00:07:28 · S3, S0, Anurag Rana
[00:07:28] S3: Repeat that? [00:07:30] S0: And cash flow fell to an outflow of $ 42. 4 billion for 12 months, I guess, trailing. For trailing 12 months? Yeah. [00:07:37] S1: Wow. [00:07:37] S0: So, I mean. How do we make sense about the spend? You need the spend to be in it, right? These guys obviously have the money to do it, but they're increasingly tapping credit markets and debt markets, as we've often talked about. You guys still seem pretty upbeat. [00:07:57] S3: Yeah, but think about it this way. [00:07:59] S1: You have to invest that money because imagine the backlog that's on their balance sheets. And it's not as if they don't have really strong businesses that's driving revenue from them or cash flow from them from other side. I mean, this AWS, think about it this way, has operating margins close to 39%. That's a very good business to be in, frankly speaking. And once you gain some market share, you're going to go out and sell additional services, application modernization. I mean, we're just in this... start of this particular cycle. And I understand that cash flow is down this year. But frankly speaking, you look ahead, I mean, from the run rate of that they have for cloud, let's say about $ 180 billion, growing 40% each year. That's really commendable.
00:07:59 · Anurag Rana, S0, S3
[00:07:59] S1: You have to invest that money because imagine the backlog that's on their balance sheets. And it's not as if they don't have really strong businesses that's driving revenue from them or cash flow from them from other side. I mean, this AWS, think about it this way, has operating margins close to 39%. That's a very good business to be in, frankly speaking. And once you gain some market share, you're going to go out and sell additional services, application modernization. I mean, we're just in this... start of this particular cycle. And I understand that cash flow is down this year. But frankly speaking, you look ahead, I mean, from the run rate of that they have for cloud, let's say about $ 180 billion, growing 40% each year. That's really commendable. [00:08:48] S0: Is there a narrative around all of them? I just think about what we've heard from Meta, from Microsoft, from Alphabet, from obviously Amazon today as well. I'm sure I'm leaving out one of them. But they're not all the same companies, Anurag. We know that. But is there a narrative around the AI spend and the payoff or no? [00:09:11] S1: It's not a question of payoff. I think what has changed in the last decade I would say six months or so are twofold. One is that interest rates have gone up quite a bit. I mean, you're looking at, you know, people's ability to fund these expansion plans. [00:09:23] S3: So that's one.
00:09:23 · S3, Anurag Rana
[00:09:23] S3: So that's one. [00:09:24] S1: The second is a changing political climate, which is seeing some opposition to data center buildup. So, you know, we all know the CapEx numbers right now. But what if the data center delivery becomes a delay? Then what happens is The cash flow is still negative, and your growth rate that you are projecting out doesn't realize because of factors that are not in your control. We saw Microsoft talk yesterday about there was a delay in data centers from one of their third parties. That's the first sign we have. What if something like this happens a lot next year because the political climate is extremely bad? negative towards new data center build?