SpaceX Beats Estimates, Netflix Forecasts a Slowdown

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.

Welcome in, everyone.

I'm Alexis Christophers, along with Nora Melinda on Bloomberg Businessweek Daily. Carol and Tim have the day off. Netflix out with earnings just seconds ago. It sees fourth quarter revenue of $ 13.

4 billion.

That is less.

Than $ 13. 5 billion Wall Street was expecting. Netflix says engagement is healthy despite 2026 price hikes. And we have got the market reacting swiftly. Shares of Netflix down about 7.5% here, Nora. And I know Netflix isn't the only company out with earnings after the bell.

Not at all.

I mean, we have a lot of companies that we're keeping an eye on after the closing bell. United coming out, SpaceX. If you want to kind of dig into what's going on there, we're keeping an eye on SpaceX. It is higher in the post-market trade by about 1%. We did see third quarter revenue for SpaceX coming in at about $ 14.

58 billion. That all against.

Estimates for $ 12. 87 billion. And, you know, of course, there's so much focus right now on CapEx. Third quarter CapEx coming in at $ 19. 59 billion.

That's against estimates of $ 19. 6 billion.

Okay, I want to dig into Netflix a little bit more now because, again, the stock getting hit here in the after-hours trade after its earnings hit the tape.

Ed Ludlow, Bloomberg Tech host, joining us now. At first blush, doesn't look too good. Ed, what is catching your eye?

Yeah, I mean, Netflix is telling us everything that was either in line with expectations on the top line or it's disappointing on the full year basis. It doesn't really tell the story, right? They're just numbers on the Netflix side. So, you know, it's not a company that gives subscribers anymore. The growth is measured against revenues. And then by extrapolation, how much revenue they might book for one particular viewer of their audience. But if you don't have the latter part, it's hard. But, you know, basically it's a very simple story where numbers are bang in line or slightly below expectations.

And when you're closing out a year and you're telling investors this is the balance of the year, there's no upside, hence the stock down 6%.

Yeah, and I mean, this is a stock that's really been pressured so much this year, Ed, down about 27% on a year-to-date basis and so much concern about whether or not it's going to be able to crank out some quality content. Was the bar high heading into this report? How are you kind of taking away the sentiment, really?

News flow so in the last week alone or if you go back 10 days netflix has announced a round of layoffs of a thousand people the chief content offer is officers gone and the head of the film studio is gone and at the highest level and a sort of breadth of those layoffs um that was a signal to the market that something needed to change so um it is it is a big growth i think that you know There was an admission very recently, you guys will remember at Bloomberg Screen Time from Co-CEO Ted Sarandos, that growth is not where Netflix wants it to be.

But based on the numbers that they just printed for The Court Gone and looking for the balance of 26, the guide that they're giving us, sales growth is going to decline for a fourth straight quarter. So whatever they're doing to change things, it's not happening yet, right? It's not resulted in something yet.

Is that really what we're going to hear from the conference call? The fact that, hey, listen, we just implemented these changes. We just had the most layoffs in our company's history. We're changing people in the big decision-making offices. I mean, like, give it time. Are they going to ask for Wall Street to be patient?

I think they kind of go back to what Netflix always says, which is the content slate. And content slate on a quality basis and content slate on a volume basis. One of the things that they struggle with, I heard that you just brought up The Diplomat, right?

Yeah.

Great show. You know, I'm a fan.

I just finished The Gentleman season two.

Oh, I'm still in love with that.

So The Gentleman season three is shooting right now, right? Now, other than the three of us just chatting about what we like to watch, what's the story for Netflix? Actually, they've struggled to keep the audience across seasons. So you might have a big hit. Season one, great success, right? By their own measurements that they disclose. But then the audience doesn't stick with those season two and season three for whatever reason. And some remedy to that is kind of important. So maybe that's kind of a line of questioning on the content side. And I guess, you know, they'll be asked maybe directly what those changes in key leadership personnel will mean for that content slate.

