Traders we up the rate cut bats as u. S. Job data disappoints to the downside. We sit down with the cfo of coinbase to break down the companys firstquarter results. Its good to our top story. That top story is apple. Shares are on track in the moment for the biggest jump since november 2022. The biggestannounced buyback in Company History probably has some part to play in that, but then there is the story that is simple. Things were not as bad for the iphone in the calendar quarter as we thought they might be. And then there is the question, what on earth is apple doing in the round of generative ai checkup lets get to mark gurman. Long day for you yesterday. I think that sums it up. Not as bad as we had feared. But we still have questions about the path forward. What did executives tell us last night . Mark i think you are exactly right, as always. Things were not as bad as we anticipated. Wall street anticipated, with their estimates. But things were not great. They still had about a 5 billion decline on overall revenue. They still had a pretty big decline on the iphone. The mac and services were bright spots. People knew that new models were coming out next week, and wearables, home, and accessories, that was quite disappointing, coming in at 7. 9 billion 7. 9 billion. Despite the fact that the vision pro launched on february 2. Looking ahead, the big thing, Artificial Intelligence. It felt like every other question low call question on the call was about ai. They did not move an inch on that front. You will hear more about that at the worldwide developer conference. Ed you have already set out the chronology of what is going to happen. China is a story in and of itself. There are some idiosyncratic things about product lines that do well and dont. I think iphone was probably brighter than expected. But i think what stuck out to me is a concession, may, from tim cook that china is becoming a more competitive marketplace for them. Mark we certainly mentioned several times that china is the most competitive market in the world. The most interesting thing that happened with the china numbers yesterday is china came in about 1 billion betterthanexpected. But what tim cook said is, the iphone grew in mainland china. This is interesting, because counterpart intelligence, idc, some other analyst firms came out and said the iphone was cratering during the quarter. The discrepancy there was that some of you talking about unit sales. And tim cook is probably talking about revenue. If the asps went out, there is a chance unit sales were down, but revenue actually was up, and they probably grew a little bit in mainland china. Either way we still are facing concerns in china for apple. There is newfound competition from huawei. There are those government bands, but certainly tim cook, they seem optimistic about china when it came to the iphone. Where coke seemed less optimistic was other products. He didnt explain what was doing so poorly for apple in china, why revenue was down in china, but he said apple does have work to do. Now, one other thing. Apple could have grown quarter over quarter. He did not specify when that growth occurred. They may be down on an annual basis. Everyday grew over the last quarter. Maybe they grew at some period during the quarter. There is a little more explanation to do from coke, but they are not going to give those details. Ed the big area where explanation is needed is the roadmap for generative ai. Check out marcs latest reporting next week with the let loose. The focus is ipad. You should find out some more about generative ai. Lets stick with apple. Joining us is jean munster, deepwater asset management. You were clear on your posts last night, how you read the earnings call. What is the standout story for you . Just one thing you learned from apple last night . The one piece i learned is that the core business is not doing great, but it is holding together. There is this fear that estimates would be revised down for the june quarter. They basically maintained them. That is testimony to the strength of their brand across the product lines, whether it be the software and services, or to even the iphone being down, it has held together. What i take away is in the june quarter we are going to see Revenue Growth for the first time in two years, over the last two years apples Revenue Growth has averaged down. 3 . It is going to be up a couple of percent in june, and a percent in december. That turned around, that reacceleration is the one thing that stepped out today. Ed im showing our audience and you a table, and the table shows the list of largestannounced Company Share buybacks in history. Less you have been living under a rock you will see there is only one name on that list. It is apple. What is the point in a 110 billion buyback . Gene there is two points. Number one is, they are sending a message to investors that they are going to continue to return capital, despite going into an investment fees related to ai phase elated to ai. Cook said it is going to impact most of their products. Not just software, but hardware. The fact that they are increasing this buyback during that period, that is one piece. The second is, their cadence to getting to net cash neutral. This has been a goal for them for the past five years. Right now it is at 57 billion. They want to bring that down to zero. That means they have the same amount of cash as they have in debt. What i see, that step up in the buyback, is an indication they want to quicken the pace. Cfo luca did mention on the call they think they will not get to net cash neutral anytime soon, so that shows the strength of the overall business is really powering this buyback. I think investors should remain confident that ultimately this business is producing an incredible amount of cash. Almost 90 billion a year in free cash flow. Despite the revenue being down 5 yearoveryear. Ed we are speaking with jean munster of deepwater asset management. You do research into apple. You yourself hold apple shares. The