Alphabet Disappoints, Microsoft's Cloud Sales Grow: Earnings Live from Schwab IMPACT

Bloomberg Audio Studios.

Podcasts.

Radio.

News.

This is Bloomberg Businessweek Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast. With Carol Masser and Tim Stenebeck.

We got to talk about Microsoft because the earnings coming out, stocks up about 2.5% here in the aftermarket.

First quarter adjusted earnings per share coming in above estimates of $ 4.

89.

First quarter revenue coming in above estimates at $ 92.

28 billion.

First quarter Azure revenue, excluding FX, up 48%. That beats estimates of 44.8%. First quarter revenue coming in at $ 92. 28 billion, as I mentioned. Another redhead crossing the Bloomberg Terminal. We're also seeing first quarter earnings per share, first quarter revenue, cloud revenue, rather.

Coming in above estimates at $ 63. 9 billion today.

At this point, Carol, it's looking like a beat across the board, except for when it comes to CapEx, which came in lower.

But I will go ahead and call that a beat.

All right.

I'm going to go to Alphabet because it's also crossing. Third quarter, Google search and other revenue. That is coming in a little light. $ 63.

35 billion. The street estimate was $ 64. 85 billion. Google services revenue. That came in light.

$ 96.

3 versus $ 98. 4, the estimate on the street. Third quarter cap X, $ 51. 36 billion. That's below the street estimate of $ 55. 78 billion. I'm taking a look at Google shares. Yeah, they are falling in the aftermarket. I don't know if you pulled it up here, but it just looks like it's taking quite a dive here.

Down about 6% in the after hours.

Yeah, so we are actually seeing some disappointment in terms of some of the numbers. Third quarter revenue, XTAC, an important number here, $ 111.

21 billion. Slightly light.

The street looking for $ 111. 29 billion. Third quarter Google Cloud revenue. That came in better, slightly. $ 30. 71 billion versus an estimate of $ 29.

1 billion. Stock is down.

What is it?

7%.

It's continuing a straight line lower right now.

So down as much as 7.2%. Yeah, go ahead. There's some really interesting stats in here.

Here's a number.

Gemini app has reached 1 billion users.

Yeah. Also, did you see the tokens number here?

What's the token?

This is pretty wild.

Alphabet is now talking about processing about 32 billion tokens per minute. That's the model APIs, Alphabet says. Alphabet also surpassing 150 million YouTube music and premium subs. And, Carol, that now turning into a redhead. Gemini app has reached 1 billion users. Third quarter cloud revenue coming in just above estimates.

At $ 30. 71 billion. It looks like shares down now 7.6% in the after hours.

Investors definitely not impressed with it. Let's get to our dynamic duo who are following these results. We have with us Bloomberg Intelligence Senior Tech Analyst Anurag Rana, also the host of Bloomberg Tech on Bloomberg TV, Ed Ludlow.

Anurag, I want to start with you. Go where you want because.

We are seeing disappointment in Alphabet's results. Microsoft, though, investors seem pretty impressed.

I think the cloud business for both of them really well. So it has to be something of non-cloud related stuff on Google. But when you look at Microsoft, the revenue was pretty impressive, frankly, on the cloud side. Even the M365 revenue was really good. And on top of that, CapEx is lower. So there's not much not to like in Microsoft results. I think people are going to like what they see on the call as well.

I want to bring in Ed Ludlow, the co-host of Bloomberg Tech out there in San Francisco. Ed, what's sticking out to you for Alphabet? Shares now down about 7% in the after hours.

Yeah, I mean, the Google Cloud upside is pretty astonishing. And actually, a lot of people on the street, like the whisper number was for growth that would exceed 100% year on year. The miss is in search, right? So search came in at 63.35 billion. Consensus was 64.85 billion. That's basically a $ 1. 5 billion miss. But search continues to be, whatever the AI story becomes for Google, the main profit engine.

And that's important enough to take into account, you know, management's talking the release about, um, search query growth accelerating, but the numbers don't, you know, don't add up on that search business to that extent. Um, by the way, just real, real quick, like on the billion Gemini users thing, they said that in August.

So I don't know, whatever. Um, and so why, what is this about that ad?

