Big Tech Earnings Put the Rally to the Test; Warsh’s Latest Fed Decision 10/28/26

Alphabet

Across the shows: 21 speakers in other episodes, 20 bullish and 2 bearish calls, past 30 days

• Mark Mahaney · Evercore ISIBearish

  Google's advertising growth decelerated across the board, the second straight quarter, which he calls the overwhelming bad news.

  Search, YouTube and ads as a whole decelerated, even on a two-year stack basis, which he calls a surprise. Meta's two-year stack accelerated over the same period, so he sees possible share shift toward Meta. He thinks fear of AI agents and agentic search taking search share will rise, but he is not sure it is warranted. Cloud growth beat and cloud margins held at 36%, but he says the advertising deceleration is the overwhelming bad news.

  “Advertising kind of for Google across the board decelerated. Now it's the second quarter in a row that it's decelerated. Search, YouTube, ads as a whole decelerated even on a two year stack basis.”at 24:06

• Brent Thill · JefferiesUncertain

  Alphabet missed on nearly every metric except cloud; search slowdown is the problem, though the stock looks cheap.

  Thill says everything went wrong for Alphabet this quarter: search growth slowed to 12% from the 19% and 17% of prior quarters, when investors had wanted something in the mid-teens. Cloud was the only business that beat, at 103% growth, though only by a little, and it missed some high-end targets. YouTube and operating margin also missed. He says Google doesn't guide, so its prints tend to produce bigger moves. He still calls it a great company and cheap, so the view is mixed: weak results on the numbers, but valuation support.

  “Search, you know, was 12%. It went nineteen seventeen twelve. That... is a slide that no one wanted to see.”at 45:31

• Paul Hickey · Bespoke Investment GroupBearish

  Search weakness will overhang Alphabet unless management addresses it, and this could be its worst earnings reaction.

  Hickey says the search business will stay an overhang unless the company addresses investors' questions. Management did not fully answer them on the last quarterly call, and if it doesn't answer them on this call either, the stock will keep weakening. He notes the worst one-day earnings reaction in the company's history was a 9.7% decline, and says this could be its worst reaction as a public company, which is a negative.

  “The search is gonna just be an overhang unless... Last quarterly report, they didn't quite address those needs... Those questions. And if they don't address them on this call, it's just gonna be more weakness.”at 47:25

Oracle

Across the shows: 18 speakers in other episodes, 1 bullish and 19 bearish calls, past 30 days

• Paul Hickey · Bespoke Investment GroupBullish

  Oracle needing only about $20B more from capital markets is encouraging for the AI trade.

  Oracle is showing it will only need to go to the capital markets for about another $20B, and he calls that encouraging. Oracle's announced limit on how much more money it will raise eased worries about the financing cost of the AI buildout. Those worries had weighed on AI-linked stocks, and the news lifted them.

  “they are only gonna have to go into the capital markets for another 20,000,000,000, which is encouraging.”at 4:13

• Brent Thill · JefferiesBullish

  Oracle has upside: its capex is lighter, funding needs are lower, and earnings power could justify a much higher stock.

  Thill says Oracle's analyst-day forecast matched its historical guidance, and that nobody believed the $20 earnings-power target. He argues that even $10 of earnings power, or half of what is guided, at a 20x multiple implies a $200 stock. He says Oracle's capex is much lighter than peers' because it plugs into other companies' data centers rather than building its own. The only thing that changed was cash flow and funding needs: he expects free cash flow to start building in the back half of 2028 and reach about $30 billion in 2029. He concludes the market has misread Oracle by lumping it in with the risky data-center builders, and that the AI giants can build infrastructure with less money than expected at high margins.

  “At the analyst day, they basically just gave a forecast that matched what they've been giving historically. No one believed the forecast, and that was to get the $20 earnings power. We said if... Even if they got $10 of earnings power or half of what they're guiding, and you put a 20 multiple, this is a $200 stock.”at 42:05

Meta Platforms

Across the shows: 59 speakers in other episodes, 47 bullish and 32 bearish calls, past 30 days

• Mark Mahaney · Evercore ISIBearish

  Meta was late to recognize how much capital it needed to raise, so the market is correctly penalising it.

  Google raised about $160B over the last twelve months and got ahead of its capital needs. Meta had to reconsider and raise more, and the market is penalising it for being late to recognize its capital needs. Amazon has also raised over $100B. The contrast is that Google's raises were earlier and more proactive than Meta's.

  “And the market is correctly dinging them for being a little late to realize how much capital they needed to raise.”at 26:31

DoorDash

Across the shows: 1 speaker in other episodes, past 30 days

• Mackenzie Sigalos · CNBCUncertain

  A DoorDash–Instacart combo could face antitrust questions, but the current administration makes approval easier.

