GOOGL, Tesla, and Service Now Earnings Review

[00:00:03]What is going on everybody?

[00:00:06]Not late. It's still 8 o'clock. Not late. How's everybody doing? Cliff, how are you? S, what's going on, man?

[00:00:18]What a day today was. June, how are you?

[00:00:25]I gotta tell you, daylight today, I'm a little annoyed at myself for not being a Service Now shareholder anymore.

[00:00:35]That was one of the best earnings calls I have listened to. Every CEO should go listen to Mcder.

[00:00:48]Anybody who's in software, this guy gave a master class This guy gave an absolute masterclass in what a CEO should do on an earnings call. I I just can't say enough good things about what he said, how he said it, how he delivered it. I mean, that was just a thing of beauty. In all seriousness, it was a thing of beauty.

[00:01:22]So, let's start. We're gonna start with Google. We're gonna start with Google because that's the one that really matters for the AI revolution right now.

[00:01:33]And then we'll work into Service Now and we'll work into Tesla.

[00:01:43]I I got to tell you, the Alphabet quarter, Alphabet should be up 50 bucks right now. Should be up 50 bucks.

[00:01:51]The fact that it was down when I last looked at it is kind of crazy. Oh no, Capex is going up again. Oh no. Did you see Google Cloud? I mean, you want to talk about an S-curve?

[00:02:05]Like, you want to talk about an S-curve?

[00:02:08]Look at that. That is an S-curve business that is now going to be on a hundred billion dollar run rate. Oh my god. Incredible. Incredible.

[00:02:22]This is a business that is just on fire.

[00:02:25]I love it.

[00:02:27]Hold on.

[00:02:31]Perie investor, are you buying Pery rookie cards? I want to know. Are you an alternative asset guy? I want to know cuz I think that would be pretty fire if you were. All right.

[00:02:45]Look, there's not enough good things I can say. I think that they absolutely redefined what is gonna happen. The chip makers got to be really happy right now.

[00:02:57]Anybody the Bears have got to be pissed.

[00:03:00]This just set the stage for Amazon and Microsoft next week. So, let's get into it. And they do have a slide deck.

[00:03:09]I I guess we could bring up the slide deck, go through it. Well, first let me I'm going to go through the numbers. I mean, man, $119.8 billion dollar year-over-year increase of 24%.

[00:03:29]24% year-over-year growth rate. Holy [ __ ] Crazy. 12th consecutive quarter double-digit growth. Operating income up 18% year-over-year, 40.8 billion. Cost of revenue, sure, it was up. It was up.

[00:03:47]Operating expenses, it was up. R&D rose 32%.

[00:03:53]Don't care. I don't care. Operating cash flow. Okay.

[00:04:01]39.1 billion and 185.7 billion on TTM.

[00:04:09]Insane.

[00:04:10]Now look, capex 44.9 billion.

[00:04:16]It was split 60% server 40% data centers plus networking free cash flow negative.

[00:04:23]Okay, it is negative 5.9 billion in Q2.

[00:04:29]Trailing 12, they're still over 50 billion, but right now the capex is negative. Likely it's going to stay negative.

[00:04:36]Balance sheet, you got the 87.1 billion of marketable equity securities on it.

[00:04:43]242 billion. Now, they are going to be putting that to work. 98.2 billion in debt, which is fine because you know what? After they spend that 87 billion or whatever they're going to spend, likely their CFO has worked the numbers, so the interest on their cash will pay for the bond issuance. All good. All good.

[00:05:11]Dividend declared. I mean, they should have scraped the dividend to be honest with you.

[00:05:17]88 cents, it's not even a percent. Get rid of it. Get rid of the dividend.

[00:05:23]Google services was incredible. I mean, I care about cloud, though. 24.8 billion, 82% year-over-year growth.

[00:05:32]Google Cloud is growing faster than anything on their infrastructure side. It is incredible.

[00:05:44]Gemini 3.6 Flash and 3.5 Flash Light announced day before 3.6 Flash jumped over 10 points. I mean the benchmarks are good. Are they as good as OpenAI and Anthropic? No. Gemini 4, they're saying the most ambitious pre-training run in their history is underway.

[00:06:10]Sundar said they need it as a larger base model to compete where Frontier models are and he's confident people are going to be pleased when it ships and Gemini 4 is going to be the new baseline.

[00:06:25]We'll see. I mean, Sundar directly said coding and agentic coding are areas where Gemini needs to improve. He's aware and the teams are focused on closing the gap. Now what was incredibly important okay token velocity model APIs 22 billion tokens per minute I mean this was at 16 billion last quarter 16 billion 38% quarterover growth 9 million developers bill with Gemini models I'm shocked 9 million developers I'm shocked I have not built anything with Gemini.

[00:07:12]I'm absolutely shocked. I just got Open AI. I've been playing around with Soul for uh 5.6.

[00:07:22]I did spin up the dedicated API. I got to tell you, it's pretty good. It's definitely pretty good. Is it better than Claude? I'm not sure yet. I will tell you I was able to build my own application, throw it on my desktop and I can open up a dedicated program and it did in all 25 minutes. Pretty good.

[00:07:48]Now, Alphabet remains supply constraint and I saw Michael Bur put out a new newsletter. I don't have a membership so I can't li read it or listen to it.

[00:08:00]Substack actually has a really good listening feature.

[00:08:04]Alphabet remains supply constrained.

[00:08:08]Management framed it as a sign of momentum and rapid adoption. Enterprise token consumption, 500 cloud customers, each individually processed over a trillion tokens in the past year. and more than 2,000 enterprises consumed over a 100 billion tokens.

[00:08:31]Crazy. Absolutely crazy.

[00:08:36]I mean, I got to tell you, when I look at these numbers, Aentic development platform has over 2.4 million weekly active users.

[00:08:50]It's hard to think that they're falling behind when you see this. And then you look at these types of numbers.