Well, no, because like at the last earnings, it was 950 million up from 900 million, which was a year earlier. Then in August, they said a billion. So like the number is not new. I'm just saying like, you know, the analysts are going to have to model for like what growth in actual Gemini uses if they're going to give a user number. And on the 32 billion tokens per minute, I find that really interesting because that's up from I think 22 billion tokens per minute. in the last quarter, I think. So it represents growth, but like, you know, in the world of AI, you're either somebody that tracks token usage or you're not, as opposed to revenue or like commercial market share, and that seems like an important metric.

All right, so Alphabet sinking still in the aftermarket, down about 7.5%. I want to go back to Microsoft because it's actually up about 4.4%. Anurag Rana of our Bloomberg Intelligence team, that's your world. As you continue to look at the results, what else do we need to know about Microsoft? And what is kind of top of mind as you think about the call coming up with analysts?

So when we get on the call, we want to know two things. One, what's going to be the CapEx for the next 12 months? And also, by how much or if they are going to raise CapEx for 2027? So I doubt they're going to give that number, but we were looking for hints for that. Second is, you know, what is the addition of backlog from non-frontier customers? That's becoming an important metric for us to follow because we want to see how much enterprises are spending for backlog or for cloud contracts that are not.

Just coming from OpenAI or Anthropic. So that's a big number for us as well.

And that's what, I mean, Anurag, I mean, Microsoft's working with both of them now, correct?

I mean, they're doing a lot with both companies.

Yeah, but more so with OpenAI than Anthropic. So, Anurag, go ahead, Tim.

Oh, sorry, no, I interrupted you. We have a little bit of a delay, so apologies for everybody. But please, talk a little bit more about Anthropic. at Microsoft versus what they're doing with OpenAI, which they have a very significant history with.

Yeah, so much larger relationship with OpenAI.

And the number one thing over there is, you know, backlog in terms of hosting the ChatGPT app, because that is really the most important part of it. And we think that's a much more stickier business than doing training for one of these model companies, because, you know, frankly speaking, they can decide to reduce their training expenditures over the next few years, but we don't think the use of ChatGPT goes down over the next few years. So we think of that as a much more stable revenue stream for Microsoft. In the case of Anthropic, I think what Microsoft is doing is extremely helpful to customers that in their, you know, co-pilot, let's say GitHub co-pilot coding agent, they're giving them the options of not just using the OpenAI model,

but also cloud. And I think that's important. Down the road, we think that's going to be the case for a lot of their applications. In fact, we think the M365 applications that they have It's going to run not just on Anthropic and OpenAI, but other third-party models as well. And if that happens, there's a high likelihood of it.

Microsoft still remains really critical in this ecosystem because they still have distribution of those models.

So Anurag, there's shares of Microsoft up more than 4% in the after hours. You've got to run in a second. Before you run, we can't look at these earnings in a vacuum. And not talk about what happened earlier this week with the news that Microsoft is offering buyouts to 60,000 employees. Just your take on that in the context of the numbers that we got today.

Yeah, see, one of the things I would say is, you know, when Brody did that wonderful piece, there's another thing he wrote. Then the last time they offered that to 8,750.

People, the take rate of that was 30%. And Microsoft is expecting.

A lower take rate of that offer of that 60,000 people. So if you were to assume, let's say, even 25% of that people take it, that's about 15,000 jobs. And on a base of 223,000 people, that's about, you know, 7% or 6.7%. So to be honest, yes, I know the 60,000 looks a lot, but if you were to peel it really in detail, it's about 7.5% of the total workforce.

All right.

We're going to leave it on that.

We know, Anurag, you've got to run. Bloomberg Intelligence Senior Tech Analyst Anurag Rana joining us with analysis on Microsoft. Our Ed Ludlow, host of Bloomberg Tech on Bloomberg TV, is still with us.

I know, Ed, you've been listening.

We're watching Microsoft continuing to gain here in the aftermarket. We are still continuing to see pressure on Alphabet. Where should we go in your view as you continue to go through these reports?

Well, reading through what is a very dense text, there's a few answers to the things that Anurag was really interested in on Microsoft. So really quick, a backlog for Microsoft is recorded as remaining performance obligation, corporate remaining performance obligation. And overall, that number hits $ 677 billion, which is a backlog, right?