firm does not. Argue me on this one. There is a frustration from people around the world, they might not be investors, they might be consumers that have an iphone and they say, come on, man, this is apple. Stop messing around with buybacks and actually do something on the innovation side. Give us the generative ai or a serious hardware upgrade. Do you have any sympathy with that . Gene absolutely. I mean, apple has been painfully silent on the topic in 2023. Of course, as mark mentioned, about every other question on the call was related to ai. They are late, there is no question about it. Another piece sympathizing with that view, is that they got asked a question about capex, basically going back to what happened with meta, and google and microsoft, increasing capex in 2024. The expectation is that if apple is serious about ai they going to be pushing their cap backs at a similar rate. Luca sidestepped the question. He outlined how they approach, and they work with third parties. But they didnt give any indication that would be stepping up meaningfully. They maintained their margin guidance. I think investors can show some, i think, some frustration related to, again, the pace. We are going to know more in june. I would have welcomed them to say they were spending a boatload on capex. I dont think theyre going to build a Foundation Model to the level that microsoft, google, and meta are doing. Some of that frustration is to be understood. Another piece is they are on board and they are going to show some exciting things in june and beyond related to ai. Ed lets scratch deeper. As often is the case with luca, it is reading between the lines. I think that is a little bit kind. We have very exciting things to talk about soon, but obviously we think it is a great opportunity, it is a great new technology. We think it has a lot of potential. What does an apple generative ai tool or platform look like, in your mind, if indeed, reading between those lines, apple is working on something to that effect . Gene its going to be in two or three phases. What we will see in the back half of this year is new operating systems. It is going to simply integrate generative ai into it. Siri, maybe you will have a conversation instead of a point answer. I suspect you will be able to ask your phone to book you an over to the airport. They will allow developers to Start Building ai into their apps, with a small Foundation Model they will come out with. I would say earlystage i think the iphone this fall, they will talk about having ai silicon in it. Not very exciting, but at least a first step. The second piece is really exciting, which is related to agent or personalized ai. This is the idea that you asked the device to do something for you and it does it has multiple steps to it and it goes out and doesnt itself. Does it itself. This is something apple has a unique opportunity in. Especially around privacy. Cook talked about privacy being a competitive advantage for apple when it comes to ai. What he is hinting to is their belief in agent ai. 2025 we will start to see this built more into the hardware, and potentially even Subscription Services that allow you to do more things based on ai. That comment to me, is an exciting product. Ed it has been a while since you have been on the show, so let me know, some value for the audience by we have you. Do you understand what is happening in the start the Smartphone Market in china . You understand the trajectory of where the iphone is going in relation to domestic oems, largely androidbased, that appear to be doing well . Gene it is something we pay a lot of attention to. The biggest force there is there is a geopolitical element to it. Even though this is not especially spoken about with chinese leadership, i think there is a recommendation that any Government Employee starts to move to homemade phones, which makes sense from their perspective. That is a big pool. There is a large population, about 50 million highend phone users that work with the government. That can have a big impact when apple is selling 250 million phones a year. I think that has an impact. I think the good news that is negative, there is no way to look at it any different. The good news is the comps do get easier, and the company is talking about diversifying away from china. But to answer your question, i think china is going to remain really important as a percentage of revenue. It is about 19 right now. I suspect that is going to drift down to 15 . Ed jean munster, great to catch up. Coming up on the show we are going to be joined by jim nejra jomayra herrera. Be right back. This is bloomberg technology. Ed lets talk about financial markets. And a zero in on the Technology Sector. This is what it looks like at the index level and macro level. The nasdaq is up 1. 5 . Semi conductors outperforming 1. 8 . And we did see a pullback in yields after the jobs number. The thing that joins all of them is the market has changed its mind again. It is basically like Rolling Hills at the moment, but the expectation from traders is the Federal Reserve will cut Interest Rates for the first time in september. They were thinking november, having earlier thought the summer, and you get where im going with that. But we focus on rates because higher Interest Rates discount the present value of future cash flows for tech. If you are a high multiple tech stock you are sensitive in a high interestrate environment. Bitcoin investing is stuck at this 61,000 level, but it is something that trades 24 7. It is up almost 5 in what is riskon mode. Tech is having a good day, and it is because of those job numbers. Lets crunch the numbers. They came in softer than expected. Nonfarm payrolls advancing 175,000 last month, which is the smallest gain in six months. The Unemployment Rate also ticked up to 3. 