[00:08:58]AI overviews and AI mode were merged in search and AI mode surpassed 1 billion monthly active users since going global in October. Less than a year they have more than 1 billion monthly active users.

[00:09:16]Google now billions of clicks to websites.

[00:09:21]It's incredible. Gemini app 950 million active users with daily activives tripling. Agentic features they're working. Daily brief Gemini Spark Agent Ask YouTube over 140 million users engaged with it on the watch page.

[00:09:45]I mean backlog. This is what we wanted to say. I said they had to come in at 50 to 100 billion quarter overquarter increase. And you know what? Backlog 514 billion. 514 billion of backlog. Crazy.

[00:10:05]Up more than 50 billion sequentially.

[00:10:08]All driven by enterprise AI demand.

[00:10:13]When I look at this and I look at the fact that just over 50% of total backlog is expected to convert to revenue over the next 24 months. Think about that.

[00:10:27]That's 200 27 billion in two month in 24 months just from Google Cloud.

[00:10:42]24 months. That's incredible.

[00:10:46]You're talking about just over $10 billion a month, $30 billion a quarter you can bank on.

[00:10:55]And that's all contracted revenue.

[00:11:00]Nothing to see here, Bears. Nothing to see. Nothing to see.

[00:11:06]Gemini Enterprise, nearly 90% of Fortune 100 use it. Pepsi, Intel, HSBC, Macy's, they all use it. I mean, and they're really getting after it. The agent development kit, they're working on security.

[00:11:24]90% of Fortune 100 are on Google Cloud security users. Google Cloud security users. We don't think of Alphabet as a security company. And then we get the TPU business Q2. And this has got a I'm actually a little surprised that I'm not seeing more on X about this. Q2 was the first quarter recognizing revenue from the TPU system sales delivered into customer data centers. They're no longer internal facing. They're external.

[00:11:59]They are external.

[00:12:01]Now re revenue timing. Small portion of the existing agreements hit in 2026.

[00:12:08]They ramp next year. The vast majority are 2027.

[00:12:12]That's a coiled spring for the cloud segment.

[00:12:17]The agreements sit inside the 514 backlog. I mean, you got to say it's pretty crazy.

[00:12:27]Margins, you know, this is a good margin business. And when I think about where they're going, I'm super bullish on Alphaben. What I think that they just did, they just showed everybody, look, we're spending. We're spending on chips.

[00:12:48]We're spending on data centers.

[00:12:51]We're expanding the backlog.

[00:12:55]This sets the stage for Amazon and Microsoft. And oh, by the way, they're spending just a little bit more this year. 195. They're spending just a little bit more this year on capex. I mean, I'm saying 195, but they're saying it could be 205.

[00:13:16]Let's me in the middle of 200. 2027, they said will increase significantly.

[00:13:25]Details to come later in the year.

[00:13:27]Remember this was only Q2.

[00:13:30]So if you're raising to call 200 at a midpoint up from 180 to 190. I mean [ __ ] that's incredible.

[00:13:42]Incredible.

[00:13:44]Now you're going to have people sitting there saying, you know what, they're spending too much. When is it going to show up? When is it going to show up? Those people shouldn't own Alphabet. Don't own it. If that's what you're worried about, just don't own it.

[00:14:00]Because you know what? Investing is not supposed to be a short-term game.

[00:14:04]Investing is not supposed to be a game of, you know what, we need to make 20% a week. We need to make our living off of being right 100% of the time. We need to make a living off of having everybody think that we're some super investor. That's not what investing is.

[00:14:26]Investing is peaks and valleys. It's a long-term game. I mean, you look at emit, he rode Palanteer down to seven.

[00:14:39]You look at Tanner, he rode SoFi down to five. I mean, long-term investing is the game, you know? You can go on and on. Teis Road SoFi down to five. I mean, [ __ ] I think all three of them rode Hood down from 150 to 70, right?

[00:15:02]Matt's rode Rocket Lab down.

[00:15:06]Everybody's road stuff down. Like, investing is not the same thing as trading. It is not the same thing as speculating. You're investing. you you're looking at three to five years, 5 to 10 years, sometimes more than 10 years. You got to be okay saying, I'm listen, I'm all right. I trust the management. I trust the board. I trust the employees that got us to the dance.

[00:15:36]If you don't trust Alphabet deploying capital when they are now doing 180 billion plus of cash from operations, don't invest. It is just insane. Don't invest. Doesn't make sense to me.

[00:15:53]Like, it legitimately does not make sense. This is uh this is a quarter that redefineses what is going to happen. In my opinion, so energized. Next week is going to be incredible. I can't wait for Amazon. I can't wait for Microsoft. Can't wait for Meta. Jake Rizzo is here, man of his word. We're gonna we're gonna talk about that call in a little bit. Jake Rizzo, don't you worry.

[00:16:25]But but in all seriousness, nothing to like where it Let's see where everything is right now.

[00:16:34]And look, honestly, selfishly, if Alphabet falls a lot, I think it's an opportunity.

[00:16:42]I really do. It's so hard. So, where's googly moogly?

[00:16:50]I just went past it. Down eight bucks, down two and a half%. That's fine.

[00:16:55]Whatever.

[00:16:56]Let it get cheaper. Let it get cheaper.

[00:16:59]I don't care. But you know what this is good for? This is good for Coreweave.

[00:17:05]This is good for the Neoclouds. This is good for Meta and SpaceX. Certainly good for Amazon, Microsoft. I mean this is good for so many companies.

[00:17:18]So after hours service now 5.27% phenomenal quarter phenomenal quarter on service now phenomenal quarter loved it coreweave 3.88% 88% the alphabet call the numbers bullish. Coreweave Nebby is bullish.

[00:17:42]Micron very bullish. Oh, we're almost back to a thousand. No [ __ ] Really? No [ __ ] Marll, I mean it's bullish for all these companies. What doesn't what's not good is oil. Now, here's the funny thing.

[00:17:57]Here's the funny thing. You got oil at 88, yet the market is still going. We're still near all-time highs.