I mean, I'm looking through some of the numbers here, and I think on every metric they missed the mark, unless you're seeing something different. I mean, in terms of around the world, when you look at the international scope of Netflix, I know they've put a lot more on the platform to try to get the international audience. I know, for instance, me being Greek, I was really excited to see Maestro in Blue come out, because that was the first Greek language series to hit the platform, and I think its next season is going to be coming out soon.

But is there someplace around the world where Netflix is doing better than other places?

Yeah, I mean, just to answer the first part of your question, the only outperformances on third quarter EPS, right, was slightly ahead of expectations by a few cents. And you always take into account that consensus is made up of a range of estimates, some of them very bullish and some of them not so bullish. You know, the way that Netflix would describe it is that Again, they don't break out the kind of subscriber numbers anymore and that they asked Wall Street to judge them on traditional financial metrics. But a unit of revenue in India has a different value to them than a unit of revenue based on a viewer in the United States. And, you know, they've talked about that. They had to have slightly different

business models in each of those regions. The role of the ad-supported tier... in different regions, like lower price points, they all manifest differently if they are to be judged by those financial metrics. And again, this is something that companies are asked for, to be judged by those traditional financial metrics.

Yeah, we know you're all over so many things in this space. I want to pivot over to SpaceX. I know that you're getting these numbers with us in real time, but we did see that third quarter revenue for SpaceX came in at about $ 14. 58 billion, topping expectations of $ 12. 87 billion. We're seeing a bit of a reaction in the stock, up about three-tenths of a.

Percent right now in the post-market.

Talk to us about what you're taking away from what you're seeing thus far.

Yeah, I mean, well, the net income number is a lot higher than we thought. And a lot of people went into this print saying, okay, SpaceX has a very high capital expenditure story. Capital expenditures in the quarter came in at 19.6 billion, which was pretty much in line, 19.59 instead of 19.6. And then you scroll down and you're like, net income, $ 4. 4 billion. The estimate was for 1.8.

This is their first quarter. Again, they only had two quarters as a public company. They're reporting for the second time. But they are reporting profit, basically, on an EPS basis, 35 cents a share ahead of the estimate's 15 cents a share. And a lot of people ask me a really simple question. I'm not an accounting expert, by the way, nor am I an analyst.

I'm a reporter.

But capital expenditures, a big bulk of that gets depreciated over a longer time horizon. And that answers, it's purely accounting, how you could have capex at that level and still see them massively outperform on their income, with revenues also outperforming on the top line against those different segments that they have, AI connectivity and space.

What about Tesla, SpaceX, the merger, if, when? I guess it's not if, right? It really is when at this point. And I'm wondering, I don't see any headlines regarding that. I'd have to imagine Elon Musk will be asked about it during the call.

I mean, they have issued a press release so far, right? And the press release has the numbers in it. What SpaceX does, very similar to what Tesla does, is they offer retail investors the chance to submit questions in advance of the earnings call. And they dedicate a portion of the earnings call to those retail investors. And how it works is it's a forum, and then registered retail investors get to upvote the questions they're most interested in. By the time I ran to set to talk to you guys, when will SpaceX merge with Tesla was question number two by votes. That happened last quarter as well. But IR, investor relations, did not put that question in front of management.

And sell-side analysts who participate in the call, as is traditional, did not ask.

Different to Tesla's.

Last quarterly earnings call, where a brave sell-side analyst just asked Elon outright. And Elon Musk had some prepared remarks about it, saying that the companies work closer together, but that wasn't the appropriate forum to discuss it. So the answer, in short, is we don't know. But I just wanted to lay out the state of play, which is the market thing is going to happen imminently, and it's just whether or not it gets put in front of management as a question today through those two mechanisms.

Yeah, and just kind of building off of that, we know that SpaceX has become the main driver of Elon Musk's wealth since his IPO and now makes up about 3%. More than three quarters of his net worth, actually, according to the Bloomberg Billionaires Index. So really helping make him the world's first trillionaire. How do you think about the focus, the split, really, when you're an investor, maybe in SpaceX or Tesla? How do you think about the split? in Elon Musk's focus between these companies?