But to answer his point specifically, Microsoft's also said if you excluded open AI from that, that RPO number is growing at a rate of 25%, excluding OpenAI. And then for what it's worth, remember that Microsoft is a big investor in OpenAI, and so in this quarter, as a contribution to net income, there was a $ 207 million net gain, which translates to a three cents a share boost to Microsoft from OpenAI. And on any given quarter, that changes.

But those two things are interesting. They jumped out at me.

Hey, Ed, I want to go from Microsoft, which is up 4% in the after hours, to Alphabet, which fell as much as 7.9% in the after hours. Julia Love and Dave Alba with a write-through from the Bloomberg News team. Writing that the quarterly sales and profit for the company fell short of expectations, a sign that the company is failing to generate enough return to justify its massive investments in AI. Your quick take on the top-line miss and the bottom-line miss. Was the top-line miss an indication to you that search... is being cannibalized a little bit by these LLMs finally.

Yeah, I mean, the data doesn't answer your question. So like Google search is really mixed. Overall search revenue missed by about $ 1. 5 billion, which is a significant miss, right, in this environment against Wall Street consensus, but informed by what they were talking about last quarter. But, you know, Google says very explicitly that AI is driving growth in search queries, right? So the use, like, people going to search is getting a benefit from AI. But in terms of revenue, like, the monetizable amount, you know, it's not in line with expectations. It's growing 12%. You know, it's hard.

I don't know the answer.

Sorry.

So where's the disconnect? But, Ed, this is the golden goose. This is what Larry and Sergey invented, you know, decades ago. A better way to give us information... and then sell it next to companies that want to reach you. And I would argue that out of Silicon Valley, the only company that's perhaps done a better job doing that is Mark Zuckerberg's company. But for search, Alphabet owns it. This is their business. And the concern a year ago or 18 months ago was that the LLMs would eat into that.

And we got over the last few quarters an indication that that wasn't happening. Everyone was like, oh, don't freak out. We're going to be fine. does it seem like it's going to be fine? Because if people are still getting the answer they want, but Alphabet's not monetizing it the way that they're.

Used to, then that could be an issue.

So search is still the golden goose, and from a scale perspective, like in the quarter, it's more than half of revenue. So the AI question matters. is the action that this company's taken, which is putting AI overviews or AI mode in search, they're saying that it is increased use of search. But are they able to increase usage without damaging monetization? We don't have a conclusive answer based on the fact that search revenue.

Is overall missed.

But you'd bet, wouldn't you, that the analysts will ask exactly that question on the call. Okay, Google or Alphabet Management searches up But the financials of this are changing. Explain that to us.

Right.

And it goes to that bigger question, right? We still think about this company as a search engine company. And how is AI changing it? Is it giving it increased ROI to some extent, right, on its main business? Like whether or not they're seeing the payoff from all this investment. It kind of is as simple as that.

Yeah, I would say search grew 12%, but search revenues did not grow 12%. What's up with that?

Pretty simple.

I would also say, there's another part of the business, which is advertising, right? And advertising also missed by well above $ 1. 5 billion as well. So something's going on there in the advertising broadly.

Yeah, sorry. Yeah.

Those two businesses inextricably linked. I mean, I think the challenge here is like, to me, this seems existential. I mean, where was a business we cover about this a year ago? And Julia Love worked on this story. And it was all about how Alphabet was trying to adapt Google and search for the next generation. We spoke to a small business owner last week who has had to completely change her business. And it's getting killed as a result of the changes that Google has made. She's now trying to optimize for the LLMs. Christina Stembel of Farm Girl Flowers.

That's right, because there's search queries.

Because the search queries are not leading to her business. So I'm just wondering if there's a link there, Carol.

Yeah, I think it's a good question. Investors are certainly weighing in. We continue to see Alphabet down more than 7.5%. Just to recap, we're talking with our Ed Ludlow, host of Bloomberg Tech, as he continues to pour over the results. alphabet the headline reporting quarterly sales and profit that fell short of expectations a sign that the company is failing to generate enough return to justify its massive investments in ai i mean still a lot 111.2 billion uh were sales ex-partner payouts for the three months ending september 30th but it was still below or just below the 111.3 billion that alice had projected um.

It's costing a lot.

Again, the narrative that has changed in the last three years about where's the payoff on all of this. And let's just remind everybody on Microsoft, continuing to watch that one as well, it's up about 4.3%.

Microsoft reported better.

Than expected cloud revenue, suggesting the company continues to reap the benefits of its massive investment in AI.