[00:18:11]I mean, I don't want to see it at 88.

[00:18:15]I'm quite interested to see what now's going to say tomorrow because it updates once a day.

[00:18:23]2.07. That's not good. That's where now is. Oil at 88 sucks.

[00:18:30]I mean, we know that Trump's going tit for tat right now. I want to see this end as much as everybody else. I don't want this war.

[00:18:40]But you know what? I don't have a I don't have any authority over it.

[00:18:46]SpaceX not good.

[00:18:50]I'll tell you this. They need to talk up selling compute. They need to start talking about they need to sell they're selling compute so much demand blah blah blah they got to spend something 116 that's ugly that is ugly 116 is ugly Qualcomm I think is going to be a sleeper and I think it's going to be a sleeper because 17746 puts it at a very low multiple and if m meta with Zuckerberg And if Microsoft with Nadella are going to trust Qualcomm with their CPU server chips in 2029, you may see some other ones trust them also. Now, I'm surprised that Salesforce isn't catching more of a bid. Service Now, I think they did a really good job.

[00:19:46]SAS is not dead. At least Service Now is not dead. Master Class Masterass uh let's see AMD 555 again or 123 pounder sideways. You got ARM back to 284.

[00:20:10]Nvidia 212. I really thought Nvidia would have been a little higher. I would have thought Nvidia would have broke out on this, but you know what? Maybe we gota wait till next week. I mean, Nvidia could run to 230, 240 heading into earnings. It very well could. Very well could.

[00:20:32]Reddit 17090 and I'll tell you, Crowd Strike, even though the price seems insane on a forward basis on earnings, they got to be the number one pick out of all cyber security right now.

[00:20:50]Netflix. Ah, still ugly. Taiwan semi. I mean, if this wasn't bullish for Taiwan semi, I don't know what is. I don't know what is.

[00:21:03]Taiwan semi is a de facto winner because everybody utilizes them for production.

[00:21:10]So, I'm not going to be surprised if this goes higher.

[00:21:16]What else do we got here?

[00:21:19]Microsoft 388.

[00:21:22]I mean IBM 20496.

[00:21:24]I did not get a chance to go through the earnings yet. I barely had time to go through everything with Service Now and Alphabet and Tesla. Okay, I barely had time. Tesla's going down hard right now.

[00:21:37]And you know what? Quite frankly, it should. Quite frankly, it should. Google down seven bucks. Amazon down 235.

[00:21:48]Meta's down 583. The lag seven. They really don't want to shake that. They do not want to shake that. The lag seven. H craziness. Lag seven.

[00:22:04]All right. So, let's finish up Google.

[00:22:06]Let's we'll try to get through everything else.

[00:22:10]guidance for the second half of the year. Q3 revenue, slight FX headwind, one point, don't care. Search comps getting harder. Don't care. I mean, it's hard to care about when they say the search comp is getting harder and search and other services just did 63.27 billion.

[00:22:33]I mean, that's hard to take that seriously. And I don't know why they're saying the comp is getting harder is when I map it out.

[00:22:46]It it looks like it's the same rhythm, right? So you got it right here. Make it bigger.

[00:22:55]So Q4 is always a blockbuster quarter because you got the holiday season. So in 2024, Q4 was 54 billion. Q1 dropped to 50.7 and then Q2 2025, 54.1. It got back just a little bit more than where Q4 was. And then it grew Q3 Q4.

[00:23:21]I mean, I'm seeing pretty much the same pattern. Q4, 2025, 63, and then it dropped to 60.4 four and we're back just over where they were in Q4.

[00:23:35]So, I don't know, maybe they're sandbagging a little bit. I'm not sure, but I think that they are in a really good spot here. 1198 billion revenue. I mean, [ __ ] this is this is really good. And the fact that people want to say like really think about that overall revenue. Do I have that chart out here? Of course I don't. Why would I have that charted out anyway? We'll do it right now for everybody.

[00:24:24]I mean, pretty exciting if you ask me. The way that they just continue to scale revenue.

[00:24:33]If we're not going to say Alphabet knows what they're doing, I don't know what company does. I do not know what company does. This is a company that knows how to allocate capital. And you know what? For all the bears out there, if you don't like it, don't invest.

[00:24:53]Don't invest. Don't do it. Who cares?

[00:24:58]Go against a go against Alphabet. See what happens. Maybe it goes down. Maybe it breaks under 300. I don't know. But to think that this isn't going to continue to happen with revenue scaling, I think you got something coming for you because the guidance I thought was decent.

[00:25:18]I don't know. We'll see.

[00:25:21]I think they're great at ROE and ROIC. I think that they are going to over the next several years flex their muscles and Alphabet is just in my opinion one of the best companies, one of the best companies in the market. So, how many of you addicted to trading? Thank you very much. Really appreciate it. OGB, thank you very much. Really appreciate it. How many of you got excited about Alphabet?

[00:25:50]Douggee, there he is.

[00:25:52]Yes, he is.

[00:25:57]If you want to [ __ ] at freaking Google for building the future of the company at today's prices, you're just foolish.

[00:26:04]I couldn't have said it better myself.

[00:26:06]You are just foolish. You're just foolish.

[00:26:11]I mean, they have figured out a way to monetize every damn business they've got into. Every business.

[00:26:25]Look, here here's the big thing. I think a lot of people forget.

[00:26:30]If you are allocating money that you can't afford to lose, you're I don't know how you invest like that.

[00:26:40]like you you got to be ready. Like you ask anybody and I feel like I feel like I was just about to go down the uh speech that Chaz Palary gave in Poolh Hole Junkies, okay?

[00:26:59]Or Dom Terretto in Fast and Furious. So, I'm not going to do it. But seriously, you ask a lot of investors if they've ever experienced a 40 or 50% draw down. Most real investors, they've experienced it. Most of them have. You got to be ready for it. And maybe the market's going to wake up and say, you know what, we really don't like all the capex being spent. Maybe there's a world where next week Amazon reconfirms and they increase. Microsoft reconfirms.