So far, it's not been a concern. You know, if you look at the disclosures, risk disclosures in the annual regulatory filings that both companies put out, Elon Musk's centrality is to the future of both SpaceX and Tesla has been sort of codified for quite some time. the question does come up from time to time in sort of more ad hoc settings. But then the other thing to remind yourself of, and this was very evident in last quarter's SpaceX earnings call, its first ever earnings call, is that there are at least two, but many more, very competent executives at SpaceX. Gwynne Shotwell, the president and COO, Brett Johnson, the CFO, they are very hands-on, present. Gwynne Shotwell spent a lot of the time speaking about SpaceX's

ambitions in telecommunications, right? Direct to cell connectivity, something that rocked the carriers. If you remember, she said explicitly, we're going to try and take customers from T-Mobile, Verizon, AT & T, and those stocks fell as a result.

That was during last quarter's call.

And so, you know, Elon Musk lets those operators do their thing. And he is kind of seen as the sort of brain that drives the bigger picture and the vision. But SpaceX AI, as part of SpaceX now, or SpaceX SI as it's now known, is full of very talented people as well, like on the AI engineering level. So I think that kind of answers it, right?

And I'm happy that you brought that up because just talking about the pressures that we did see on the telecom stocks, Verizon, T-Mobile, AT & T, more broadly, What is the expectation for SpaceX and its push into just mobile services? Is this something that is expected that SpaceX should excel at?

Excel in, rather?

Yeah, so the story started with satellite constellations that were for internet, right?

Starlink.

Very simply, you had a ground receiver, a little dish in your home or in your business. or on your boat, and it was really amazing, super fast internet. And that was on the business side, the cash cow. And very quickly, the story grew and evolved into ambitions around direct to sell. And what has happened in the last quarter, the last 90 days since that last earnings call is SpaceX moved very quickly and very aggressively to buy terrestrial assets and to buy spectrum necessary for them to basically offer themselves as a more complete carrier, offering not just constellation space-based internet, but direct-to-cell services as well, guaranteeing cell coverage whether you're out in the Rockies or in the wilderness of California

where I like to go, or you're in a blind spot in Manhattan. And so we're waiting for the continuation of that story to kind of present itself as a business model, what SpaceX Mobile looks like. And we're not quite there yet. And obviously, in the earnings statement, the press release, there's nothing about that codified.

I'm going to just step back from the earnings for a moment and talk to you about another story regarding SpaceX and Elon Musk that made news this week on X. He said he wants to give a share of SpaceX. to every kid in America next year. He didn't really say how he was gonna do it. He suggested maybe like through the Trump account program, but I know that also comes with restrictions on when you can sell.

Have you heard anything at all?

We also know that Elon Musk doesn't always, you know, doesn't materialize everything the man says, but what have you heard?

Well, so this played out on X as well, right? So once we ran our story with the update, which I'm about to give you, then the President of the United States weighed in and said, thank you, this is what Trump accounts was all about. And then there were other people replying to Elon Musk about Trump accounts. But based on a source and some reporting that we did just before that, Elon was meeting with administration officials, others involved in the Trump Accounts Program for about the last 18 months, you.

Know, in the run up to this, behind the scenes.

And the tipping point was when they basically did 70 million auto account setups. And once Musk had seen those 70 million accounts, many of which were auto setup, as I say, he was like, okay, this is the mechanism. It's the only mechanism in which you could distribute a share to those children. And the math, by the way, like census data, I think there are, between 72 and 73 million eligible children in the United States anyway. So all that was was the Trump Accounts Program basically providing an account for almost every child in America by default.

And that got the world's richest person committed. That's my understanding of how that played out.

Yeah, we want to bring George Ferguson into the conversation, and he is Bloomberg Intelligence Global Head of Aerospace Defense and Airline Analysis. So we want to talk to you a bit about SpaceX. That's what we've been talking to Ed a lot about. Right now we see shares that are higher by about 2.3% in the post-market trade. Tell us kind of what you're taking away from these numbers.

Yeah, so I think what stood out is a couple of things.

There's more profitability that flowed through both the connectivity business and the AI business than we originally expected. One of the things that sort of came out to me was that it looks like there are some decent economies of scale inside Starlink. So it looks like they grew revenues pretty well, and we didn't see sort of a similar increase in.