What's the difference?

None of these companies are exactly the same here, Ed. I mean, but we tend to kind of put them all in the same bucket, these hyperscalers, but they all have different core businesses.

Okay, free cash flow. I mean, going into these earnings print, that is the comparison that you make. So in the quarter, Alphabet had negative free cash flow of $ 9. 1 billion, which actually shows worsening free cash flow from last quarter, where it was just under $ 6 billion. Compare and contrast, kind of fun. Microsoft had free cash flow of almost $ 19 billion.

And if you just take those hyperscaler names, or the Mag7, and you look at the stock, their performance since last quarter's earnings, or year to date, the best performers are those throwing off cash.

Nvidia, Apple.

The worst performers in the stock market are those with negative free cash flow. And so you can't take the search myths in isolation with Alphabet. You have to look at all of it. And so the cloud growth is amazing, astonishing. The spending we know about, but now Wall Street has this high bar where it's looking at the negative free cash flows and that also is a factor in this reaction.

Microsoft has good free cash flow.

I'm going to give you props.

You said it on surveillance this morning with Tom and Paul, just saying that Wall Street is increasingly, they care about free cash flow, right? These publicly held entities, you're spending a lot of money People are looking. And investors can be fickle for each specific story, but they're increasingly, they care about this stuff, and we're seeing it play out.

Hey, Ed, I want to talk a little about the other business over at Alphabet. And forgive us for sticking on Alphabet, but this is the one that really has my attention.

Are you talking about YouTube?

No, I'm talking about the CapEx coming in below estimates at $ 51.

36 billion.

And Ed already mentioned the growth of cloud. Google Cloud Revenue grew 103% in a different world, Ed. And by a different world, I mean a different quarter. Those two things that I just read would be greeted by investors sending shares the other way.

Okay, but this is what I mean by you can't take any of these data points in isolation. So CapEx in the quarter was actually slightly below expectations. I think it was like 51.4 billion, right? But if you just take where they are nine months into the year, Alphabet spent about $ 132 billion. They guided that for this year, CapEx will be in the range $ 195 to $ 205 billion.

That's a lot. You know, a year ago in any given quarter, Alphabet was spending like 20, 25 billion. Now, you know, now that obviously is tracking way ahead of that. So the cloud growth is there and growth in the operating income from it as well. But again, balance it against the spending commitment and how deeply that is putting them into free, negative free cash flow, irrespective of their operating cash flow. And I'm not an accountant or a forensic guy by any means, but yeah, I think that's what the math people are doing.

Stay with us.

More from Bloomberg Businessweek Daily coming up after this.

Welcome to Bloomberg Businessweek Daily. Carol Master, Tim Stenevek. We are not in New York City.

No, but we are in Boston, Massachusetts. It is Schwab Impact 2026. We've been coming to this event for years. We were in Philadelphia. We were in San Francisco. We were in Denver.

We were.

And now we are in Boston in 2026. We are.

It is the 36th Impact Gathering. It's all about the RIA, Registered Investment Advisors, the community, the support for that community. And I have to say, I was thinking about last year, we were talking about different things.

There is a lot to get and catch up with from the Schwab team.

I feel like whether it's AI, whether it's geopolitical concerns, we've got elections just around the corner.

So there's a lot to get to.

Yeah.

The three days at this event, it's just packed with activities and with events.

More than 6,000 people here. We're going to be covering it all.

And a big part of that backdrop, Carol, is not just what we heard from the Fed chairman in the inflationary environment, but also what he said about technology, especially when it comes to AI and that being a layer of technology.

In the economy.

Pulling it all in.

It was the seventh FOMC meeting of the year, and that's what's really fascinating. The fourth for the new Fed chair, relatively still new, Kevin Warsh. And what's interesting, and I think what caught everybody's attention is, yes, the Fed left interest rates unchanged. They reiterated their commitment to containing inflation.

That is still a problem. But without offering a clear signal that they might raise rates at their next meeting in December, that will be their last meeting of 2026. Two dissents, muted market reaction initially, I got to say, what caught everyone's attention, it caught us, it was a red headline on the Bloomberg, Fed Chair Kevin Warsh on the actual meetings themselves.

