Mad Money 07/22/26 | Audio Only

My mission is simple: to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now.

Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramer. Other people, my friends, I'm just trying to save you a little bit of money here. My job is not just to entertain, but to do some teaching. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. The cross currents are roaring every day. This is almost always what happens during this particular portion of the earnings season. We have situations that are hard to understand without much time to understand them. We have companies that expect us to look at metrics that seem made up to us. And we have all sorts of macro inputs: oil, interest rates, war. And that's how you get open field running where stocks can reverse on a dime, as can the averages, which traded all over the place until the Dow finished down six measly points as the S&P climbed 0.14%, but the Nasdaq lost 0.57%.

Now it may help to understand the backdrop. Okay, I'm back to waking up at 2:47 a.m. again. I mean, not a lot of people were up at that hour. So you fire up the machine and boom. What do you see? SK Hynix. Oops. SK Hynix down huge and oil up gigantically. So, you know, at 2:49 a.m. it's going to be a bad opening. And it is, but things are so fluid and confused because we're in the fog of earnings season and the snap judgments are whipsawing everything. I'm going to give you some examples. This morning, we had a watershed moment we've all been waiting for. One model from OpenAI, searching for an answer, hacked its way out of what was thought to be a contained test environment known as a sandbox, then went online and hacked into Hugging Face's server. Come on. This was amazing. Then Hugging Face used a Chinese model to stop it. I mean, this is insane. It means that the impossible has indeed happened. Agents went rogue. It's how it's war games. It's Asimov. Hopefully, it's not Terminator. I'll be back. I think this is one of the biggest stories out there. In a world where AI agents can go rogue, what do you do? Well, you should just buy the stock in CrowdStrike. They have a cybersecurity product that will stop it. But the stock was down big and traders ignored their solution entirely. So much for that idea.

Then there's Vernova. We're all sure of one thing in this world: there's going to be a surge in turbine production because we're short on power. The demand for these things? Insane. So you got to own Vernova, right? The biggest turbine company in the world. One I've been recommending kind of forever. And what happens? It misses the quarter. Not misses. It misses by a mile. You look underneath though and the cash flow is terrific. The orders are huge. The build out is gigantic. But the earnings are the earnings, and Vernova didn't have them. So the stock plunged nearly 9%.

More on that later. Meanwhile, we've heard nothing out of Nvidia of late, right? Make no mistake about it. I think the world of Nvidia. I wore my Nvidia cufflinks for the morning show just for good luck. But lately, there hasn't been any news. Perhaps we can say that Super Micro, a customer of Nvidia that then sells Nvidia product, had great orders, and therefore we can assume maybe Dell and HPE, Super Micro's competitors, must have good orders too. That market sure thinks so. That could be great. Then Nvidia opens down a couple of bucks. And well, there goes that theory. But wait a second. Out of nowhere, mid-morning, the stock does a 180, ending the day up $4.77 or 2%. I searched all day. I can't really give you a reason why. Delayed reaction, ball confusion. That makes sense.

I've been pounding the table on Johnson & Johnson for days now. I thought the quarter was excellent. Nobody agreed with me. The stock got hammered. I've been screaming about how terrific its technology is, saying perhaps it's okay to diversify away from disk drives into J&J. No, nobody seemed to care. Then today, we found out that J&J got a green light from the FDA for its Ottava robotic surgical system. Next thing you know, the stock's going bonkers. Investors realize that J&J, wow, they're a technology company. I say, 'Duh, no kidding.' But the market's shocked. Look out. Changing his tech. Although it won't matter for a few years, it doesn't stop there. For months, the markets hated enterprise software stocks: Salesforce, Workday, ServiceNow. You have to think these darn things deserve a break, right? I mean, these are some of the finest companies revered for years. They keep getting savaged. We're talking to ServiceNow tonight to see if this company can turn itself around, but it's amazing. The enterprise software stocks simply cannot catch a bid. And ServiceNow got crushed during the day before we even saw the quarter. This is not supposed to be happening.