The cost, which is probably no surprise, right?

Starlink should have a fair amount of scalability to it. And maybe one of the reasons why you saw him go in and buy more spectrum so he could fix some of the challenges with Starlink for like being in buildings and such. So a push, I think, to enhance the profitability of Starlink, probably because in the near term, that's going to be important to the SpaceX story. It's going to be important to generating cash flow, showing profitability.

But again, I think we saw both in Starlink and in the AI business, we saw better profitability than we expected.

When you talk about catalysts for this stock, it continues to be an unfolding story, George, but with SpaceX, we've got Morgan Stanley analyst, Adam Jonas, saying that the Starship rocket's next launch could be a catalyst for SpaceX's valuation.

What are your thoughts on that?

Look, I get calls after every Starship launch, right, asking me, was it a good one, was it a good one, was it a good one? Look, I think that SpaceX has gone a long way with space launch.

And everything they do is very impressive. They talk about it here as well in their 10Q.

And the amount of satellite, the size of the satellites they can get up, the increased power of that satellite they can get up, it improves the Starlink business.

I think it's great, right?

But I think that we need to see sort of Starship come.

More repetitively.

I'd like to understand better whether or not they had any problems with the heat shields on the last launch so that we could understand what kind of.

Cadence they can get out of Starship.

Again, look, it's amazing what they're doing with launch, but they'll need more of that to get data centers in space. They'll need more launch, faster turnarounds to get data centers in space and keep building out the constellation. But one quick thing I'd mention before I go back for another question, I think You know, we saw, I think.

11.1 thousand, so 11,000 plus satellites in orbit.

I think last time we saw about 10-ish thousand. So they're building the constellation. Starlink looks like it's building out. It's good stuff.

Yeah, I mean, I'm also just curious how you're thinking about SpaceX right now. When you think about its launches, you think about the Falcon 9 and how it's really matching up against competitors right now.

This is for George, excuse me.

That was for me. This is for George.

So again, Starship is much larger than Falcon 9. And to me, Starship is the more important story on launch for this company.

Falcon 9, great rocket.

They're using it for some NASA missions and such. The space business actually lost a little bit of money. Less money than we expected to lose. It was very nominal. Less money than we expected to lose. They're spending a lot of money on R & D in the space launch business. Again, to me, the future of this business is Starship and not Falcon 9. Falcon 9, I think they got down to a really nice science for usability, but Starship reuses everything and has much more volume so they can replenish the constellation and get data centers in space.

To me, that's more.

Important to the story than Falcon 9.

So I want to bring Ed Ludlow, the host of Bloomberg Tech, back into this conversation. To your mind, Ed, what is the next big catalyst for SpaceX? We were talking a minute ago with George about Starship and the Starship launch being that catalyst.

Sure.

Yeah, I've said on this program so many years now, Elon Musk's great skill with the investor base is keeping them looking to the horizon, to the next thing. You know, George... explained very clearly that all of these future business lines are predicated on the success of Starship. Orbital data centers do not happen without Starship. The scale of the Starlink constellation and future generations where that constellation contributes to a direct to cell service, i.e. Starlink Mobile, it doesn't happen without the capacity of Starship. That is our ongoing track of progress Starship makes.

They're also on the hook for NASA, right?

But for me, it's just continued consistency and update of when we get the first deployment of a data center in space. Because again, if you just go back two quarters to the IPO, the prospectus could not have been more clear that All of these future total addressable markets, 26.5 trillion of them, they don't happen without data centers in space. And as a step before that, Starship being a rapidly reusable and economically viable launch system.

Yeah, and another name that we're keeping an eye on that reported earnings after the closing bell is United Airlines. I want to talk to George on this one. We're seeing shares of the company down by about more than 2% in the post-market trade. And a lot of the conversation when it comes to these airlines has been fuel and the cost of it. We see that third quarter fuel expenses were up by about $ 1. 8 billion year over year.

What are you taking away from this report and broadly how you're viewing airlines right now?

