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Markets can be capricious. Markets can be moronic. But if you own stocks, the market's always right. There's no alternate universe. So it doesn't matter if the action's crazy. It doesn't matter if the market's literally playing rock, paper, scissors with Meta as the rock and Microsoft as the scissors. You have to deal with the closing prices, and they can be brutal. Dow inching up 56 points, S&P declining 0.13%, Nasdaq losing 0.72%. But those are much higher than where it was at one point in the day when it looked like the market was going to take a real Microsoft-related header. That incredible horse race, and it didn't pay any attention to Meta's good stuff.
You know, though, it's hard to believe that Meta, which had been written off as a company that spends way too much on AI just last quarter, could rally more than 10% today as those investments paid off in spades. Last quarter, Meta had been the scissors. This time, it's the rock. Meanwhile, Microsoft, perennial rock, isn't spending enough to meet the demand for AI, or at least in the right places, because it seems to be putting its resources into the wrong stuff. They've become the scissors, and they got crushed down 10%. Truly horrific, horrible to watch. Is that fair? Like, that has something to do with it. Let me explain.
The market's been obsessed with AI. Everything you need to profit from it, right? The company that's making the most money from artificial intelligence is obviously Nvidia. Their chips are the foundation of the entire industry. Of course, Nvidia's chips can't just be plugged into the wall. They aren't bricks with transistors stacked up like statues. They are giant boxes filled with all sorts of tiny circuits packed into servers that burn so hot that you need to spend fortunes on electricity just to keep them cool. They consume enough power that we need dozens of new nuclear power plants and natural gas plants and solar farms to keep everything running. The companies that are making money from these chips are all those that live in and around the data center. Fellow server components like the memory and storage makers, they've been huge winners. You know that. So have those that produce power, help get electricity to the data centers, provide backup generators because we don't have enough power in the system. Think Eaton, GE Vernova, the electric companies, especially the nuclear ones, Constellation. There's Cummins, there's Bloom Energy, I like that. There's Brookfield, and there's Caterpillar. Hardly a day goes by without one of these generating a monster set of numbers. Today was Caterpillar's turn. The earnings from its generator business set the stock soaring 3.4%. A year ago, CAT was at 393. Today, it hit 665. Tonight, SanDisk, a memory device company, reported earnings and gave a forecast that sent its stock soaring.
But let's speak truth right here, right now. I listen to CEOs constantly. I read their words. I hear their calls. I talk to them. And until last night, I hadn't heard a single executive who actually uses AI, not participates in the making of it, but uses it as an actual client, state unequivocally, just with no caveats, that AI is the greatest force multiplier, that it can make his business fortunes, that it's accelerating the sales and earnings, that AI is changing the company's fortunes in a way that is just extraordinary. And last night, it finally happened, and it is Meta. Leave it to Mark Zuckerberg from Meta to say that AI has allowed his company to offer the greatest advertising vehicle in the world aimed at his user base. Oh, by the way, it's just 3.5 billion daily active users. It's like half the people in the world, for heaven's sake, or like close to it. This Meta knows everything about you. And if you've been a Crest user your whole life, I swear, I swear they could get you to switch to Colgate. It could get you to buy something you never thought about. Zuckerberg, where is he? Is he at his desk? Is he in a yacht? No. He's in your cerebral cortex, silly. He's in your... he's in your darn vagus nerve. And his company will present your brain with exactly what you want. You'll watch the darn accelerated computing make sure of that because the video is better and cleaner than ever, and you will buy what they advertise because generative AI is finally that powerful. No more scissors. This one is a rock for certain. It's not done going higher.
Now, though, let's look at Microsoft. Mr. Softy, as I called it when it came public. It's tough to watch this great business, this rock, play the scissors. There's so many amazing things about this company, which has dominated software for 40 years, has been unassailable until last night when we heard, frankly, a convoluted story. I mean, like, don't buy, don't buy, don't buy, don't buy. They said that Microsoft isn't going to spend enough money to meet its artificial intelligence demand, but at the same time it was proud that it had 15 million paid users of Copilot. 15 million. Wait a second. They have 1.5 billion users. They were proud of that 1% of these people who pay to use Copilot. How many use Clippy? What does it tell you? How about that? Maybe Copilot just isn't that big a winner? It's like Microsoft makes dog food that the dogs don't want, right? And somehow they think if they slap new and improved on the side of the can, the dogs will clamor for it. Dogs can't read. Of course, I simplify. But when I listen to the conference call, I can only conclude one thing. Unlike Meta, Microsoft may not be making all that money on AI even after all the massive investments in OpenAI and all that stuff. Certainly less than expected.