Then by mid-morning, oil starts to come down and we start thinking, 'Ah, here it comes. The president's going to talk about how the Iranians are begging for a deal, that the talks are going well, that they agree to be defeated and stop developing nuclear weapons.' Same story from the spring. Instead, we get the exact opposite. The president ratchets up the stakes, talks about taking out bridges if the Iranians attack shipping. The Secretary of State says there are no talks. Then oil reverses and goes down on that news. Now, that makes no sense at all. It should be spiking like mad, but it never visited the highs of the wee hours of the morning. Meanwhile, interest rates were going higher anyway. The 10-year testing its high. Oh, well then that means all the interest rate-sensitive stocks should be going down, right? Oh, no, not at all. Wrong. Best performing sectors: utilities, AP, Southern, Dominion, Duke. Well, it gets even crazier. Pulte Group, one of the biggest home builders, posts a strong quarter. It's incredibly counterintuitive, especially if the president slaps a big tariff on Canadian lumber. It gets even nuttier, people. The consumer goods stocks should be getting clobbered on higher rates. Their dividends aren't worth as much when you get better returns from the bond market risk-free. Plus, they're being hurt by inflation. Higher oil really stymies their earnings power. They should be going down. Yet, it turns out to be a Procter & Gamble day. Kimberly-Clark, Colgate rally. J.M. Smucker is breaking out. Kraft Heinz is starting to craft a fantastic chart. You can't make this stuff up.

Then tonight, Alphabet reports, and this is a perfect example of how confusing things are these days. The company reports an absolutely enormous earnings beat with earnings per share of more than nine bucks. Wall Street was expecting less than three bucks, but you must forget about that immediately because the quarter included $99 billion, just $99 billion in other income, which relates to the company's investments in SpaceX and Anthropic. Good hunting. The rest of the quarter mixed. Google Cloud terrific, up 82% versus last year. That's incredible. This isn't a small division, but the bread-and-butter Google search business tad light, which is what the bears have been warning about as we move into the AI era. But the most important line might have been free cash flow, or actually negative free cash flow, much worse than expected, down nearly $6 billion. That's a result of the company's enormous capex spending, and it helps explain why the company's issuing $85 billion in stock to pay for all these investments. The stock's been all over the place after hours, but the cash flow might have been the swing factor and the reason shares ultimately moved lower after hours. Somehow, I don't think we've heard the last word on this one yet, though.

You could say that these moves make a ton of sense. You just need to think through them. Or you can say, 'Forget it, Jake. It's earnings season. You can't possibly figure this stuff out on the fly. Information's on overload.' And you can't just go to the chatbots for answers because they don't know either. You know what? I think these things have the mind of an intern but the language of a CEO. Is it just too hard? Here's the bottom line. There's a reason I tell you to sit on your hands during earnings season. Just try to take it all in. Accept the market as its own secrets that will be revealed over time. Don't expect or demand rationality. Don't play the best this bet the house on the earnings numbers. And in the end, you know what? You don't need to. You just have to own good companies long term. Block out the short-term noise except when it gives you sweet buying opportunities that are certainly worth taking. Now, let's take questions. I'd like to start with Craig in Florida. Craig?

St. Johns. I love St. Johns. Oh, man. I hope it's not too hot down there right now, though. I really like it in the winter. What's going on?

Can we get Anthony back on the allegations? I mean, I can look at the allegations again. I looked at them earlier. We talked to Anthony Noto a lot and I think that they don't hold a lot of water. I will tell you this. A lot of the stocks have just been kind of locked in a range right now. They don't really have explosive earnings power. And we know that fintech has been a very tough place to be. And it is a fintech par excellence. If you want fintech that's working, you have to own Affirm. All right. You can't always expect rationality in this market. Just make sure you own good companies for the long term. That's what this is about. It's not a game. It's for real.

On Mad Money tonight, I'm digging deeper into Vernova's latest quarter that I just mentioned after that big miss. Don't miss my take on this club stock. Then General Motors, I don't talk about that one enough, reported an incredible quarter. So, is now the time to get in on the stock as we look for non-tech opportunities? I'll take a closer look. And ServiceNow is on the move after earnings. I'm sitting down with the CEO amid a busy day for AI and for enterprise software. So stay with Cramer.