Yeah, so I haven't had a lot of time to look at United yet. But what I will say is we kind of knew where the fuel bill was going to come in for all the airlines.

The story really becomes... revenue, you know, revenue improvement, right?

United was one of the fastest growers in the US airline business in the third quarter, especially of the big full service carriers.

I think they're growing too fast to be honest with you.

And they've got to find a way to boost that revenue line more than the expense line is rising. At Delta, we saw an expense line rising in a 20%-ish level. So, you know, to me, it's all about can United get fares up? And what I've seen from United is they're not showing the discipline they need to show on capacity, on what they're going to put in the marketplace.

All right.

George Ferguson, Bloomberg Intelligence Global Head of Aerospace Defense and Airline Analysis. Thanks so much for joining us. I know you've got a busy after the bell here talking about SpaceX and United Airlines, but we want to get a reset right now, take a look at the day that was, which wrapped up just about 23 minutes ago. But do stay with us because we still have Ed Ludlow, our host of Bloomberg Tech. We're also going to be joined by Bloomberg's Geetha Ranganathan, to talk through Netflix and SpaceX earnings, which were out just moments ago. Let's get that reset, though, first on the markets and the day that was with Charlie Pellett.

Charlie.

Thank you very much. And here's what's going on. Alexis and Nora right now checking in on Netflix. Yeah, we'll have more in a moment. Right now, we got the stock moving lower by 4.4%. Netflix sales growth will decline for the fourth quarter in a row. Also reporting after the close of trading, the big story we heard Ed Ludlow on at SpaceX. Profit beat estimates on a big jump in its AI business revenue. Right now, also, United Airlines shares lower by roughly 2% after ours. United missed estimates squeezed by those soaring fuel costs. The Dow, the S & P both higher today. S & P 500 index holding on to a gain of three tenths of one percent. Big move for the Dow up by one percent today, but both Nasdaq, Nasdaq 100 index both declined.

Nasdaq 100 down one tenth of one percent. We also did see the two-year, 4.77%. The 10-year, 5.11%. 30-year, 5.41%. A drop for crude, WTI down 1.8% at 101.79. The barrel, Brent, 108.95. Lower by five-tenths of 1%. Just a reminder, 35 minutes from now, we've got Ken Griffin live. Ken Griffin, of course, with Citadel Securities. We'll have that conversation live with Danny Berger coming up 5 o'clock Wall Street time. I'm Charlie Pellett.

Nora and Alexis, that's a Bloomberg Business Flash.

Well, thank you so much for that, Charlie. I'm Nora Melinda here with Alexis Christophorus. We are in for Carol and Tim, and there's a lot going on in the post-market trade.

Yeah, to say the least.

Can we take a breath?

Yeah, let's do it. Let's start with SpaceX.

Absolutely.

Exceeded estimates for quarterly revenue and profit driven by substantial growth. in its AI and satellite internet business, and the stock is higher here in the post-market.

But then we've also got Netflix in focus.

It saw its fourth quarter revenue at about $ 13. 4 billion. That's against estimates of $ 13.

51 billion.

And also a lot of focus there when it comes to its sales growth set to decline for the fourth quarter in a row.

Yeah, we're going to dig in much more into Netflix in just a moment, but I also want to bring everyone's attention to United Airlines.

They were also out after the bell today.

Stock is down about 2% here in the extended trading. Fourth quarter adjusted earnings per share falling short of estimates. And really, this just underscores how this soaring jet fuel, the cost of jet fuel for the airlines, just eating into profits, right, despite the resilient demand we continue to see for air travel. Shares of its peers, American and Delta Airlines, sort of slipping in sympathy here after hours, Nora.

Yeah. And we want to bring in Geetha Raghunathan.

She is Bloomberg Intelligence senior media analyst. But as we're going to talk about Netflix very shortly, Ed, you know, we just wanted to ask you just what you're thinking about more broadly as we head after this report. We've kind of digested the numbers if we'll call it digested yet, Ed. But what do you think is kind of like the next leg forward that we're going to be looking into tomorrow?

