00:00Lindsay, I mean, just taking a look at these numbers here, assuming you believe that the
00:03company is actually going to hit these targets here. These are massive numbers. And I just want
00:07to put that in perspective for a second, because if you go back a couple of years ago, you were
00:11talking about a company with annual revenue of around 50 to 55 billion dollars. They're now
00:17saying that from the hyperscalers alone, they're going to get nine billion dollars for the full
00:20year. What do you make of that? Yeah, I mean, it's really impressive. I think it was seven
00:24quarters ago that they had zero revenue from AI infrastructure sales. So it's definitely a
00:31company that has evolved over time. That outlook that you mentioned, I think that's a huge boost
00:35to the stock today. I mean, it was already above 100 bucks when we closed and now we're up another
00:4010 percent or so. So I think that the outlook is good. The gross margins were good because that was
00:45the worry last quarter. Remember, we want to hear a lot more about memory costs and how they're
00:50managing that. And hopefully we're seeing gross margins stabilize. It seems to be the case when
00:56I looked at the guidance within the press release. But definitely want to hear more about that from
01:00from management on the call. But while this was a blowout quarter and it looks like more growth is
01:06on the way. Well, and to that point on more growth, I just point out another headline. And this has
01:11to do
01:11with the idea of the company actually restructuring. Normally, that would be a bad thing. But this is
01:15clearly a restructuring plan. I'm just going to read it directly from that to sort of reinvest
01:20in key growth opportunities, including silicon optics, security and artificial intelligence.
01:25So this is a company, let's just face it, an old economy, old tech economy company, I should say,
01:29that apparently seems to have found a new lease on life here and appears to be going all in on
01:34it.
01:34It is going to lead to some charges in the short term. But as you see with the reaction in
01:38the
01:38shares of 14 percent in the after hours, investors seem to be pleased with that. You're pleased with that
01:42pivot? Yeah, I'm pleased with that pivot. But it is something that we have to keep an eye on,
01:47because let's not forget one component of this company's business is services or security and
01:53software, which has higher margin than the AI infrastructure, silicon one product. So we do
02:00want to keep keep an eye on what that mix looks like, because that's what's part of what has impacted
02:04margins in the last couple of quarters. In addition to obviously memory costs has been a huge component.
02:10And, you know, I think the other thing is we're looking for memory costs to have peaked and come down.
02:15That, though, could be a sign that, you know, AI growth has also peaked. So it's, you know,
02:21I think we've got room to run, especially from what we're hearing today. But there are some nuances
02:26to the story that we do need to keep an eye on, Romaine. Well, it's interesting that you bring
02:30up memory. That's where I wanted to go. And you think back to three months ago, basically,
02:35Cisco coming out with that weaker than expected forecast for profitability. That was blamed on the
02:40shortages that they're facing in memory. And I just wonder, you know, for the environment more
02:45broadly, obviously, this has been a great environment for some of those memory chip makers.
02:49But, you know, the concern is out there that this could act as sort of a breaking measure on this
02:56rally that we're seeing more broadly. If you have more companies like Cisco, you know, having to crimp
03:02their forecast for profitability because they just can't get their hands on enough of it.
03:07Well, the good news about Cisco is that they have been able to increase pricing. And that's still
03:12working its way through the system. And they've been able to renegotiate their contracts. And
03:17they've talked about this on their earnings call in the past, that their customers understand the
03:22situation with the memory environment and the cost pressures that they are going through. So
03:27there's an understanding there. Of course, Wall Street doesn't want to see margin compression.
03:31We want to start to see a stabilization, which is what we were promised in this third quarter
03:36that they've just reported. And we want to start to see that stabilize into the fourth quarter and
03:40hopefully increase because, as you know, it's all about profitability at the end of the day.
03:45Absolutely. And some more color here when it comes from Cisco. This coming from
03:49a blog post from the company, actually, that they're going to cut less than 4,000 jobs. That is
03:54fewer than 5 percent of their workers. Just a little bit more detail there. And,
03:59Lindsay, it's interesting. I mean, you and Romain were discussing
04:02the hyperscaler spending. Of course, that is one of the reasons why we see Cisco shares now higher by
04:0813 percent after hours. But, you know, you think about this market more broadly,
04:12and we were talking about the B2B spend, how that is really benefiting
04:16a really small part of the S&P 500. And then you think about what's going on
04:21when it comes to the economic landscape, when it comes to inflation, the questions about,
04:26you know, whether or not companies have pricing power left, that's hitting the consumer facing
04:31names. And I wonder when you add it all together, whether you see the stock market becoming even
04:36more concentrated at the top, even more bifurcated than it has been.
04:41Yeah. I mean, I see it as a K-shaped economy and a K-shaped market. I think investors over
04:48the last
04:48several years have turned to tech as a defensive growth play, is what I call it,
04:53because they have incredibly stable and growing earnings and sales growth. Also,
04:59these are the best margins in the industry, and they're also expanding at exponential rates.
05:04So I think that you see the market really, you know, turning to this part of these industries,
05:11these sectors, the AI trade right now. And that's the part of the market that has really
05:16been moving higher. And in addition to energy and materials since the Iran war took off. But then
05:21you look at the consumer, you look at the inflation numbers that we got today. And there's good news,
05:27bad news there. It's not demand driven, but the supply side of it really does impact the consumer
05:33in terms of gasoline prices that crimps their wallets. And we've had some fiscal offsets here,
05:38but the consumer cyclical sector of the market, the home building sector, if you looked at them today,
05:44the financials even are under pressure. And that tells a completely different story than what we're
05:49seeing the excitement of AI and technology and communication services.
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