We keep hearing that AI is eating the software industry alive, right? Kind of like when software was eating hardware. Something, by the way, that Ben Reis over at Melius predicted would happen years ago, and it's finally coming true. AI is enjoying a smorgasbord of endless proportions right now. And that includes software as a service companies that used to be tremendous secular growers. Microsoft never seemed to be on the menu, though, until last night. It's kind of like an odd dervish. Yep. Last night, Microsoft played the scissors, and Meta was the rock. No two ways about it. Is it time to give up on Microsoft? What, are you out of your mind? Absolutely not. Remember, this is Microsoft. Remember the game. Meta went from loser to winner in one quarter. Microsoft can do the same. It's just got to kind of have to bite the bullet here. I haven't bought this stock for my clients in two years. We have a size position. Don't need to. But I am betting that next time around, Microsoft could come out on top, and I'm looking at a level to buy Microsoft. Satya Nadella and CFO Amy Hood will figure it out. They're smart. Yes, the situation is that fluid. I'm just waiting for the velocity decline to dry up, and then I will decide. Club members, stay close. I know it's hard to believe how quickly this market can change its attitude.
Last night, I heard a disastrous car company speak. Turns out it's actually a robotics and cybercab company, and I want to buy. Yes, Tesla's the paper that turned into scissors in one session. I didn't like it as a car company. Boy, I love it as a cybercab and humanoid robot juggernaut. Call me a buyer, and give me five robots while I'm at it. After the close, Apple reported a magnificent quarter. Just tonight, a robust top and bottom line beat driven by staggering levels of demand for the iPhone 17 that nobody was looking for. Wall Street was looking for iPhone sales of less than 79 billion. It came in at 85 billion. I knew they're popular, but I mean, come on. I underestimated them. Now, we still have to see what they say on the call about some important topics like how they'll deal with skyrocketing memory prices. Still, after seeing these great numbers for the last quarter, I have an idea. I've been thinking. I've been thinking. How about own it, don't trade it. Now, if you only have one takeaway from this entire segment that I just went through, other than the vagus nerve thing, the bottom line is you must not give up on any of these companies because they are run by really smart people with lots of money. They're nation states. I thought Alphabet would be carrying the face of AI, but I bet when we hear from them next week, we'll realize, nuh-uh, AI search winner. Alphabet may be next week's rock, and it may be even making more money from AI. Meta, Amazon, paper, scissors. I think it's paper, but this game changes so quickly you may actually have to rush your judgment. Unless, of course, you're Nvidia. They aren't playing a game at all. They're running the game. They're the house. That's the best place to be.
Oh yeah, calls. Silio in Florida. Silio.
Hi, Jim. First-time caller.
Oh, thank you. I'm glad. Thank you for all your help. Oh, thanks a lot. Thank you.
I'm calling about a biopharma that has struggled last year. Share price dropped nearly 40%, but year-to-date has gained about 20%. This biopharma has a first-mover advantage over the GLP-1 global market, which is projected to reach about 170 billion by 2031. P/E ratio less than 20 compared to Eli Lilly. While still owning 50% of the global market share. What do you think about NVO?
NVO? I kind of liked it when I spoke to him. I got to tell you, I kind of warmed up to him when I was in San Francisco, and I said, you know what, I get that stock a little down more. Maybe we do some buying. But I love Eli Lilly and David Ricks. And what can I say? You know, as long as Eli Lilly and David Ricks are putting up those numbers, and they get that pill form soon, I think that Novo is a hold, not a buy. Rock, paper, scissors. Vegas. All right. And that's Vegas. Today's lesson is that you should never give up on the hyperscalers. Can't just say horrible things about Microsoft, right? And yet, what am I? A buyer. All right. Mad Money tonight. Royal Caribbean cruise higher after the earnings today. And I'm getting to the bottom of what's continuing to propel the travel business with the company's co-CEO. Then Big Blue proved last night that it's ready to earn some big green. I'm breaking down the post-earnings IBM story. And I'm checking in on the state of the construction market with the CEO of elevator maker Otis. That includes the service business.
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On a freezing cold day here in New York and a not-so-hot day for the averages, I want to focus on warm weather and sunshine. I'm talking about Royal Caribbean Cruises, the largest cruise line in the world by market capitalization, which reported a solid quarter this morning, then gave us incredibly strong guidance, sent the stock up nearly 19% today, second-largest gain in today's session. Management was very bullish on recent booking trends, and their full-year forecast for 2026 is spectacular. What makes them so confident? Let's take a closer look with Jason Liberty, the chairman and CEO of Royal Caribbean Group, to find out. Mr. Liberty, welcome back to Mad Money.
Hey, Jim, great to talk to you, and welcome, and greetings from South Florida.
Oh, we are very lucky to be in South Florida. Now, let me ask you something. A lot of people feel that the travel bull market might be on its last legs. I look at this and I say there is something very major going on for you to have this kind of outlook, and it just seems spectacular. Can you give me some of the factors that are making these bookings unbelievably great?