Yeah, it's hard to have half a brain for Netflix and half for SpaceX. I mean, you know, Netflix is a really simple story by the financials, right? So third quarter revenue, $ 12. 9 billion. Forecasting sales for the final three months of the year, $ 13. 4 billion. That's short of the street's expectation. And the way that Netflix explained it is...

the advertising business is underperforming. $ 300 million less than the company expected.

For those numbers. So why?

What's happening there? Like, okay, advertising's falling short. What's going on? And, you know, for Geetha, that's probably a better question directed at her. When it goes to the call, you put all the numbers away, and we go back to the questions we posed earlier, which is you made some big changes.

How's that impacting your content strategy going forward?

Stay with us. More from Bloomberg Businessweek Daily coming.

Up after this.

Two big deals getting our attention today. Salesforce buying marketing software company Braze for nearly $ 6 billion. This marking another major acquisition for the software giant. And separate to that, Anthropic could be lining up another massive AI infrastructure deal. So much money that we're talking about here.

So much.

With InScale and Talks to provide the company with as much as $ 45 billion. That's the number we were just calling out earlier in computing power. We're joined by Bloomberg Tech reporter Brody Ford. And I really want to start here with Salesforce. What does Braze give Salesforce and why make this acquisition particularly now?

Salesforce's weakest segment for maybe the last year or two has been their marketing software. Effectively, it helps them track your behavior across a couple of different surfaces and you know blast you with some text messages to encourage you to sign up for that gym you were looking at or things of that nature and braze is effectively one of the younger companies in this space that was starting to give salesforce a run for its money especially as marketing software is one of the most easily transformed by ai so salesforce is really getting back to its old ways right um There's a famous joke that people don't know what Salesforce does, but most people know that it likes to make big acquisitions. And it certainly has been

on a string of them in the last year or so.

Yeah, I want to talk about that, Brody, because I was looking at some of the deal making. I guess this really solidifies Salesforce as a company that is looking to, you know, really become.

A serial software acquirer.

Just remind us of some of the other big deals that Salesforce has made this year.

Totally.

Through the 2010s was the kind of most famous streak. I mean, they were buying companies like MuleSoft and Tableau and Slack and really expanding into a couple of different markets. They started as software just to kind of keep track of your contacts and sales pipeline for like salespeople. And they've expanded largely through acquisitions. For a while, activist investors said, Salesforce, please, you're spending so much money.

Stop doing this.

And they stopped for a little while, but in the AI era, it seems that they are feeling the need to really bolster their offerings.

Yeah.

And I mean, talk to us about how much this really means in terms of Salesforce trying to strengthen its position more broadly when it comes to artificial intelligence.

You got to remember earlier this year, there was the famous word everyone loved was SaaSpocalypse.

Everybody was under this.

Impression that With Anthropic, you could easily vibe code something to replace your Salesforce software with. A lot of those anxieties have dissipated, but they're not gone all the way. There is definitely a sense that the traditional SaaS platforms, the moat they have is not as strong as it once was. It's not as easy to capture new dollars because so much money is being spent on AI. And so any of these kind of younger software companies that can tell a convincing AI story They become really attractive assets to a company like Salesforce, which is trying really hard to hold on to its customers.

Hey, Brody, I want to just switch gears for a minute since we have you and talk about Nscale. We know that's that AI cloud startup.

It's backed by... by NVIDIA.

A lot of backlash recently over the valuation it is seeking in its upcoming IPO. I think it was something like $ 30 billion in the street thought, well, maybe it should.

Be half of that.

But now there's talk that Nscale is is going to be in some sort of a multibillion-dollar deal with another AI startup, Anthropic, who's also looking to go public. Just put this in context for us, and what would these two be doing together?

Yeah, the NeoClouds are a really interesting and hotly debated type of company. They're effectively a cloud provider, but just for that AI GPU segment, typically their customers are these big AI companies or the hyperscalers themselves. Nscale is super interesting because they have some real flagship contracts, but they have a really big way to go until they can deliver on these contracts. And they're going to IPO soon.

