this year for
• 15:49
  Speaker 9: HBO Max is the new Harry Potter series. So a
• 15:51
  Speaker 9: lot of excitement, a lot of buzz around that.
• 15:54
  Speaker 2: I never understood why they use the word Max in
• 15:57
  Speaker 2: the app name, like it just goes It's.
• 15:59
  Speaker 3: HBO was deemed by some people on the right as
• 16:04
  Speaker 3: being too woke and to hollywood ish.
• 16:07
  Speaker 2: So Max brought it back to earth.
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  Speaker 7: Yes that was the reason.
• 16:10
  Speaker 2: Okay, but then it just confused everyone exactly.
• 16:12
  Speaker 7: It was a terrible decision.
• 16:14
  Speaker 2: And HBO, the branding on its own is so powerful
• 16:17
  Speaker 2: in terms of content spend, Gita, is that something that
• 16:20
  Speaker 2: Paramount is going to stick to. I mean, HBO is
• 16:22
  Speaker 2: known for being willing to spend on content. Is David
• 16:26
  Speaker 2: Ellison willing to spend in the same way.
• 16:29
  Speaker 9: He is absolutely willing to spend. So they have outlined
• 16:32
  Speaker 9: six billion dollars in synergies Scarlett, but none of those
• 16:36
  Speaker 9: cuts are going to come on the content spend side.
• 16:38
  Speaker 9: So we're looking at a combined programming budget for both
• 16:41
  Speaker 9: those companies at about thirty thirty two billion dollars. That
• 16:44
  Speaker 9: is the highest in the industry. And remember, Paramount, even
• 16:48
  Speaker 9: before they went and acquired Warner Brothers, really did a
• 16:50
  Speaker 9: whole host of different content deals. We had that really
• 16:53
  Speaker 9: important deal with Duffer Brothers. We had the south Park
• 16:56
  Speaker 9: streaming rights deal where they're paying something like one point
• 16:59
  Speaker 9: five billion dollars. We had the UFC deal, which was
• 17:02
  Speaker 9: you know, close to almost eight billion dollars over a
• 17:05
  Speaker 9: period of seven years. So David Ellison is not holding back.
• 17:08
  Speaker 9: He's made this commitment to have thirty film releases. That's
• 17:11
  Speaker 9: basically doubling the output at both the studios starting next year.
• 17:16
  Speaker 9: He's saying all the right things and doing all the
• 17:18
  Speaker 9: right things as far as Hollywood is concerned right now.
• 17:20
  Speaker 9: From a content investment perspective, KEITHA.
• 17:23
  Speaker 3: Karen from The Jersey Shore writes in asked about Peloton,
• 17:26
  Speaker 3: I know they released some earnings. We got the peloton,
• 17:29
  Speaker 3: we got the bike, we got the tread, we got
• 17:31
  Speaker 3: also what's going on there?
• 17:34
  Speaker 9: So this is a story where you know, we've seen
• 17:37
  Speaker 9: consistent progress in terms of praftability metrics. So again, we
• 17:40
  Speaker 9: had a quarter where they really reported strong numbers when
• 17:43
  Speaker 9: it came to EBITDAU. When it came to free cash flow,
• 17:46
  Speaker 9: they raised their free cash flow targets pretty significantly. I
• 17:48
  Speaker 9: mean this was a company that just a few years
• 17:50
  Speaker 9: ago was burning a lot of cash. So they've definitely
• 17:53
  Speaker 9: definitely right sized their cost bace, lots of cost savings initiatives.
• 17:58
  Speaker 9: All of that is going well. But really, the the
• 18:01
  Speaker 9: ultimate story I think for Peloton is are they going
• 18:05
  Speaker 9: to be able to turn around the demand story? And
• 18:08
  Speaker 9: that is where we really have a tough time kind
• 18:11
  Speaker 9: of getting behind this name, because you know, the consumer
• 18:16
  Speaker 9: demand for connected fitness just doesn't seem to be there.
• 18:19
  Speaker 9: I mean in terms of existing subscribers, yes, they're hanging
• 18:23
  Speaker 9: on to them, but in terms of attracting new subscribers,
• 18:26
  Speaker 9: we're really not seeing much traction there at all.
• 18:29
  Speaker 2: Yeah, it's not a growth story. Is Peloton a content
• 18:32
  Speaker 2: company or a hardware company? Very quickly it.
• 18:37
  Speaker 9: Is actually a mix of both. So they're trying to
• 18:39
  Speaker 9: really kind of shift the narrative from being a hardware
• 18:42
  Speaker 9: company to a subscription based company, and I think they've
• 18:44
  Speaker 9: they've done that, done a pretty successful job. But again
• 18:46
  Speaker 9: it's coming down to growth in subscribers and they really
• 18:50
  Speaker 9: aren't getting much progress there.