9 . That is the kind of dated the fed is looking at. Lets break it down with jomayra herrera, a partner at reach capital. When you track the data what are you looking for in these job numbers . Jomayra yeah, thank you so much for having me. Im generally looking at the data, looking at, one, what are the sectors driving the growth we are seeing . We have seen pretty consistently health care has been a big driver of job growth across the u. S. Economy in the economy. In this past month we saw retail, warehouse, and transportation as well continue to be a driver in job growth. Some of the things we consider as well our wage increases. Wages increased by. 2 over the past month, a little lower than we anticipated. And we also look at other numbers, like, what are the openings we see . The job openings . The report came out on wednesday and those continue to be relatively healthy and stable. Those are some of the numbers that we are generally looking at when we are looking deeply into these labor market reports. Ed did you learn anything about the Technology Sector this morning . Jomayra when it came to the Technology Sector, it is a tale of two cities. There is a cognitive dissonance when you look at the labor market reports. At a high level you see unemployment continues to be under 4 , and that is for the 27th consecutive month. You continue to see high demand across some of these key industries, like i mentioned. Now you look at the Technology Sector more deeply, job postings for most tech jobs are below 25 from prepandemic. There is a bit of a lag in the tech sector in terms of seeing that increased demand. You see folks who have been laid off over the past year continue to fight continue to struggle to find access to jobs, particularly if they are in nontechnical roles. It is a hard pill to swallow, because when we look at the earning reports for the past quarter, whether it is meta, microsoft, alphabet, they are quite strong. But they are also showing discipline around maintaining operational efficiencies. Have not yet seen that resurgence in the same way we see the strength of the labor market across these other industries. Ed hold that thought. Earlier today we spoke to or yesterday, rather, bank of america. Listen to her thesis. Who is going to benefit from all of these chips and ai and automation checkup it is old Economy Companies that get more laborlight. That is the benefit we could see over the next 12 to 24 you know, a few years. The areas are Industries Like ours, the banks. Banks are very laborintensive. Neither is this tool we can use to replace people with bot and processes, etc. Ed taking your read of the Technology Sector, i think you agree with each other. About the direction of travel right now, about what is happening in jobs in the Technology Sector, and how technology is impacting, basically, oldschool economy. Jomayra completely and totally. I think what is interesting, never you have a Large Technology shift, often times we are very, very good at predicting what jobs we are going to lose. We are very, very bad at predicting which jobs are going to be created. In this shortterm period what we are going to feel is increased automation around tasks that right now people are doing. And that will be a net productivity gain for the economy, but there is going to be some real labor market pain felt by employees in the short term. But over time what we will see is, employees will be able to lean into human tasks, and there will be new jobs created in ways we really cannot anticipate right now. Ed jomayra herrera, partner at reach capital, great to have you on the program. Stay with us. So much more to come. This is bloomberg technology. At cdw, we get the importance of clear communication. And when your teams are spread out, thats not always easy. Our experts can help by implementing poly audio and Video Solutions to keep you connected. From headsets to collaboration tools, poly Solutions Offer simple setup and eliminate distracting background noise, so the people youre talking to only hear you. To collaborate with quality, trust poly and it orchestration by cdw. People who get it. Ed u. S. Prosecutors making their Closing Remarks annual stream of revenue for the company, and the result of this is that there has been a stifling of innovation across the the tech industry. We would have seen certain developments like i hit the market much sooner if it were not for this to to have taken place. Hey mike bear with me for one second. On a day where tech stocks are pretty markedly higher, alphabet parent of google, is the only stock thats pretty low and is a points drag at the index level for a very quick. I dont draw a causal link between the move and the news headline, just just explain what happens next in this process. Well, in this to be fair to the company, they are arguing this is not a question of anticompetitive behavior. Google is saying, we make a better product and you should not penalize us for that. But it will take the judge several months to deliberate. But we are expecting a ruling before the end of the year. This is a significant case. This is the first in a series of antitrust actions government is bringing against tech companies. We know the Biden Administration has made the whole question of competition a focus across a number of industries. But tech is really drawing the lions share of that attention. Ed bloombergs Mike Sheppard out of d. C. We are going to sit down with the cfo of coinbase to break down the companys quarterly results. From san francisco, and in a moment new york city, this is bloomberg technology. Before i started playing basketball, i was kind of quiet. I wasnt really that confident or outgoing. But now, with basketball, i feel like a leader. Yo, cayden sport for good means to me that ill be able to give back to my family and my community. Goals can be accomplished, dreams can be accomplished, but dreams are just dreams if you dont go out and try to achieve them. Learn more about sport for good at laureususa. Com. Ed welcome back to bloomberg technology. Ed ludlow here in san francisco. Lets greet lets recap the markets quickly. Jobs data, slowing down in april in terms of hiring, and the market is reacting, saying may