They have their S1 out. And the question is, how do you value a neocloud? It's very hotly debated. And so this is some pretty good news for Nscale. But they inked another $ 45 billion deal with Anthropic, bringing the total to $ 90 billion. And this is all for one data center in West Virginia, which is going to be one of the largest anywhere. And so it's just it's another proof point that demand for AI computing power remains insatiable in this moment. It doesn't help settle the debate about what does that demand look like in 10 years.

Yeah.

And when we think about some of the challenges that InScale has had delivering some of these projects, how big is the execution risk here?

Pretty much the whole thing is execution question, right? I mean, this stuff really is not functional yet. It's not built. They have early stage construction going. They have some very strong bench of executives over there that have done this at companies like Microsoft or Oracle before. But building big infrastructure is difficult. You need thousands of workers. You need materials that are super backordered. You need to make sure that a natural disaster doesn't put you off schedule. And so the demand is there. But yes, pretty much the entire debate here is execution risk.

Let's get back to that N scale IPO idea. What's the timeline like for them right now? And what about that conversation around valuation? Where does it stand?

Yeah, so their S1 is out. And the narrative has been that they're going to IPO this year. As far as we know, that is still the vision. As we've reported, there is some debate over what is the ultimate valuation here. And we saw overnight that Neocloud in Korea had a pretty sad debut. We've had a couple of these negative points on it being a bad week or two for Neocloud sentiment. But these things are so volatile.

I wouldn't be.

Shocked if in a couple of weeks the sentiment flips back around because we get a The expectation is still we get an N-scale IPO this year, but it's been a rough week or two for Neocloud News, no doubt.

Stay with us.

More from Bloomberg Businessweek Daily coming up after this.

New residential construction fell in September to one of the weakest paces since the pandemic. And affordability, we know, Alexis, was already a major challenge broadly in the economy. And now we've got mortgage rates that are moving even higher. Homebuilder confidence actually falling to a 14-year low. And we are going to get over to Bloomberg News U.S. real estate reporter Prashant Gopal. He joins us via Zoom from Boston. Prashant, thank you so much for joining us. I want to start with the housing data that we got today. What are you taking away from some of the latest housing market activity?

Yeah, the market has stalled.

It's pretty clear that these rates above 7% have really put a deep freeze on home sales and builder confidence. I mean, this is a pretty dismal market.

Yes, certainly.

Are there any bright spots in this market? Are there segments of the market where we're seeing strength? Is it in luxury? Is it, you know, look, if you can afford it and the higher mortgage rates don't mean is not a make or break situation for you. Is that an area where we're seeing some strength?

Yeah, absolutely.

I mean, I wouldn't say the same about the luxury market.

I think the luxury market's doing fine.

People who don't have to rely on mortgages, cash buyers, for example, the wealthy, they're continuing to buy what they want to buy. And I don't think the rates matter as much to them. There's also a real geographic disparity. You're seeing a lot of the markets in the Northeast. Think about New York suburbs, places like that, Bergen County.

These markets are still very tight. There's limited inventory, so these high rates don't do as much damage. Chicago, the Midwest, is acting in a similar way. Then you go to San Francisco, where AI is driving that market. On the other hand, you have Sunbelt markets, pandemic boom towns, Denver, across Texas and Florida.

These markets have a ton of inventory and buyer demand is limping along.

Yeah, and you have a fascinating story that we see here on the Bloomberg Terminal out today about the ultra-wealthy reshaping parts of the South, particularly you call out Nashville. Can you talk to us about how the story came together?

Yeah, I mean, I worked sort of hand-in-hand with the data team to put this together. And really what it showed is that a lot of the wealth has shifted to the South. And Nashville really seemed to be leading the way. And so I decided to go down to see what was going on. And where I ended up is, you know, 20 miles south of Nashville in Williamson County.

This is sort of where those beautiful, like, rolling hills are with the picket fences. It's really remarkable, like, just a beautiful landscape. And this is where many of the very rich people are going. They're kind of carving up the farmland into... you know, gated compounds. And, you know, they have their own social clubs. And it's just really a place that's changed pretty dramatically.