[00:27:33]Actually, no. Microsoft reports their Q4 numbers. So, they're going to put out a new set of guidance. Maybe there's a world where the bears come out. Bur writes a new Substack letter and, you know, says that this is all circular financing and it's all going completely. Could be possible. But the cash flow is real. I mean, that's the big thing I got mad at Ed Zitron for. And I invited him to come on the channel. He didn't he didn't respond.

[00:28:05]I mean, my question is, if this is all fake, if this is all fake, are you going to say that the accounting firms because it's got to be Deote, it's got to be KPMG or EY, what are we going to say that they're certifying for phony?

[00:28:27]numbers. I don't think so. I don't think so.

[00:28:32]I'm not buying it. I'm not buying that story. It's just not happening. So, I'm long data centers. I'm long Google. I'm long Amazon. I'm long Microsoft. These companies are the future.

[00:28:46]And if Alphabet happens to take a dip, is it going to suck seeing a lower number in the account? [ __ ] I'm used to it. But yeah, it's going to suck.

[00:28:56]But it's only going to suck while the number stays at that level. Eventually, it will turn. And you know what? I'm good with it because Alphabet's a position I'm holding for the long term.

[00:29:08]All right, let's get on.

[00:29:11]Let's get on to Tesla. We'll do Service Now last. Let's get on to Tesla. Jake Rizzo.

[00:29:16]Jake Rizzo, before I get on to Tesla, what was your honest opinion about the earnings call, please?

[00:29:26]Quarter mile at a time, baby. Quarter mile at a time. Any real racer.

[00:29:33]Doesn't matter if you win an inch by an inch or a mile. Winning's winning, right? Winning's win. Winning.

[00:29:42]Gotta love it.

[00:29:45]More capex equals a longer cycle on chips and data center build. Absolutely.

[00:29:50]You know what else it means? We need more energy.

[00:29:54]Need more energy.

[00:29:56]Companies are going to do really well.

[00:29:59]Quarter pounder at a time. Like it.

[00:30:03]Quarter pounder at a timeun.

[00:30:10]Listen. All right. Got to respect that.

[00:30:13]Yikes. Ouch. And I don't care. Listen.

[00:30:16]Jake Rizzo's rode Tesla down, but he's a believer.

[00:30:21]He's a believer like a lot of people. I mean, look, Tesla mixed bag revenue 26% year-over-year increase. Incredible.

[00:30:32]EPS though down 18% and I missed the estimates. The Street One 53 cents, came in with 33.

[00:30:41]Automotive, I was actually surprised that they were up 23% on it. Now, I would have rather seen automotive only up 13% and energy generation and storage up 23. I would have liked to seen energy and storage up a lot more. 3.14 billion.

[00:31:02]I mean, it's good, but it's not great. Services and other up 50%.

[00:31:09]Margins down 41 bips, 16.8% 8% total gross margin. I mean, that's down from 21.1% in Q1.

[00:31:20]Auto gross margin 16.9%.

[00:31:26]On the bright side, auto margin X credits actually up 130 bips year-over-year.

[00:31:39]That's actually bullish, especially if oil comes down and you get a rate cut next year. I'll tell you with oil at 88, I'm feeling a lot less bullish on a rate cut this year. Got to be honest. Balls and strikes. Got to be honest.

[00:31:59]Just ID 3.27 billion down 4%. You know, the problem is for me, okay, the problem for me is that the margins are so bad. And I feel like the margins will be good in the future, but right now they're just bad. I mean, FSD and software up 56% year-over-year on subscriptions, 1.48 million.

[00:32:31]Uh the North American record, 55% of all new deliveries include FSD.

[00:32:39]FSD version 14 light began shipping to vehicles in the US and South Korea.

[00:32:47]And the robo taxi fleet is running V15 build. CyberCAB will use the same software version. Now Robo Taxi and CyberCab is live in seven metro areas. Austin, Dallas, Houston, ramping unsupervised.

[00:33:05]Miami, Orlando, Tampa launched unsupervised in July. San Francisco, Bay Area operating with driver safety. Phoenix and Vegas prep stage.

[00:33:19]Cybercap production is going to begin in the Gigafactory. Texas.

[00:33:24]I still want to see National.

[00:33:26]Sorry, I still want to see it. Now, Optimus Model SNX lines decommissioned at Fremont. First generation Optimus lines are being installed. Production anticipated later this year. The initial build goes to the Optimus Academy for training, data collection, and functionality development, not to customers. Optimus building construction at Gigafactory in Texas. is full swing.

[00:33:58]Now, Must did call Optimus the hardest product to scale that Tesla has ever attempted because of the supply chain. There's none that exists for it.

[00:34:11]I'll tell you this.

[00:34:15]When I was asked two months ago if I would rather buy SpaceX or Tesla, I said SpaceX.

[00:34:22]If Tesla falls, like if Tesla really falls, not to 325. Tesla really falls to like 225, 175, I'm buying the [ __ ] out of it. I'm buying the [ __ ] out of it.

[00:34:40]I think that Tesla is in a position at some point, the Elon premium, it it's got to stop. But you know what? I'm never gonna bet against Musk. Never gonna bet against him.

[00:34:57]And if anybody can figure out this supply chain and actually bring this to market, it is Elon. I just want to pay a way better price than it's trading today.

[00:35:08]And and I'm very open about that. I hate the valuation today. I absolutely hate it. But if you look at China, you look at where we're going with robotics, robotics is the future. I don't see how it's not the future. I just I don't see it.

[00:35:26]So, if robotics is the future, I got to believe Tesla's going to be the ultimate winner in production. You'll have other companies.

[00:35:38]Figure Boston Dynamics. You'll have other companies, but I just I think it Tesla's a proven company in manufacturing. It's hard for me to believe they're not going to figure this out.

[00:35:55]I would Yeah, I would start to get interested SpaceX around 80 to 100, but you know what? There's a big lockup period.