We've decided on a change in our FOMC schedule starting next fall. We believe eight meetings per year is the right number for the FOMC. But in 2027, one meeting will focus exclusively on broad monetary policy strategy. With neither a vote on the federal funds rate nor a policy statement anticipated. The rest will be regular FOMC policy setting meetings.

And I expect that in 2028, we'll have two meetings dedicated to discussions of strategy and six for setting policy. All right.

That, of course, Fed Chair Kevin Warsh at today's press conference. On to the next decision, which is December 9th. But I got to say, it's a new era.

It's a new era.

And I think That not entirely coming as a surprise, given what the Fed chair has said over the last few months about the ways that he thought the Fed has been over-communicating.

I'm not shocked. I'm actually shocked that it's not more than one fewer meeting.

It was a shorter press conference today. One question only.

So people who usually are called on were not called on.

Yeah. We are definitely living in a different environment, which is why we want to get going with the conversations here at Schwab Impact 2026. And it's great to be kicking off our coverage. with someone we talked to just about a year ago, Omar Aguilar. He's CEO and CIO of Schwab Asset Management. It is good to be kicking off with you. First of all, I guess I have to start with the Fed decision. How important was it that, you know, we're not getting a lot of clarity about what comes next. We might have fewer meetings where there's actually interest rate decisions or decisions.

That come out. How are you thinking about this new Fed in today's environment?

Yes.

Well, first of all, welcome again to Impact. It's always great to have you guys. And the energy around here, it could not be the same without you guys.

It's great.

Thank you.

Well, the decision was not a surprise. I think what we looked at was there's two dissents. That obviously provides a little bit of insight of what's going on in the discussions there. And then the idea that they're going to be committed to look at inflation and It only tells us they're looking at a lot of data. And what that, for us, means, yes, they will likely make a decision in December to rate hikes. It will be very hard unless they see a dramatic change in inflation data from now until then that they will not make a move in December. The communication process is definitely different.

I think it is clearly something that... The chairman has made a conscious decision to keep this a little more vague and then let everybody else try to interpret what they're trying to do. I think in the spirit of what the Fed is trying to do philosophically, I think if we believe that we'll continue to look at data as being the main driver for the decision process, that really doesn't change other than the communication process. But if we believe that the mandate is still the same and we believe that they're still going to continue to track them, Then I think the process, and you can see the market reaction on the futures clearly spiked up by saying December is probably a done deal.

We'll get to December now, and then I want to talk more about communication. Why wait until December? Why not raise rates at this meeting?

If inflation is a problem, right? Why not do it?

Yeah, and I think that's a good question. I think if you look at the data that we got on CPI and PPI, and you look at how... A lot of the current inflation is really driven by energy. And a lot of the other components that go into the inflation, whether it's wage growth, whether it's supply chains, whether it's all those, they just started to just play a role.

I think the decision to just wait for a couple more months, it's probably not as a bad decision, given that it's not very clear to me how much is just oil prices being too high. other than there is really a sustainable thing that is going to be hard to break. Now, again, in the past, depending on the Fed, they have been preemptive trying to just not get out of hand. This Fed seems to be a little more patient, which, again, it's a double-edged sword. It could actually mean that if they could be late, that that's always a problem. But also at the same time, it could be that they are not overreacting to just one particular set of points.

You know, I always think about when we get to catch up with somebody, and if there's a year or 12 months, A lot has happened. In particular, we've got wars, but we're also, I think, increasingly questioning the AI spend and the impact. What's the smart narrative for you, investment thesis-wise, about AI?

Which is a big topic here. It is a big topic.

I walk around and a lot of RIAs keep on asking about what is our view on AI and the future of it.

Well, I think we got.

To a point now where we are seeing deceleration of capital expenditure.

So what that is.

What that means is we saw a significant boom of CapEx that got us to.

Where we are today.

And a lot of that has come primarily from these hyperscalers. Now, the ability to hyperscalers to basically provide that boost into CapEx for AI has actually been the driver of a lot of performance on those stocks that are driven on AI, mostly semiconductors and the areas around it. Now, when you see that deceleration, that doesn't necessarily mean they're going to stop their capital expenditures, but that actually means they're going to be more selective of where they go in terms of AI.

So smart.

Smart is probably a good word to say.

On the other hand, when you look at the other part of it, which is the adoption of AI, which is, in my mind, probably the phase that has been less talked about, is, you know, how many of the rest of the industries are starting to adopt and invest into that?