• 18:53
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 18:59
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• 19:03
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• 19:06
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• 19:09
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• 19:14
  Speaker 3: Let's get back to the earnings land right now. Sabani
• 19:19
  Speaker 3: Joints to share Bloomberg Intelligence senior semiconductor analysts. We had
• 19:22
  Speaker 3: arm holdings. They reported I guess some weakness in their
• 19:26
  Speaker 3: phone business, but they do have some AI tailwinds as well.
• 19:30
  Speaker 3: Stock trading off here today on the news, let's go
• 19:32
  Speaker 3: to Sabani Kunjan talk to us about arm holdings.
• 19:35
  Speaker 4: What did you hear today?
• 19:37
  Speaker 10: Yeah, this was a roller coaster of a stock, right,
• 19:40
  Speaker 10: So if you look at the reaction post market, the
• 19:43
  Speaker 10: stock was up at one point eight to nine percent
• 19:45
  Speaker 10: and is now dined down equally the same amount. What
• 19:49
  Speaker 10: people initially really liked. Just for context, just six weeks ago,
• 19:53
  Speaker 10: this is an IVY company, does not sell chips until recently,
• 19:56
  Speaker 10: just six weeks ago, they had their coming out party
• 19:59
  Speaker 10: that they are going to enter the chip selling business
• 20:02
  Speaker 10: and they guided revenue for their AI server CPU chip
• 20:07
  Speaker 10: to one billion of revenue in their fiscal twenty eight,
• 20:10
  Speaker 10: which is really proxy for fiscal twenty.
• 20:12
  Speaker 8: Seven so next year.
• 20:14
  Speaker 10: Just within six weeks yesterday, they came in and said
• 20:17
  Speaker 10: the demand was now two billion. So investors really loved that.
• 20:21
  Speaker 10: I mean, in a matter of six weeks double your
• 20:23
  Speaker 10: demand for one year out is amazing as a brand
• 20:27
  Speaker 10: new chip selling company. I think what they didn't like
• 20:29
  Speaker 10: is towards the end of the call, the management said
• 20:32
  Speaker 10: we are still going to keep the same outlook of
• 20:34
  Speaker 10: one billion because we don't know if we will have
• 20:36
  Speaker 10: supply to meet that. So that was sort of a
• 20:39
  Speaker 10: really getting excited and let down moment. Other than that,
• 20:42
  Speaker 10: in terms of their numbers, they reported there was nothing
• 20:45
  Speaker 10: really to scream about. You know, everyone is aware handsets
• 20:48
  Speaker 10: are having weakness. They are almost immune to that because
• 20:52
  Speaker 10: of their content in a richer handset mix, and they
• 20:55
  Speaker 10: get the newer generation of IP gets them a lot
• 20:58
  Speaker 10: more dollar per chip, so their business is still likely
• 21:02
  Speaker 10: to grow through the year, while other headset makers are
• 21:04
  Speaker 10: going to see that headphines.
• 21:06
  Speaker 2: So Armholdings is run by Renee has And what's interesting
• 21:10
  Speaker 2: here Kanjohn is that he's got a side hustle. I
• 21:14
  Speaker 2: think he also has a role leading SoftBank Group International.
• 21:19
  Speaker 2: How does that work? How does he do both jobs?
• 21:22
  Speaker 10: Yeah, so he has been the CEO for ARM for
• 21:25
  Speaker 10: many years. The new role that you're referring to is
• 21:28
  Speaker 10: sort of a new incident. Look, this is that soft
• 21:31
  Speaker 10: Bank just just tells you the amount of trust and
• 21:34
  Speaker 10: the reliant soft Bank has on ARM. Now they have
• 21:38
  Speaker 10: been their initial investors, they have been all SoftBank I
• 21:42
  Speaker 10: think is still the largest holder of ARM. And this
• 21:45
  Speaker 10: boards really well for ARMED shareholders. That especially now that
• 21:48
  Speaker 10: it's going into the chip making or the chip selling business.
• 21:53
  Speaker 8: Having that seat running.
• 21:54
  Speaker 10: Sort of the AI semiconductor strategy for saft Bank, which
• 21:58
  Speaker 10: again is a very important semi doctor company. Now when
• 22:01
  Speaker 10: you think about outside the US, that really bodes well
• 22:03
  Speaker 10: for armshareholders.
• 22:06
  Speaker 3: Kunjan, what's the streets consensus or belief here at this
• 22:09
  Speaker 3: early early stage of this entrance into the chip business,
• 22:13
  Speaker 3: because I think there's some established players there. It's kind
• 22:15
  Speaker 3: of a competitive business as I understand.
• 22:17
  Speaker 10: It, it is, But the good thing for them is,
• 22:21
  Speaker 10: you know they are here to coming from a zero
• 22:24
  Speaker 10: share basis, right, So even a few percentage of share
• 22:27
  Speaker 10: pickup on a.
• 22:28
  Speaker 8: Very big and large growing market.