[00:36:05]I don't know. I'm very excited about their earnings call. I want to see what they say. But uh you know Tesla's what I I I said it before. I got bullish at Tesla on one point. I even bought shares on my own because of Optimus. Okay. I really hate the valuation right now and if it sells off I would really make a push into it. I really would.

[00:36:35]I don't agree. I mean, look, let's uh let's remember something.

[00:36:41]Every administration is going to have their own beliefs and ideologies.

[00:36:47]Unfortunately, when it comes to robotics and AI, I don't think an administration can stop it. Because if you stop production in the US, you give the wind to China.

[00:37:00]You give the wind to China.

[00:37:05]You give Whoa. Aaron, when did I ghost you? What are you talking about? What are you talking about?

[00:37:15]I definitely did not see you in the chat asking. I would have said Benjamin's.

[00:37:20]In fact, I've been talking about New York Stakes a lot here.

[00:37:27]Oh, that would explain it. Would you hold at a 190 price on Tesla? I mean, look, it depends. I can tell you this. At 190, if Tesla fell, let's just say hypothetically Tesla fell over the next two months.

[00:37:52]190 is a buy price for me of Tesla, but I would be willing to hold it for 10 years.

[00:38:02]So, I don't know.

[00:38:05]I don't know. But that's where I'm at on Tesla. I think it's going to fall. We'll see if it ever gets near my where I want to pay for it.

[00:38:15]Maybe I'm not going to be that lucky.

[00:38:17]Who knows? Maybe I'm not that lucky.

[00:38:24]I could be dreaming. Absolutely. I could be. It's going to be interesting to see what happens tomorrow with it. But you know what? I think that the earnings calls sucked.

[00:38:34]I don't like when Elon does the earnings calls. I think they need somebody else to do them. But you know what? It is what it is.

[00:38:43]Now, company that I thought did excellent, Service Now. I think Service Now did absolutely excellent. I mean, this is just You talk about a setup that was one of the worst setups you can possibly get. I mean, the setup was so damn bad heading into this print. McDermott slayed it.

[00:39:13]McDermott deserves to hold the Excalibur because he slayed it. I mean, this has been bumping around 80s and 90s and low hunds. Took a brief stint up to 130 and back down.

[00:39:28]You had IBM scared the market. Then Pegasus Systems scared the market. I mean, the street the street was looking for 86 cents in EPS and 3.97 billion in revenue.

[00:39:45]Service Now beat top and bottom line 90 cents and 3.99 billion. Now I did not like that McDermott was talking about they're the fastest growing enterprise software whatever the statement was they said. I don't remember his exact words.

[00:40:02]I didn't like it unless he's just not and maybe I gotta relook at it and see the context.

[00:40:12]But I mean Z uh Palunteer's got a way bigger growth rate and a way bigger rule of 40.

[00:40:22]I mean operating rule of 56 on its way to rule 60 for service now.

[00:40:32]Sure. Great.

[00:40:35]I mean, they're also looking at it as an operating rule of 56 with their subscription growth plus free cash flow margin. A little bit different, but once again, I mean, Palunteer's growth rate is just so much better.

[00:40:55]But you know what? This is an incredible company, incredible earnings. They are absolutely slaying it. Subscription revenue was up 24.5% year-over-year.

[00:41:10]150 bips above the high end of guidance.

[00:41:14]I mean, you got the revenue 24% year-over-year.

[00:41:18]Non-GAAP diluted EPS 11% year-over-year.

[00:41:22]And you know what? Regardless of Mcder saying it's the fastest growing major enterprise software companies that's what I believe he said doesn't matter misspoke forgot about Palunteer omitted it like I would omit a question on SATs so be it service now AI crossed a billion in annual contract value I mean that's the stat that I think people need to run with agentic deployments AI grew 9% 9x 99% 9x in nine months.

[00:41:59]Pretty incredible.

[00:42:03]123 deals over a million dollars.

[00:42:07]123 deals. That's Palanteer type numbers. Now granted, Palanteer did 204 over a million, but still 123 is nothing to shake your head at.

[00:42:21]That's up 40% year-over-year.

[00:42:24]658 customers above 5 million. You got the CRPO up 21% year-over-year.

[00:42:34]I mean, pretty awesome. Contracted revenue contracted up 21%. The total RPO 29 billion up 21% year-over-year.

[00:42:50]I think this was great. Margins are good. Look, they've gone on an M&A span, okay? You gotta expect compression when they're in an M&A span, but I think that this is going to grow.

[00:43:06]I think they're going to upsell. I think their security business is going to do very well. They have a professional services business that's starting to get monetized.

[00:43:15]There's a lot of things to be excited for for Service Now. And if you if you look at where they were and where they've gotten to and where they're going, I don't know how you can be mad at this company, they allocated 7.45 billion in cash on acquisitions in Q2 alone.

[00:43:38]8.8 billion year to date. Move works, Armis, Vza, I mean these are Armis is going to be transformational if you ask me. I think it's going to be transformational.

[00:43:52]A lot of these deals debt funded, 3.9 billion senior notes issued, 3.5 billion commercial paper, 1.5 billion repaid, plus 4 billion term loan drawn. Total debt, 7.5 billion.

[00:44:08]Cash plus investments, it fell. We're at 6.7 billion. But once again, balance sheet's clean. I like it.

[00:44:16]Operating cash flow 587 million. I mean, you really gotta like it.

[00:44:26]I don't know. I don't know how you can look at this print and not get excited for Service Now.

[00:44:32]Did they prove out the SAS case the way that Alphabet proved out the AI case?

[00:44:38]No. They proved out the Service Now case. That's what they proved out. I mean, if we look at how much this company has just gotten clobbered, I mean, does service now deserve to be trading where it was in April of 2023?

[00:45:08]I don't think so.

[00:45:10]I really don't think so. I think they're a stronger company now than they were.

[00:45:16]I think they bottomed.

[00:45:18]Like I'll say it and I never, you guys know I never say this after this report.