  Bernstein modelled a combined DoorDash and Instacart, which would hold about 88% of US third-party delivery. That share raises the question of whether antitrust scrutiny comes into play. She says the timing is an advantage under the current administration. DoorDash is down 7% week to date and Instacart is up about 15.5% on deal news, with a possible close as soon as the next morning.

  “You've got Bernstein modeling what a combined Dash and Instacart might mean. They're looking at 88% market share in terms of those third party delivery services here in The US... certainly an advantage”at 31:24

Microsoft

Across the shows: 21 speakers in other episodes, 17 bullish and 1 bearish calls, past 30 days

• Brent Thill · JefferiesBullish

  Microsoft is bullish: Azure and M365 accelerated and enterprise AI deployment is early, so the stock should rise.

  Microsoft beat on both lines, with Azure growth accelerating and M365 also accelerating, and capex a little lower while remaining-performance obligations (RPO) rose massively. Thill says the quarter's operating margin is one of the highest the company has posted, even while it spends heavily on AI, and that the company keeps improving margins. He argues the key question is the sustainability of AI demand, but says 'we're really, really early in enterprise AI deployments,' which he thinks bodes well for Microsoft over the next year. He says the stock is still going higher.

  “But I think, again, we're really, really early in enterprise AI deployments, and that is... Bodes really well for Microsoft, over the next year.”at 41:25

AI infrastructure & data centers

• Scott Bessent · U.S. Department of the Treasury

  AI-related debt stress is not a problem; neoclouds are a small part and deals are still getting done.

  Treasury monitors the lower end of credit, including junk bonds and AI-related debt with double-digit yields. He does not think it is problematic because neoclouds are a small component of the wider ecosystem. Financing and deals are still getting done, and companies like Meta are choosing to finance with equity.

  “I don't think it's problematic at all because, you know, we're seeing that that's the neo clouds or a small component of the overall ecosystem.”at 18:13

• Mark Mahaney · Evercore ISI

  Alphabet's cash and operating cash flow let it fund its AI spending without raising capital.

  Alphabet enters this with close to $200B in cash and will lose about $20B in free cash flow this year, but it generates roughly $200B a year in operating cash flow. He thinks a few tweaks won't create a funding gap, and he doubts it needed to keep raising since it planned ahead. Google Cloud growth was strong with operating margins held at 36%. He says he cannot be 100% sure and hopes management will say it has raised all the capital it needs.

  “this is a company that's going into this with close to 200,000,000,000 in cash... This is the company that generates 200,000,000,000 a year roughly in operating cash flow.”at 27:48

• Brent Thill · Jefferies

  Hyperscaler capex may moderate from full throttle, which would help AI investments reach companies that monetize them.

  Thill says the market is bracing for a capex moderation after companies like Oracle and Microsoft signalled they may not need to spend as much. He describes capex as having been run at full throttle and says it could be pulled back to seven or eight, from eleven. He argues that this would redirect AI investment toward hyperscalers that will actually monetize it, and that the big spenders can build what they need with less money than the street assumed.

  “You know, we've had the throttle at 11 on on CapEx, and maybe we pull it back to seven or eight. And I think that would bring many of these AI investments back into some of these hyperscalers that are actually gonna monetize these investments.”at 40:41

US Treasuries & yields

• Scott Bessent · U.S. Department of the Treasury

  Fed cuts do not pin long yields; after the 2024 50bp cut, ten-year yields never returned lower.

  He says the Fed's 50bp cut in 2024 was followed by ten-year yields that never went back lower. That shows the bond market does not simply follow the Fed. Yields are influenced by many things, including term premium and exogenous factors. He says he always respected the bond market. He suggests the bond market has been doing tightening on the Fed's behalf.

  “We saw a 50 basis point rate cut, and ten year yields have... They never been lower since then. So the ten year yield never looked back.”at 12:16

• Scott Bessent · U.S. Department of the Treasury

  Long-end Treasury yields are tightly correlated with oil prices and crack spreads.

  He says the market has shown a very high correlation between oil prices and the ten-year and thirty-year yields, and crack spreads. He expects oil to be better supplied once the Iran conflict ends, which would ease the pressure. Yields have stayed where they are while oil is elevated, and he thinks Fed chair Warsh can steer between growth and inflation.

  “I think that we've seen a very high correlation between oil prices and the ten year, the thirty year, the longer end of the market and between crack spreads.”at 13:57

AI chips & semiconductors

• Paul Hickey · Bespoke Investment Group

  Semis and memory stocks must lead the AI bull market; holding their support range is key for the trade.

  He calls this an AI bull market, so the semiconductor and memory stocks must lead it. They finished last week at support after a washout and are rallying from it. As long as they hold that range, he thinks it is very positive for the overall trade. He sees these two sectors as the keys to the market right now.