• 22:30
  Speaker 10: Remember, even the X eighty six guys who are the
• 22:33
  Speaker 10: incumbents the Intel and AMD have doubled their TAM in
• 22:36
  Speaker 10: less than six months, So the pile is like growing
• 22:39
  Speaker 10: two x in a very short amount of time. So
• 22:41
  Speaker 10: even if ARM grabs a few single percentage points of
• 22:45
  Speaker 10: share here, this is billions of dollars of new revenue
• 22:47
  Speaker 10: for them which didn't have, So we see it as
• 22:50
  Speaker 10: quite positive for them.
• 22:51
  Speaker 8: Despite the rising competition.
• 22:53
  Speaker 2: Memory chip makers have been super in demand. Their share
• 22:57
  Speaker 2: prices reflect the of memory chips, you know, the most
• 23:02
  Speaker 2: basic memory chips, because all of them are moving towards
• 23:05
  Speaker 2: high bandwith memory chips. What does that transition in the
• 23:09
  Speaker 2: memory chip industry mean for a company like ARM.
• 23:13
  Speaker 8: Well, they are seeing that pin point. Right.
• 23:15
  Speaker 10: The first end market that is being squeezed because of
• 23:18
  Speaker 10: this is the smartphones, right and again today's still smartphone
• 23:21
  Speaker 10: is their biggest royalty business.
• 23:23
  Speaker 8: So they are seeing that impact.
• 23:26
  Speaker 10: Like I said, fortunately for them, the stage they are
• 23:28
  Speaker 10: in the royalty they're getting pert chip is sort of
• 23:32
  Speaker 10: keeping that impact softened. But they are definitely seeing that impact.
• 23:36
  Speaker 10: The next market that could see a squeeze here could
• 23:38
  Speaker 10: be PC markets, right, So the top market, which is
• 23:41
  Speaker 10: the data center market, is of course going to get
• 23:43
  Speaker 10: all the priority. ARM is pivotting to increase a lot
• 23:46
  Speaker 10: more revenues coming from data center market, whether it's on
• 23:49
  Speaker 10: the IP side, whether it's on the chip side. So
• 23:51
  Speaker 10: we don't see other than smartphone headwinds, we don't see
• 23:55
  Speaker 10: a lot of impact to other markets for ARM and
• 23:58
  Speaker 10: this chip.
• 23:58
  Speaker 3: Just broadly speaking, Kujohn talk to us about this memory
• 24:02
  Speaker 3: chip shortage. What's the status I mean? And is this
• 24:06
  Speaker 3: just a function of time the chip makers make more chips, yes.
• 24:12
  Speaker 8: And no, it's a combination of both.
• 24:14
  Speaker 10: So if you think about memory right typically it's been
• 24:17
  Speaker 10: the most one of the most cyclical in the semiconductor
• 24:21
  Speaker 10: It's similar to a lot more of a big manufacturing business,
• 24:24
  Speaker 10: right where the memory makers don't usually go ahead and
• 24:28
  Speaker 10: install more capacity because of the risk of losses when
• 24:31
  Speaker 10: the cycles you turn.
• 24:32
  Speaker 8: Where we have come to this inflection because of.
• 24:34
  Speaker 10: AI is just the memory demand has superseded any prior expectations.
• 24:39
  Speaker 10: So we don't see this really going away anytime soon.
• 24:42
  Speaker 10: It's not very easy. Yes, the memory makers are installing
• 24:45
  Speaker 10: new capacity and working every day to get more capacity up,
• 24:49
  Speaker 10: but it takes time and we don't think.
• 24:51
  Speaker 8: This is just going to turn around anytime soon.
• 24:55
  Speaker 2: I look at the Philadelphia Semiconductor Index and the move
• 24:58
  Speaker 2: has been incredible. I mean since March thirtieth, it's been
• 25:02
  Speaker 2: a straight line up and I know it's off about
• 25:04
  Speaker 2: one percent today, but it's pretty much sitting at record highs.
• 25:07
  Speaker 2: What's the next catalyst, Conjohn to keep this thing going?
• 25:12
  Speaker 10: It's I mean, look, the demand numbers have been continued
• 25:15
  Speaker 10: to increase for the last four quarters. And what we saw,
• 25:19
  Speaker 10: especially after the war started in the Middle East that
• 25:22
  Speaker 10: socks was not doing much despite the numbers were kept
• 25:26
  Speaker 10: on going up and up. So we now are seeing
• 25:28
  Speaker 10: a little bit of a phenomenon where the risk on
• 25:31
  Speaker 10: trade is come back and investors are now reacting to
• 25:34
  Speaker 10: all of those numbers uplift. I think catalysts growing up
• 25:38
  Speaker 10: from here are going to be much harder. I mean,
• 25:40
  Speaker 10: it could surprise us like the CBU makers did surprises
• 25:43
  Speaker 10: this earning season, but again, you know, most of the
• 25:46
  Speaker 10: numbers continue to stay high, we lose things, they will
• 25:49
  Speaker 10: continue to go up in terms of fundamentals and expectations,
• 25:52
  Speaker 10: but right now I think the big catalysts.
• 25:54
  Speaker 8: Are going to be clarity on the twenty twenty eight numbers.
• 25:58
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