This morning, GE Vernova, the power spin-off from the old General Electric, reported a widely panned quarter. And in stock, it got eviscerated. This had been one of the best performers out there because its equipment is essential for powering the data center or bolstering the electric grid. But the stock plunged 9% today. It is a big position for my charitable trust. I think that sudden decline is actually an overreaction. And in fact, I think we're looking at one of the great buying opportunities of this quarter so far. But first, let me walk you through the numbers. Vernova reported a healthy revenue beat, 22% growth year-over-year, but it earned just $2.47 per share when the analysts were looking for more than three bucks a share. Now, that is a major earnings miss. So you can understand why the stock got punished even after it already pulled back pretty hard from its late June highs. But that was along with the rest of the AI infrastructure plays. But you know, I think it would be a mistake to sell Vernova here based solely on the earnings miss. While it looks bad when you look under the hood, going through the orders, gigawatts, pricing, production expansion, and enormous backlog extending to 2030 and beyond, well, I think you see a very different, much more positive picture.

As CEO Scott Strazik explained on the conference call, the real story here isn't earnings. It's gigawatts. The expansion of turbine output and a massive backlog. Now, look, I'm not saying we should just abandon earnings per share for gigawatts per share. We can't have another Wingstop situation where the earnings were supposed to not matter anymore. But not every line item is equal. And in some situations, earnings may not be the most important metric when you think of the future. And I think this is one of those cases. Just look at the backlog. Vernova finished the quarter with a $176 billion backlog. That's up $13 billion sequentially, nearly $48 billion from a year ago. That's year-over-year. Those are monster numbers representing about four years' worth of revenue. Management expects the total to reach $200 billion by next year, providing an extraordinary amount of visibility to the company's future business. Specifically, GE Vernova has 116 gigawatts of gas equipment either in backlog or covered by slot reservation agreements, up from 100 gigawatts three months ago. Management now expects gas equipment under contract alone to reach at least 125 gigawatts by the end of this year. Wow. The orders do not stop. Utilities, developers, data center operators are making commitments years in advance because they're worried they won't be able to secure the equipment when their facilities are ready.

In terms of production, Vernova is making the jump from about 3 gigawatts of gas turbine output per quarter to 5 gigawatts per quarter starting in the current quarter. Going forward, that means we're talking 20 gigawatts per year. They plan to grow that to 24 gigawatts in 2028, 30 gigawatts in 2030. They're making these investments because they see the data center as a generational opportunity, as do I. And hey, they'd know. Vernova can see years of demand ahead. They're just looking at their backlog. They're currently getting orders for many years into the future, and that's given the company real pricing power. Again, that speaks to long-term earnings power. Plus, every time these guys sell a turbine, their services business gets bigger. Remember, they don't just sell machinery. They also make money from long-term service agreements to keep the stuff running. As the installed base grows, the higher-margin services division grows with it.

The other major line shareholders need to watch is electrification, which is basically the orchestration of electricity from generation to consumption. That requires transformers, substations, switchgear, grid software, power conversion equipment, and high-voltage transmission systems. All GE Vernova's bread and butter. Hugely lucrative. The electrification division saw orders increase by 66%. Stunning. That's organic growth. Revenue up 68%, rapidly rising margins. The segment recorded a book-to-bill ratio of about 1.7, meaning it received $1.70 in orders for every dollar of revenue it recognized. Its total backlog reached $44.6 billion. Now, I think they're not getting enough credit for that red-hot electrification business that really didn't even exist a few years ago. But it's also a key part of the data center story. Of course, not every part of Vernova is firing on all cylinders. Come on. You wouldn't be down this much if that were the case. The earnings miss did not come out of nowhere. Wind power remains the weak link here with wind orders down 40% organically. Revenue off 11%. The segment lost $275 million of earnings before interest, taxes, depreciation, amortization compared with a $165 million loss a year ago. Ever since the Trump administration rolled back the tax credits for wind power, the demand for windmills has fallen off a cliff. Still, that's a relatively small piece of the pie compared to the incredible demand for turbines and electrification equipment. You know, I honestly wish they could just get rid of it. I mean, just spin it off or something. Except I know under a different president, it could be a terrific source of renewable power that could get sponsored again by the government. It's terrific as long as you aren't a whale off the coast of Nantucket or a wayward bird pretty much anywhere.