  “This has been an AI bull market, and for those... AI is gonna have to lead, those two sectors need to lead. They finished last week right at support and they're rallying.”at 4:59

US rates & the Fed

• Scott Bessent · U.S. Department of the Treasury

  Fed should not hike into an energy supply shock; the ECB's 2008 hike into one was a policy error.

  He argues the current price pressure is an energy supply shock, and the Fed should keep an open mind about its transitory nature. He cites the ECB hiking into a similar energy price shock in 2008, one of the great policy errors in central banking history, before the GFC. He says a future hike would not necessarily be a mistake, since the Fed's statement implies the economy is accelerating. He says the Fed cannot fight energy-driven inflation with rates.

  “I think we are getting an energy supply shock here... When the ECB hiked into a similar energy price shock, and then... we obviously saw what happened in September of o eight in the GFC.”at 10:29

US growth & recession risk

• Scott Bessent · U.S. Department of the Treasury

  US third-quarter GDP should be strong, with the Atlanta Fed estimate well over 3%.

  He says he has not seen the number yet but expects a strong Q3 GDP print. He cites the Atlanta Fed GDPNow nowcast at well over 3%. He links this to the Fed's statement, which implies the economy is accelerating. The number is due the next day.

  “I think we're gonna get a strong GDP number for the third quarter. Atlanta Fed is well over 3%.”at 11:27

Middle East & Iran

• Scott Bessent · U.S. Department of the Treasury

  The economic blockade is isolating Iran; its economy may contract as much as 25% in a year.

  He says the blockade, called the toughest operation ever to isolate a single economy, has been very successful. The currency has collapsed, and internal estimates show the economy could shrink by as much as 25% from March to March, a faster contraction than Russia's after the Iron Curtain fell. Elected officials are worried, the IRGC is talking about collapse, and the regime cannot pay troops or obtain dollars. Proxy funding is being cut off.

  “We have internal estimates that show that the economy from March to March, when the blockade started... may contract by as much as 25%.”at 16:06

Europe's economy

• Scott Bessent · U.S. Department of the Treasury

  Europe's core problem is a lack of growth, which is the biggest risk to financial stability.

  At the G20 in Asheville in August, he pushed members toward growth and said the biggest risk to financial stability is a lack of growth. He says that is what Europe is now seeing. The US has a temporary price spike, but its nominal growth is much higher, and the mix should shift toward real growth and lower inflation. He has been telling allies this for months.

  “We said that the biggest risk to financial stability is a lack of growth. And I think that's what we're now seeing in Europe”at 19:23

US consumer

• Scott Bessent · U.S. Department of the Treasury

  Consumer spending is strong even though consumer surveys look gloomy.

  He says consumer surveys can look gloomy, but consumer behavior is quite strong and corporate behavior is too. He credits tax policy, trade policy, energy policy and regulatory policy, including the One Big Beautiful Bill's business expensing and the president's tax cuts on tips, overtime and Social Security. He says the midterm agenda is largely baked in.

  “consumer surveys can be a little gloomy, but the consumer behavior is quite strong. Corporate behavior is actually quite strong.”at 21:04

Tariffs & trade policy

• Scott Bessent · U.S. Department of the Treasury

  Trade deals are largely locked in, except Mexico and Canada, which are being renegotiated.

  He says the USTR under Jamieson Greer is doing a good job and a Section 301 study is still outstanding. Aside from Mexico and Canada, which is a USTR renegotiation, he says the trade deals are pretty locked in. That means no broad change to the tariff structure is planned.

  “aside from Mexico and Canada, which is a USTR renegotiation, the trade deals are pretty locked in.”at 21:38

Software & SaaS

• John Fortt · CNBC

  Application software faces a very hard road, and any perceived miss is getting sold.

  ServiceNow's results were roughly in line, but its stock fell about 16.5% after hours. He says ServiceNow is held to a very high standard because it has tended to beat. Application software companies are having a very hard road in this environment, and anything that looks like a miss is getting sold. That combines the high bar tied to its growth and multiple with the current attitude toward enterprise software.

  “application software companies... have a very hard road to hoe in this environment. Anything that's seen as a miss, you know, is tending to get sold.”at 33:53

US stock market outlook

• Paul Hickey · Bespoke Investment Group

  Gradual Fed moves in either direction are good for stocks; aggressive moves make the market uncomfortable.

  Hickey argues the market's reaction depends on the pace of Fed policy. Aggressive hiking or cutting makes the market uncomfortable, while gradual moves in either direction are a great setup, since they mean policy is tightening or easing without urgency. He says forward returns after these start-stop cycles have been much better than average, even over the next three months. The Fed's hold at this meeting fits the calm backdrop he describes.

  “When the fed's either hiking or cutting rates, when they're doing it aggressively in either direction, that's when the market gets really uncomfortable. When they can do it gradually in either direction, that's a great situation for the market.”at 48:02