And to me, you know, the biggest, you.

Know, challenge that we face is that a lot of the rest of the industries that are starting adopting AI, they're using the dead market to try to use CapEx. And that's a little more dangerous.

You know, it's different.

It's not just companies that are, you know. Not the hyperscalers.

Correct.

You have hyperscalers that are doing this now that, in a million years, you wouldn't have thought this would be a company that would have negative cash flow.

Right.

Exactly. And I think that's the key piece.

Again, if you have somebody that has significant strength in the balance sheet and they borrow, you would think that they're doing a good thing, right? In a certain way, they're using their capital inefficiently. But you have a company that doesn't necessarily have that cash flow or doesn't have that strength in the balance sheet, and they're using the debt market to invest in AI and That's where we're starting to see challenges in the credit market. And I think that's, to me, going into next year, the biggest part of what we have.

To look at.

Challenge or actual bubble? And we're going to see some implications of a bubble bursting.

And we may see some cracks in the credit market as we go there. We believe that that's obviously also a pretty normal part of a cycle where we need to see some credit events for us to start realizing that that cycle starts to go differently.

With a spending boom like this, does there have to be a bust?

It doesn't have to, but there will be volatility, and there will be winners and losers. There will be that kind of dispersion that will exist.

What do you think is the biggest risk right now?

And looking at the notes that you shared, your team shared with us, midterms, U.S. war with Iran, higher energy prices, still persistent inflation, AI meeting that higher rate environment that we've just been talking about, CapEx spending coming down, earnings expectations, and the.

Comparisons, that's getting tougher and tougher.

What is the biggest risk, you think, to the investing environment right now?

Well, I think for us, it's basically looking at the profitability of AI investing. And I think that is going to come to a place where you can spend as much as you want, but at the end of the day, there has to be some return on investments that we'll need to show on earnings. Because if you look at it, the earnings growth component that we have seen over the last few years has been in a way.

Fueled by this AI.

But at some point, it just gets to an area that that doesn't exist anymore. And I think to me, once you get to that point, we still believe that earnings expectations are way too high going into next year. So I think that at some point, the potential disappointing on earnings growth is latent.

But don't you think that, and this is the whole argument for productivity, don't you think that the companies that are not necessarily the picks and shovels or the hyperscalers when it comes to this technology are may be in the next couple of years, the biggest beneficiaries on an earnings basis of the technology?

Well, I think the assumption there is that productivity will, you know, get into areas of potentially cost savings. And it's not very clear to me that we have seen any instances or any evidence that that is the case just yet. And I think in certain way, the labor market gives us a lot of information. There is no firing, there is no hiring. And A lot of that is people are expecting that productivity will have some impact in labor market.

It hasn't happened yet. You're not convinced?

No.

We're not convinced yet.

You're not convinced that this will lead to higher productivity?

Doesn't necessarily.

No, no, no, no, no, no. Changes in the labor market or cost savings. You know, I think what may happen is that, you know, the changes in productivity will translate in potential acceleration of other parts of their business.

Okay.

But doesn't necessarily mean that people are going to get fired because, you know, there are productivity gains.

20 seconds. Is it an easier environment this year versus last year?

In terms of investing?

Yeah, for the RIAs that are here.

Oh, this is, well, this.

Is definitely a more challenging market this year, you know, and especially going into next year for the reasons that, you know, you mentioned between geopolitical risk, inflation, higher yields on bonds that we didn't get to talk about. interest rates in a different cycle, earnings expectations that need to come down, deceleration of capex. I can go on and on, but there's a long list of what we call the wall of worries getting taller and taller.

Stay with us.

More from Bloomberg Businessweek Daily coming up after this. We are, of course, at Schwab Impact 2026 here in Boston. And we should point out that last evening they made an announcement. They announced National RIA Day. It's a first annual day celebrating independent registered investment advisors. And that includes the more than 17,000 independent registered investment advisors that.

Work with Schwab.

Working to make sure that those RIAs have exactly what they need is Lisa Salve. She's head of business consulting and education at Schwab. at Schwab Advisor Services.

Good to see you again. How are you? I'm good. How are you? It's great to see you here. It's good to have you here.

And I want to ask about a National RIA Day. Tell me about the culmination, because it's got a great kind of back history, a grassroots history.

Tell us about that. It sure does.

