One Knightsbridge Capital Monday Espresso Podcast

Monday Espresso Podcast - 27th July 2026

[00:00:00] Rory Dowie: Good morning. Today is Monday the 27th of July. I'm Rory Dowie, Portfolio Manager here at Marlborough. Joining me today, once again is Andrew Shaw, one of the Senior Investment Analysts on the team. Andrew, good to have you back and good morning.

[00:00:13] Andrew Shaw: Morning Rory.

[00:00:14] Rory Dowie: Lots to cover this morning. Main headlines are probably from the US. We're in the thick of second quarter earning season, and last week we had some of our tech heavyweights reporting in Alphabet and Tesla.

[00:00:25] Rory Dowie: They're really the first to go in that kind of bunch of tech names. Andy Burnham also took the reins here in the UK and I'm gonna keep the update to Iran brief this week. The situation is really kinda, as we were at the start of last week, oil's continuing to rise on the uncertainty. Brent crude is now back at about a hundred dollars up from around $70 at the start of the month.

[00:00:45] Rory Dowie: However, before we get into that, Andrew markets, how are they looking?

[00:00:49] Andrew Shaw: Yeah, it was another volatile week last week, Rory with the exception of the US most major markets finished the week up between half a percent and 2%. Markets had got off to a strong start last week, but they fell sharply on Thursday and that was following the earnings from Tesla and Alphabet, which we would all discuss a little bit later.

[00:01:08] Andrew Shaw: The US finished down about half a percent for the week. The UK was up three quarters of a percent and Europe up half a percent. If we turn to the East, Korea and Japan finished the week up around two and a half percent. Korea had been up as much as 8% midweek though, but gave up most of that on Thursday and Friday.

[00:01:29] Rory Dowie: Okay, so another choppy week, but looking at those year state numbers, if I zoom out a little bit, there is still a lot of healthy green out there. The US and Europe, or actually and the UK are all up about 8% this year. And as you mentioned, leading the way this year is Japan, Korea, and emerging markets, all of them up double digits.

[00:01:47] Rory Dowie: Remarkably Korea remains up 60% despite the fact it's actually fallen 20% over the last month. Andrew, moving on, let's start with US earning season. We're in the thick of it. Headline for me last week was probably Alphabet, the parent company of Google, which reported. They're one of those businesses spending lots of money on the AI build out.

[00:02:06] Rory Dowie: So investors were obviously watching those numbers closely to try and understand the direction of travel with respect to that AI spend. What were the points to pull out in your opinion?

[00:02:16] Andrew Shaw: Yeah, as we've been getting used to strong numbers, revenue was up 24% year on year, and earnings per share came in $9.11 cents, and that was verse market expectations of $2 90, which looks remarkable, but that beat was due to a $99 billion net gain on that equity portfolio, and that was notably from SpaceX, IPOing.

[00:02:40] Andrew Shaw: Taking that out earnings per share actually came in 5 cents below the $2 90 expectation. Driving the revenue for Google was Google Cloud, and that was up remarkably 82% year on year or just under $25 billion. A lot of that has been underpinned by AI usage such as compute, power, storage, and databases.

[00:03:03] Rory Dowie: Wow. Yeah, so strong numbers again there from Alphabet, I have to say that Google Cloud Print was, was unbelievably strong.

[00:03:08] Rory Dowie: 82% year on year. As you said. That was a real acceleration from I think the 60% odd percent we had last quarter, and I think if we look a year ago that business was growing 20%. So really seems to be exploding. Google Cloud and as you said there, underpinned by a lot of that AI usage. Moving on the capital expenditure, obviously the market was looking at that probably quite closely.

[00:03:26] Rory Dowie: What was the update there?

[00:03:27] Andrew Shaw: Yeah, the full CapEx range was raised to 195 to 205 billion and that was up from 180 to 190, so an increase at the top end of about $15 billion and that was with the 2027 expected to increase further still. So this is the third consecutive upward revision in CapEx. So in short, Rory, it's not slowing down.

[00:03:52] Rory Dowie: That capital expenditure clearly a positive data point for the beneficiaries of that spend then those semiconductor companies, et cetera, which are performed very, very well this year though investors didn't like what it meant for Google. The stock was actually off 7% on the day and that's because of that large capital outlay that has eroded away the free cash flow.

[00:04:09] Rory Dowie: We believe that free cash flow is typically what drives stocks over time and actually for Google last quarter they, they lost $5.8 billion of free cash flow. So for us that's probably why the stock was down even with a strong operating performance and that very, very strong cloud growth. Moving on, Andrew Burnham is in anything from that last week here in the UK?

[00:04:30] Andrew Shaw: Yeah, we're starting to get an idea of what the cabinet's looking like. The big one is the Chancellor and John Healy was chosen in our view, not a bad choice. He has had several senior cabinet positions in the past and he's experienced, well, liked and respected figure in parliament and he's got experience within the treasury from way back when he was part of Gordon Brown's team.

[00:04:51] Andrew Shaw: So far the UK Gilt market has held up pretty well, so, so far so good. We'll be watching any developments closely in what the potential implications may be on UK rates.

[00:05:01] Rory Dowie: Still early days then, but a step in the right direction for UK politics relative to where we were last week anyway. Right. Andrew, keeping on time, finishing off what's on the decks this week.

[00:05:11] Andrew Shaw: Again, Rory, it's earning season we have Microsoft, Amazon, Apple, and Meta all reporting so lots to keep an eye on, keeping an eye on management comments, particularly around those capital expenditures that we have discussed. We've got economic data from around the region, so we'll be monitoring that and it is the Federal Reserve meeting.

[00:05:30] Rory Dowie: Brilliant. Thanks for that, Andrew. To our listeners, thanks as always for tuning in here if you have any questions and wishing you all a great week ahead.