Now, the main reason I'm not freaking out about Vernova's earnings miss is that their guidance was excellent. The company raised its full-year revenue forecast by a billion dollars. While they maintained their EBIT margin forecast of 12% to 14%, they dramatically raised their free cash flow outlook to between $11.5 billion and $12.5 billion. That's up from the $6.5 billion to $7.5 billion range. That's an incredible increase in cash generation, a metric every bit as good for this company as EPS. Vernova now expects organic power revenue growth to come in between 18% to 20%, up from 16% to 18% in the previous forecast. They raised their outlook for electrification too. So then, okay, let's go back because stocks tell the truth. Why did it fall 9% today? The earnings miss was real and the stock had also gone practically parabolic. You know what I think about parabolic situations. Vernova needed to deliver something spectacular to keep climbing. Instead, they report a quarter that was disappointing at first glance, even if it looks pretty strong under closer examination. Plus, the broader AI infrastructure trade has been under pressure for weeks now as investors question how long hyperscalers can continue to spend. Some people feel like drunken sailors. Those are legitimate concerns. Vernova certainly isn't a cheap stock up here at 33 times earnings after gaining more than 74% in 12 months. I think you could argue it was due for a pullback, but I don't see anything in this quarter that breaks the bull thesis. Orders increased 88%. Backlog rose by $13 billion in three months. The company expects at least 125 gigawatts of gas equipment under contract by year end. Turbine output is increasing from about three gigawatts per quarter to five gigawatts. Electrification revenue grew 29% organically as margins expanded by 700 basis points and data center orders have already more than doubled last year's total. Look, it's only that wind business that's weighing this thing down. Here's the bottom line. Sure, Vernova did miss its earnings and I was upset by that, but it was because of wind. It's got an incredible backlog thanks to the strength in turbines and electrification. When you look at the order book and how the company's expanding production, it makes me very confident of the future, which is why I see today's decline, actually yes indeed, as a buying opportunity. But Wall Street can't seem to look past the earnings. I would say this though, if Vernova keeps getting hammered, you've got my blessing to keep buying on weakness and you might find my charitable trust buying right alongside you, even as we have a much lower cost basis from long ago. Mad Money is back after the break.