[00:45:24]I think Service Now bottomed. I'm not just getting excited. I'm not a shareholder, okay? I am not a shareholder.

[00:45:32]I have no horse in the race. I think they bottomed. I really do.

[00:45:40]I really do. I think they bottomed. I don't think they go below 80. We'll see.

[00:45:46]We will see. This is a chart that sucks with a great operating business.

[00:45:54]Would anybody really be surprised if they got to 150? I don't think so. I mean, [ __ ] they were trading at 150 in 2024 and then spiked to 240. Service Now may be one of the uh one of the real big SAS plays that really works out in the next six months. We'll see.

[00:46:16]They have a tremendous moat.

[00:46:19]Kevin, thank you very much. Money is funible. I appreciate it. Thank you.

[00:46:30]Yeah, I look at this and I'm just like, you know what? I think people got scared for the wrong reasons here. Is there really a reason for them to take that much of a nose dive? No. Look, I'm calling balls and strikes. I got no skin in the game. I don't have to say I like Service Now. I do. I like it. I think it's a great quarter. I think they are proving out that this is overdone.

[00:46:54]And if we look at where let's look at um let's bring up tip ranks. Let's see where they believe this is going.

[00:47:12]I happen to like tip ranks a lot. I almost typed in tip ranks. Oh my god.

[00:47:19]Service now.

[00:47:22]Okay. 140 140 talking about 47% upside if this pans out.

[00:47:33]29 buys, two olds, one sell. I wonder how this is going to change.

[00:47:42]I know. I talked to Chris this morning and you know what?

[00:47:49]I understand why he sold. I mean, if you listened to the stream that him and Tevis did, I would never say, and I knew how much money he had in it. He told me I would never say anybody's personal business out loud. Okay? He said it out loud, though. He told everybody how much money he had in it and how much money he still has.

[00:48:16]Yes, he has a fourth of what he had in it yesterday, but you know what?

[00:48:26]It's still a good position. And you know what? He still got a lot of exposure to it. Quite honestly, I don't know that he made the bad move.

[00:48:41]It's up four and a half% right now. I'm not sure what price he got out of it. He ended up hedging.

[00:48:49]And you know what?

[00:48:51]I don't know that it was a it was the right play for him. That's all that matters. He's the one that has to live with it. Nobody else. He straight up said that he still thinks it's going to do well.

[00:49:04]So, we'll see.

[00:49:07]We will see.

[00:49:14]I mean, Jay-Z said it. I even though he said publicly, I'm not going to say a number, but yeah, it's it's that it's that neighborhood.

[00:49:27]But you can't go by one person exiting their position. He had reasons to exit.

[00:49:33]If you're looking at Service Now for the company it is today. Okay, the company it is today.

[00:49:41]I mean, looks pretty exciting.

[00:49:48]Oh no, what is this guy doing?

[00:49:55]And now I lost it. I went to go to seeking Alpha and there was a blurb about uh Trump ordering something with the military. Here we go. What's he doing?

[00:50:04]Donald Oh no.

[00:50:08]All right. I don't really want to talk about it, but Donald Trump orders military to open the gates of hell as allies fall into Iran's firing line.

[00:50:18]Jesus Christ. God help us.

[00:50:26]All right, I am going to go truth social and I'm going to get back to service now. I'm going to look at the forward numbers. I want to see exactly what he said. I don't want to look at any news outlet. I want to go directly to truth.

[00:50:48]Well, Trump reposted it, I guess.

[00:51:05]Okay, great.

[00:51:09]Great. Just what you want to see. So the actual article said uh United States Military Central Command Sentcom has now announced another round of strikes against Iranian military targets. The announcement came marking the 12th night. Earlier on Wednesday, commander-in-chief said, "From this point forward, anytime the Islamic Republic of Iran shoots at a ship in the straight of her moose, whether by missile, rocket, drone, or any other device or weapon, the United States will bomb and destroy one bridge or one power plant." Okay, that's old news.

[00:51:46]Not happy about this. That's why oil is spiking.

[00:51:54]Un very unfortunate. Look at this.

[00:52:09]8826 WTI 8826 Brink crude 9582 We're back in a bad way. We are back in a bad way.

[00:52:25]SPSS, thank you very much. June, thank you so much. Really appreciate it.

[00:52:35]Not the numbers you want to see, ladies and gentlemen. Not the numbers you want to see.

[00:52:45]All right, service. Now, let's look at the forward numbers. Let's see if we got a little bit of a turn. Let's see if anything's coming out.

[00:52:59]Oh, this is the cheapest I've ever seen Service Now trade at, ladies and gentlemen. It is the cheapest I've ever seen them trade at. Under 25 times forward, or this year, current year, 20 times forward, 16.78 times 2028.

[00:53:21]Insanity. This is insanity.

[00:53:25]Absolutely insanity.

[00:53:32]I don't even know what to say. I may start a position tomorrow.

[00:53:37]I may restart a position with how good I think this quarter was.

[00:53:42]I don't know. I got to figure it out.

[00:53:44]What did I do? I haven't even You guys are going to see a raw reaction is I have no idea what IBM did. All right. So basically they made a smart move by announcing early took the sting out.

[00:53:59]I'm gonna have to go through the chart.

[00:54:02]I'm going to have to go through the transcript. I just don't want to do it right now. Went through too much already today with these earnings calls.

[00:54:11]Painful. If every earnings call was like service nows, I'd be happy. Google and Tesla's so boring.

[00:54:20]McDermott. Everybody needs a uh master class. Yeah. I mean, I'm not necessarily a buyer.

[00:54:29]I'm thinking that Service Now is ripe.

[00:54:32]I'm thinking Service Now is uh inexpensive, and I'm considering it. I'm not in it, but I'm considering it.

[00:54:44]I wonder what uh Corey's option chains are like. Let's take a look.

[00:54:51]Coreweave up 3% after hours. I love it.

[00:54:55]Wait, people really hate this company.