This is an idea that was actually born at Impact about two years ago. We always have students here. We always love to get them with advisors. And one of the professors who chaperones to students, wanted to bring that back to campus. So the first RA day was born. And they had signs. They had advisors on campus. Students were learning more about RA profession. That kind of took off organically. More and more universities started to host them.

And it got us thinking, you know what? We've never had a holiday, a day to celebrate independence. And so we created one. So February 17th, will be our very first national RAA day, but it's going to go beyond universities. We'll have probably about at least 30 universities celebrating, but we're also going to be in DC. We'll ring the closing bell and we really hope to see every single RIA celebrating in their neighborhood and for this to take on so we can have a unified voice to celebrate RIAs.

You know what I think is notable about this is just the idea that in recent years so much has changed about the industry. So the folks who, I don't even want to call them folks, the kids who are in college right now who are interested in this as a career are looking at potentially a completely different landscape and completely different needs from clients and than not even a generation ago, than five years ago.

It's wild, isn't it, Tim?

I mean, the pace of change has never been faster for all of us. And when I look at our benchmarking data, we need 70,000 more people to join the RA industry over the next five years to keep up with the growth we're experiencing right now.

Where's that growth coming from? Who are the people providing that growth?

Just to keep up with the organic growth and the inorganic growth that the RAs are experiencing today.

So it's not just the boom in wealth that's being created in certain parts of this country as a result of the AI boom that is being factored into us.

Well, we'll certainly take all that growth.

This is everywhere.

Yes, yes, yes.

Yes, yes, and yes.

And when I give you that number, 70,000, that's not even taking into account attrition, retirement, or newly formed firms. But it's also not taking into account AI and the implications that's going to have.

Lisa, that's where I want to go because I think there's a lot of the younger generation wondering about how does AI impact our world and job opportunities. So how much of it, when you're out on campuses and talking with students or talking with academia about explaining how AI, what the role will be in what we're surrounded with, what it will be in the management of investment advisory and management of money.

It's It's the conversation everyone's having, right?

All of us.

It's shifting everything. I think everybody's job is going to change a little bit. And we are actively having that conversation with universities. We've been very active in helping to found and grow CFP programs, Certified Financial Planner programs at universities for over a decade. And those universities really want to produce the talent that advisors and companies want to hire.

So we're having that conversation now. We know things are going to shift. Nobody knows exactly how, but we know that the technical skills are being augmented by technology already.

That's what I was wondering.

In terms of what instruction they're doing at schools, that's changing.

It is, but we're also seeing, when I talk to advisors and have that conversation, which I do every week, they're very interested in students focusing on soft skills, too.

And the people skills.

Oh, thank God.

And the skills, I know. You know, it's great to hear that because.

Because you're talking to two liberal arts majors. That's why it's great to hear that.

No, exactly.

And that's, you know, when you look at the types of AI that are starting to come into advisory firms, they're using it in.

administrative operations.

About half of firms are using it in their marketing strategy, but where it's not going to come in as much as in that human relationship, the trust, that's even more value than ever before. And they want, when they hire young people, for them to have the ability to do those things.

You guys did a study, the 2026 Independent Advisory or Advisor Outlook Study, and I was amazed. Advisors placing greater wealth weighed on relationship and emotional intelligence skills when hiring, 33%. Prioritizing judgment and critical thinking, 30%. Looking for candidates who are comfortable and fluent with AI, 26%.

It matters. It certainly matters.

And some of the talent programs that we provide to advisors, leadership, new people leader programs, those are some of our most popular.

So what's your advice to somebody who's either got a student.

Like thinking about Where are careers going?

I have a 23-year-old who's watching a degree in economics and just wondering.

Just got about 30 seconds here.

I would just say to everyone, and every time I'm in front of a crowd, I would always say, set yourself a goal of becoming AI fluent, no matter what your job is. No one can do it for you. You can take instruction. I've taken classes, but nothing can. Replace just rolling up your sleeves and trying to build something go build an app today I promise you you can do it just tell it what you.

Want it to do This is the Bloomberg Businessweek Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

Alphabet Disappoints, Microsoft's Cloud Sales Grow: Earnings Live from Schwab IMPACT

Kapitelklicken springt direkt hin

Shownotes

Transkriptvom Podcast bereitgestellt · Zeitmarken springen hin