What do we make of this incredible quarter that General Motors reported yesterday morning? Here's a stock that's done very well long-term and even in the last 12 months it's up over 50%, but pretty much all those gains were in the second half of 2025. Year-to-date GM's only up a percent. Coming into this year, a lot of people expected we'd get Fed rate cuts, and I thought I was one of those people, and those are a gift to the auto industry because they make it cheaper to get financing when you buy a car. But we've had no rate cuts and instead we got this war with Iran that's caused a spike in both oil prices and long-term interest rates set by the bond market. Rate increases could be the agenda. When the war wound down in April, GM was about to mount a comeback. But since we once started shooting again last month, the stock got slammed, fell from 85 to 75 where it was sitting right before yesterday's earnings report. Fortunately, when GM reported yesterday, they shot the lights out and the stock shot up 5% before taking another 3% today. Yep. This company posted a sizable revenue beat, putting up nearly 2% growth. Wall Street was looking for a small decline. Even better, GM earned $3.57 per share. Analysts were expecting them to earn $3.19. That's 41% earnings growth year-over-year. Much thanks. You know, mostly it was because of higher-than-expected margins. Now, Wall Street loves margin growth when it comes to the complicated auto earnings reports. Best of all, management raised their full-year forecast for the second straight quarter, taking up its guidance for both free cash flow and earnings per share. Now, here's the cadence. At the start of the year, GM thought it would earn $11 to $13 per share in 2026. After the first quarter, they went to $11.50 to $13.50. Now they are saying $12 to $14. At the $13 midpoint, get this, it would represent a 23% increase from last year. How'd they do it? GM's strong quarter was driven by its core North American business with earnings before interest and taxes up almost 43% in the region. Again, that's all about much higher margins. On the conference call, the self-facing CEO Mary Barra explained that, quote, 'Customer demand in North America remains steady, including for our pickups and SUVs, and pricing is consistent,' end quote. She goes on to say, 'Despite lower than target inventories for most of the year, our share of the US full-size pickup market stands at more than 42% through the first half of the year, which is more than 10 percentage points above our closest competitor. And we grew share year-over-year in both the second quarter and the first half,' end quote. Wow. Honestly, GM rarely gets enough credit for the strength of its pickup truck business. Look, the Ford F-150 has been the bestselling pickup in America for nearly five decades. But between the Chevrolet and GMC brands, General Motors is extremely competitive. The company said yesterday that it's on track to lead the industry in full-size pickups for the seventh straight year. That's a long time. And in the full-size SUVs, GM remains dominant. When you combine the Chevy Tahoe and Suburban with the GMC Yukon and Yukon XL, those SUV sales are three times the size of the nearest competitor with very low incentives and tight inventories. Overall, GM's on track to lead the industry in full-size SUVs for the 52nd straight year. Their crossovers are doing great, too. GM also remained number one in total US fleet sales, capping off its best first half in more than five years for fleet sales. That includes its highest government sales since 2009 and record full-size pickup sales driven by strong commercial demand. Now, earlier this year, GM announced that it was scaling back its electric vehicle ambitions. And the company's taken cumulative charges of nearly $11 billion related to this restructuring, including $2.3 billion in the quarter they just reported. But the move away from electrics is exactly what saved GM's margins. Plus, even though they've made this a much lower priority, they're still the number two player in American electric vehicle sales, 13% market share. As GM explained the overall strength of the business, there were a couple of things that stood out. First, GM is separating itself from the pack with its technology. The company's OnStar business, their safety and connectivity platform, had $800 million in revenues, up 20% year-over-year, and its deferred revenue was up nearly 50% year-over-year. Some of that's thanks to GM's Super Cruise semi-autonomous hands-free driver assistance technology. This quarter, recognized revenue for Super Cruise was up 70% year-over-year, and the company added about 70,000 new subscribers. Second, GM continues to be very competitive on pricing. The company said it had three consecutive years of pricing discipline, which in turn is why they now have some of the lowest incentive spending in the industry. They don't need to cut prices deeply in order to lure you in because their pricing never got insanely out of hand to begin with. Finally, GM has been aggressive about improving its cost structure. They've seen 70 basis points of total company margin expansion over the past few years. I know it doesn't sound like much until you realize that GM's major competitors have seen their margins shrink by 400 basis points over the same period. Get it? All told, everything seems to be going pretty darn well for GM. But the best part of the story, frankly, is that the stock's cheap. Can't find a lot of cheap stocks right now, right? Even with its 8% gain over the last two days, this thing sells for 6.2 times the midpoint of full-year earnings forecast. Yeah. 6.2 PE. That's the kind of multiple you expect from a boom-and-bust cyclical business that's about to go bust. GM is very cyclical, but its earnings are going higher, not lower. And I'd expect that to continue unless the war with Iran gets much more extreme, sending oil to the triple digits. The analysts who cover this thing certainly expect more growth in 2027 and 2028. Now, if GM stock can get what we call rerated higher, just a little bit, the gains, they'd be enormous. Even if it only starts trading at 8 times earnings based on next year's estimates, which seems reasonable, this now $82-and-change stock would go to $119. Of course, that doesn't mean the market will change its mind. As we saw in the first half of the year, the stock is hostage to macro forces, especially the volatile price of oil. But the bottom line, at a time when we're looking to diversify away from tech, at least to some degree, I think General Motors, terrific idea. Despite a tough environment, GM just reported an amazing quarter fueled by automakers' phenomenal execution. Given that the stock sells for barely more than six times earnings, I'm betting there's plenty of upside here, especially if peace breaks out in the Middle East. And the higher the price of oil goes, the more likely it is that our government will cut some kind of deal. Now we want to go to Don in Ohio. Don?