[00:55:00]I feel like I just wrote an article about them not too long ago since July 6. Sell strong by strong buy, sell, strong by strong buy, hold, buy, strong, sell, hold. People legitimately hate this company.

[00:55:14]Hate it.

[00:55:19]All right, tomorrow's Thursday. Let's go to the end of the month. Wow, that's big.

[00:55:27]And you're getting paid what? Three and a half% on the 90.

[00:55:36]Big numbers.

[00:55:41]Can still make a percent on 100. Oh my god.

[00:55:48]option contracts. Oh my god.

[00:55:53]Incredible. How about the end of August?

[00:55:56]Damn.

[00:56:01]Can write the 130s and pull in a buck 93 for basically five weeks worth of work.

[00:56:08]I mean, that's a big premium, right?

[00:56:13]Big premium.

[00:56:20]I don't know. I think today was good.

[00:56:21]Look, overall, I think that the I think that Alphabet really did it tonight. I'm going to be doom scrolling on X. I want to see what the Bears say.

[00:56:36]I want to see the Bears come out of hibernation.

[00:56:40]I want to see the [ __ ] that happens.

[00:56:44]But this just revalidated everything that I think that I has been in my mind.

[00:56:50]I think we're early and I think the AI revolution doesn't stop here. I don't think it stops anytime soon.

[00:57:01]Okay.

[00:57:04]Covert big bet.

[00:57:07]I'm not saying that you can't vibe code stuff, but vibe coding with service now does. I don't know, man.

[00:57:17]I don't know.

[00:57:21]I don't know if that's really a fair statement.

[00:57:30]We'll see. I mean, look at that's been the argument that people can vibe code these companies away. We're not seeing it.

[00:57:38]We're not seeing it. Do I think that Cororeweave can become a $1 billion company? What's the market cap now?

[00:57:53]Yes. Yes, I do. Yes, I do. It may take two or three years, but yes, I do.

[00:58:06]And look here, here's what I'll say. I'm not uh trying to pick a fight, okay? Not trying to pick a fight. What I would say is that when you think about Service Now, this is not a consumer-grade product.

[00:58:24]Can a small business, five, 10 people, maybe 20 people, create something they can use? Yeah.

[00:58:31]Yeah. Sure.

[00:58:34]Enterprise Gray. And here's the big difference and just follow me down this path for a minute.

[00:58:40]Okay.

[00:58:43]Oh, Brandon, I'm going to answer your question in a minute. Let me get this thought out.

[00:58:49]Keep in mind what I used to do for a living. Okay.

[00:58:53]Keep in mind co so covert. Let me answer your question.

[00:59:00]when you are at a large company and granted I wasn't at the biggest company but we had 4,500 employees like we were big right like 4,500 people that's not a small business the decision making process it's very very simple the opinions of most employees never get factored in. That's just the honest truth. They're never in the room.

[00:59:36]They're not in the RFP.

[00:59:39]And it is not just about what Service Now can or cannot do or can you vibe code away. You have to look at it like this. I'm actually going to move the comments so I can't see them so I don't get distracted. And you got to think about this with a lot of companies, okay?

[00:59:58]When you're in business and you get audited, auditors ask the questions about how is your data stored. They ask the questions about who houses your data, who scans your data, who works on the data. Then they want to see sock two reports. They want to see sock three reports. They want to see very specific questionnaires answered with a lot of cyber security stuff.

[01:00:28]Not to mention with cyber security and cyber attacks on the prowl and getting more advanced the company that you use to house your organizational workflow, your ticketing and basically everything for it. You got to make sure the security of that is exquisite. Not to mention not to mention a CTO or a CIO, the chief technology officer or the chief in chief information officer, okay?

[01:01:09]When they make a decision. So, think about it like this.

[01:01:14]You have an IT department of 30 or 40 people.

[01:01:18]Some companies way bigger. Look, when I was at Bed Bath, when Bed Bath was an $80 billion company, the IT department was over 500 people. I mean, we had IT East and IT West at the corporate campus. It was crazy. I could tell you stories about when Steve Tamaris walked around and said, "I want everybody to see out a window."

[01:01:44]And we demoed the office. The production that it was with it was insane. Now when a CIO or a CTO decides to get rid of Service Now because you can vibe code away, their career is on the line now.

[01:02:02]It's not necessarily Johnny and Victor who actually vibe coded the products.

[01:02:10]It's the CIO or the CTO. It's their head on the pike if it goes bad because they're the ones recommending to the CFO and the CEO and the COO that, hey, we can do what Service Now does internally and save a million bucks.

[01:02:30]And look, you'll get some people that make that pitch because they think that it's going to make them look better come bonus time or come annual review time.

[01:02:41]And maybe it does for the first year, but in the long run, those decisions more than likely are going to come back to haunt you. And corporate America works in a very different way. So you hear all these people on X commenting this, commenting that. I don't know what they do. Okay? Maybe they have similar experience that I do, maybe they don't.

[01:03:04]I don't know. I can tell you that from my experience, I would find it very hard to believe that any CTO or CIO worth their weight and salt would make that type of recommendation because it's their head on the pike. Now, for a very small business, I don't think it matters. I don't think that very small businesses, 5, 10, 20 people are really using service now. So, sure, you could vibe code it, but you're a big enterprise solution company. I think the chances are uh very slim of coding away service now.

[01:03:39]And listen, service now is in cyber security.

[01:03:46]Not to mention, there's so many things that have to happen. You don't just vibe code it and then it just works. You need maintenance. You need updates. You need a lot of stuff. There's a reason these companies patch patch patch.

[01:04:01]So, I'm of a different mindset.

[01:04:06]I'm in a different mindset. But you know what? That's what makes the market. You need people selling shares and buying shares. Happens with everything. Maybe I'm proven wrong and I could be. I could be. But to me, my knowledge of corporate America, I don't know.

[01:04:24]I think Service Now is going to be just fine.

[01:04:34]Why build all this AI infrastructure if the models won't be able to do what now does? Okay.