Are they being lured there by, oh, surprise, surprise, low taxes, perhaps? What else is, you know, enticing them south, especially to that area?

Yeah, I mean, low taxes are a big benefit. I think that's one thing. But I think it's also, you know, the fact that people... went there after the pandemic and really liked it. And they told their friends. So you're starting to see sort of, you know, the wealthy moving sort of like a herd, right? And that you're seeing more growth there. There's also just the idea that, you know, this area offers something that it's harder to get in densely populated places. They get, you know, privacy, isolation. You can buy hundreds of acres to surround your home and never have to see anyone. So there's, you know, things you could do in Tennessee you can't necessarily do in New York or Los Angeles.

Yeah, and tell me, you know, from my perspective, I don't feel like the idea of... You know, the ultra wealthy or I'm going to say like retirees, for instance, moving to the South is more of a new phenomenon. I'm curious, building off of what Alexis was talking about when we were talking about the tax environment, you think about the Pita Terra tax here, when you think about second homes in New York City. Tell me, how has this all really been informing how people are thinking about where they want to live?

Well, I think like people, um, there, there is sort of a, a feeling, um, that I got when I was down there that people were, uh, you know, they, they were leaving like the blues, the, the politics of blue States as well, you know, they're moving to a place where maybe there's not as much kind of, um, anger toward billionaires, um, um, a place that, that may feel more welcoming, um, And, you know, yeah, so that's you know, I think that's probably part of it, that they're not they don't feel under attack.

What about other places that used to be hot? Like I'm thinking Austin. There were some real estate markets that were really tough to to break through just a few years ago.

What are things looking like there now?

Again, we have to separate the markets in a sense, but the overall market in Austin is down. There's a ton of inventory. Part of it is this was a big builder market. You had not only vast subdivisions of single-family homes going up on the outer edges of the metro, but you had a multifamily there's a huge amount of multifamily going up there. So there's a lot of, a lot of new housing and, and as a result, you know, the market has softened on the other hand, I, you know, I think the upper end may still be a little stronger.

You know, and I'm curious, what does all of this influx of wealth really mean for the people who are already living in these communities? Because, you know, your story points to the fact that it's not just lower income residents that are feeling the pressure. even folks that were traditionally considered to be affluent are becoming priced out.

Yeah, you know, I was thinking about the country doctor or lawyer, you know, who may have felt, you know, that they were on the top of the hierarchy there.

But suddenly you have this whole new layer of.

You know, of absolute wealth that, you know, maybe has never been seen there before. And so you're, you move down a peg or two on, on that hierarchy. So, um, you know, there's a, there's a group of people there who, uh, may have houses in multiple cities. So they may not necessarily live really in any of them, um, or live at all of them at the same time. Um, so it just, it just sort of changes the dynamic and sort of the landscape in a sense.

I wonder, though, because we started this segment by talking about the fact that home builder confidence is now at a 14-year low. Can potential home buyers capitalize on that in the sense that these builders are now offering more incentives? Maybe they are cutting prices for spec houses. Is that an opportunity for entry, you think?

It's huge.

I mean, if you're in the right market, so if you're in Texas or you're in the You know, there are parts of California where there's a lot of construction or, you know, North Carolina. You know, these builder heavy markets, there are lots of opportunities because, you know, in order to get these homes sold, they can't just have them sit.

It costs them money. They have to kind of keep these homes moving. So they're offering all kinds of incentives and even price cuts.

Yeah, I mean, just super quickly, is there anything that you're kind of looking ahead to right now when we think about the housing market in this moment?

I am looking ahead to the spring because we're about to enter the doldrums of the holiday season when not a lot sells.

But as we get into.

January, that's where we'll sort of be taking the temperature and seeing if there's any sign of life.

I think a lot of people right.

Now have very low hopes for anything better than what we've seen because it doesn't look like rates are going to be coming down anytime soon.

And that those 7.4% rates are not doing a whole lot for sales right now.

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.

SpaceX Beats Estimates, Netflix Forecasts a Slowdown

Kapitelklicken springt direkt hin

Shownotes

Transkriptvom Podcast bereitgestellt · Zeitmarken springen hin