Look, Allstate is a steady Eddie. I don't talk about it much. It's been good. The reason why I don't talk about it is the fact that it's a low-multiple stock in a business that's really hard to understand for a lot of people. But Allstate's been a winner and all I can say is congratulations, you did a good job. Let's go to Rebecca in New York. Rebecca?

You know, Ford, look, I have a longstanding belief that Ford is very undervalued. Okay. It needs to get the warranty thing better. I think it's doing that. It sells for only eight times earnings. My problem is GM is cheaper. But I will say that I think that Jim Farley's doing everything he can to get it right. The legacy of what he inherited is a lot tougher than people thought, but he's getting it right. And over time, I can't see why you buy it with a 4% yield how you're going to get hurt. I know that may not be enough for you, but the stock is up in the past year. And I don't think it's expensive. Anyway, if you're looking to diversify away from tech, I think General Motors is a great way to do it. Not sliding Ford, but GM a little cheaper.

Now, much more Mad Money, including my post-earnings exclusive with ServiceNow. Then I give you my blessing to, oh boy, speculate. As long as you do it wisely. One stock in last night's lightning round reminded me of that. I know how smart you guys are. I listen, I'll reveal it. And of course, all your calls rapid fire tonight in the lightning round. This is, stay with Cramer.

For over a year now, the enterprise software stocks have been crushed by worries about competition from AI. Take the stock of ServiceNow, a once-beloved company that helps businesses automate all sorts of IT and back-office processes. As of today's close, this stock was down almost 38% year-to-date and more than 60% from its all-time high in January of last year. Nobody expected anything good here, which is why the stock got pulverized today in anticipation of earnings. But after the close, ServiceNow reported a nice top and bottom line beat with its revenue growth accelerating for the first time in four quarters. On top of that, they raised their full-year forecast for subscription revenue. Turns out business is pretty good, which is why the stock bounced in after-hours trading. Earlier tonight, I got a chance to speak with Bill McDermott, the chairman and CEO of ServiceNow. Take a look.

Mr. McDermott, welcome back to Mad Money.

I am fine and I hope you are too, sir.

Okay, so Bill, revenue growth, some serious acceleration. People were concerned maybe the last couple quarters they didn't have the growth that they wanted. This seemed to be the quarter where you definitely have pretty strong bookings. Looks good.

Yes, look, the ServiceNow's blueprint for agentic business after what happened today with OpenAI and Hugging Face, I thought that this was a brilliant document and I did not know that you do this. What, for a huge percentage of the Fortune 500 you're involved in this?

Okay. Now we do have to try to figure out there is a puzzle because the stock has been going lower. There's been a pushback by some and I'm just going to read you one. One analyst said, sure, ServiceNow is doing fine now, but customers are going to sign shorter contracts and negotiate better terms for their deals because of the emergence of AI competition. Now you've pushed back on this point, haven't you?

All right. Well, I hear you on that. I just want to again be sure that our viewers are getting what people are saying because they're probably saying, 'Why is the stock down?' I'm going to read you something from KeyBanc analyst Jackson Ader. He published a review of your report on Monday and he said, quote, 'We have heard from customers that they renewed large contracts early, nine months early in one case, in order to avoid the large pricing increase that was going to be imposed upon them had they made the switch over to the new pricing model on July 1.' Is there a chance that you pulled forward some of these contracts?

I'm sorry. Go ahead. I'm sorry.

Well, I was just like Jensen Huang.

I think Jensen has a good line. He says ServiceNow is destined to be the best platform, the operating system of enterprise AI agents. Nvidia, to me, that's somewhat dispositive of how things are going.

Well, look, Bill, you know, look, I want everyone to know all sides. I mean, the stock has gotten hit, the stock goes up, the stock goes down. But I know you are true north. When you talk about your company, I appreciate the pushback on those comments that I read because those may have been driving the stock down. And yes, I do believe that if Jensen Huang believes that you are number one, he does not award that lightly. Bill McDermott, thank you so much for coming on the show. Chairman, CEO of ServiceNow. Good to see you, Bill.