[01:04:43]Okay. We'll see. Listen, I can't prove it. I can't disprove it. You can't prove it or disprove it. We're going to have to see in five years from now what happens. Maybe I'm wrong and I'm willing to say I could be wrong. Okay, I could be wrong. Uh, no, I would say that uh Service Now is pivoting security because it goes handinhand with what they do and they're able to upsell current customers.

[01:05:16]So, we'll see.

[01:05:19]We will absolutely see. I think there's a better argument for getting for vibe coding away Adobe or into it. I I will definitely say that those are likely to give vibe code away compared to service now. We'll see.

[01:05:44]Uh I don't know if I agree with that. We are spending trillions of dollars, but I don't know that it's so we can get rid of traditional SAS and traditional web.

[01:05:59]Either way, that's why I'm buying data center companies because I think that it's just the the long-term winners data centers. I think that Coreweave is a long-term winner. Nebius is a long-term winner. I think they're all long-term winners. Truly do. I truly believe they are all long-term winners.

[01:06:23]So, we'll see. But I think that this is still very early.

[01:06:30]I think AI's got a lot of good things it's going to do.

[01:06:34]I'm super bullish on I mean, [ __ ] I spend a bunch of money on it every month.

[01:06:40]I'm actually pretty impressed with Open AI's 5.6. six.

[01:06:52]I did see what Cuban said. I absolutely saw it. And you know what? We'll see. I don't know. I I I mean, listen, it Cuban obviously very smart guy. He's made a tremendous amount of money. Um he's very well informed.

[01:07:13]I think he's wrong, but once again, I could be wrong. And I never say that I'm 100% correct. I absolutely could be wrong. But you know what? If data centers are a waste of money and they're a really expensive paper weight, we got really big problems, ladies and gentlemen. Ash, thank you very much.

[01:07:32]Really appreciate it. Like, we got really big problems if that's the case.

[01:07:39]All right, give me one sec.

[01:07:51]Yeah, the listen the Nebias buy, the corewave buy.

[01:07:58]I think they're going to be good.

[01:08:01]I think they're going to work out well for us.

[01:08:08]So, we'll see. We'll see what happens.

[01:08:23]Could you build out what Covert is talking about on Apple's upcoming M7 chip?

[01:08:29]Um, what did he say? I missed the comment.

[01:08:38]Okay. So, every comp will have their own model that handles all the software needs.

[01:08:44]I think Covert's right to a degree.

[01:08:48]I do believe that Covert's right to a degree on that statement. I do.

[01:08:54]I think that you're going to get computers where so I agree with that statement also that models will become commodities and every company will have a priorit proprietary model that handles all software needs. I'm not saying that they won't have a proprietary model and I do think the way Apple is positioning computers with 1.5 terabyte max on RAM, I think they're positioning their computers to be able to handle workloads being able to handle workloads locally.

[01:09:38]And I and I think that that's a great thing. What it's going to mean for SAS, I couldn't tell you. I don't know. If there's one thing that I would say that I'm very confident on, we're still early and whatever that means, we're going to have to find out. But I think these computer companies will figure out a way to make computers good enough so Frontier models can run locally instead of the cloud.

[01:10:01]We'll see. I don't know.

[01:10:04]A lot will depend on how Apple is able to build the M7 chip because then it brings up the question if Apple and now keep in mind like let's go to Apple's website real quick. Okay.

[01:10:19]Um Covert, do me a favor. Stay here for one minute. Covert. Please help me out with this line of thinking because you brought up some good points that I want to go over and I'm agreeing with you on some of them. Like I'm not trying to be a dick. I'm legitimately agreeing with you on some. So, if we go to the MacBook Pro right now, not the 14. We need the uh we need the 16 blacks first one. Who cares about the display? Whatever. So, you go M5 max chip. We go the more expensive chip. How much RAM can we put in? So, we could only go up to 128 gigs. We're already at seven grand for the laptop. Okay, we're already at seven grand. Maybe two terabytes is fine. We'll keep it at that. So, okay, we're at seven grand for the M5 Max with 128 gigs of RAM.

[01:11:23]The M7 chip is going to have a Max and a Pro or I'm sorry, a yeah, a Max and a uh a Pro, Max and Ultra. The Ultra is the one that's going to have 1.5 terabytes.

[01:11:38]I mean, what's that going to cost? 15 grand.

[01:11:43]I mean, I'm just trying to think.

[01:11:45]Upcharging on memory, up charging on a bigger chip, the chassis, you may need a different motherboard. I mean, at these prices, that uh MacBook would probably be 15 or 20 grand, I'd have to think, with a 1.5 terabytes of RAM. And look, we don't know what the uh requirements will be. I mean, that's what the rumor was. Maybe you can run it on 512 gigs of RAM. I have no idea. I don't know. What do I What do I know?

[01:12:18]What do I know?

[01:12:19]Um, I don't think that those computers will be for normal people. Okay, the fool. I mean, seven grand for this Mac right now with 128 gigs. They're talking about an M7 Ultra chip with 1.5 terabytes.

[01:12:46]It could get 15, 20 grand.

[01:12:50]It absolutely could.

[01:12:52]So, I don't know. We're going to have to see what happens with the computing, but this could be a situation where it could be a situation where they are absolutely running models locally. I don't know.

[01:13:06]It's going to be It's going to be exciting.

[01:13:15]I got to tell you, I may like Micron here. We'll see. Kind of like Micron in the streets. I could buy a couple of cows.

[01:13:31]You know what I mean? A couple of cows for that amount of money.

[01:13:36]All right, everyone.

[01:13:39]We are going to get going.

[01:13:43]Appreciate everybody being here. Thank you everyone. Hopefully you enjoyed the stream. Listen, if you enjoyed the stream, do me a favor. Please like and subscribe. You would be very surprised how many people are not subscribed to the channel that actually tune in a lot.

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[01:14:18]Drink some milk, relax, watch some TV.

[01:14:22]Thank you. Have a great evening.