Sure. Well, I think first and foremost, Jim, just foundationally, when we look at our business, you know, we've been building this dream machine of having the best brands in their segments, having the best ships, having the best destinations that are now expanding. And you couple that with the best people in the world delivering the best vacation experiences in the world. And you couple that with a lot of strong tailwinds, right? We're still a very small part of the $2 trillion leisure market. There are great secular and demographic trends driving this. And we've also invested heavily in AI and other sets of technologies to better personalize and yield-manage our business. And collectively, what that's driving is high-quality demand that is supported by a great and new loyalty program that's keeping our guests inside of our ecosystem, resulting in more reps, which is why we're seeing strong booking volumes at higher prices.
Well, it's clear that this whole notion that we hear about, that there might be an oversupply of Caribbean ships, is something that you put to rest today. I'm not going to ever let anyone get away with that canard anymore. Correct?
Yeah, I think that's exactly right. I mean, you know, there's always an increase in supply in the different deployments that we go into. And I do think we're differentiated, you know, between the ships that we have on the water, the private destinations we have with Perfect Day at CocoCay and the Royal Beach Club that we just launched a few weeks ago, that differentiates us in the Caribbean space. And still, the Caribbean is the number one destination that our guests are looking to go to. And so I think, you know, some of the concerns that are out there, which I certainly can understand, but that is not what we're seeing from the consumer. And I think that's also bolstered by drivable markets. We have, you know, more drivable markets here in the state of Florida as well as Texas that go into the Caribbean that lower that cost to the consumer or to our guests. And that's also why that value proposition to land-based vacation is still at least 15%. And so we're still also insulated from any type of concerns that could be out there. And so as you said, you know, we're not seeing that in the Caribbean. We're seeing similar trends that we're seeing in our broader business with the Caribbean.
Okay. I understand also, it's not just the Caribbean. The double... we spoke about river cruises when they came out. You actually introduced them on our show. That was not that long ago. You're doubling the number already.
Yeah. Well, as I said on your show, Jim, this is not a hobby. And so the first thing we wanted to do was to make sure we had designed the ship and we knew how we were going to elevate the experience and do that in our first 10 ships. Demand that we have seen has really been well above our expectations. Our guests, our customers, our loyalty members, their thirst to go on river, not as a substitute but as an additional vacation experience, is very clear with very, very long waiting lists, you know, to get on. So we have full confidence, you know, that we're going to generate high-quality, strong demand for an elevated river experience here, and that provides easy confidence for us to put an order in for more.
You know, I understand you also have a new cruise line going out, a whole new line. No one knows anything about it. I want you to talk about it, really just tell people on air because it'll be the first time anyone's ever heard about it.
Well, I don't know, it's not a different cruise line. I think you're talking about our new class, which is coming out. Yes, our Discovery class. And so, of course, we'd like to keep the marketing machine going here in the little things here. But what I will tell you, like we do on all of our ships and all of our classes of ships, is that this will be a game-changing ship in this segment. It's going to continue to build incredible multi-generational memories, which is very much at the heart of our Royal Caribbean brand. So we're very excited about it. The first one will come out in 2029, and, you know, we've been designing the ship for several years, and that coupled with the incredible Icon class for the Royal brand just drives so much excitement. And these, by the way, these ships are generating NPS scores, you know, into the 80s, and so that's obviously a great sign of incredible advocacy, and also that our guests walk away with great experiences, which infuse trust.
All right, we'll have to discover those later. Now, one last thing. I was taught by you and by your colleagues and predecessors, this is wave season. People have to recognize when you talk about 2023 booked for 2026, these are ironclad. It's not like they're looking at it and saying, we're doing okay. This is numbers, raw numbers that we actually can put pencil to and figure out what to pay for Royal Caribbean. To me, it says pay more than it's selling for.
Well, I think that's... I mean, and that's, by the way, how our yield management tools that are fueled by AI work. We're two-thirds of the way booked for this year, and that puts us in a position to effectively manage pricing. And we try to encourage everybody to book early, not just in order to get you maybe the price points that you want, but also to make sure that you're getting the vacation experience you want, which is not just about your booking on the ship, but it's also, and we have been seeing this, the pre-booking activities for all the wonderful things and experiences you can have on and off the ship during your vacation period. So, as you said, Jim, we have great visibility into the quarter. We have great visibility in the year. And we feel very encouraged by the trends.
One last question. I know you guys are actually pros at AI. Can we actually think about how many bookings you get during the middle of an NFL game after we look at those fabulous ads?
Well, you know, Jim, I think it's amazing, and I think we're very thankful for the advancement in technology. You know, we have 15 million price points that we're managing every day and growing. And so, as you said, these great ads and these great sponsorships that we have, whether it's during NFL and other sporting events or Inter Miami that just won the championship this year that we're the sponsor of, you know, that's really where the eyeballs are. And that, you know, that stimulates them to dream. And, of course, you know, in times like this when it's incredibly chilly in different parts of the country and they're watching football and they're looking at sunshine, that certainly stimulates them to dream about being in the warmth and being on our beautiful ships.
Well, I know it's certainly done it to my family. We want to thank you so much, Jason Liberty. Great day for you. Deserving day. I know how important wave season is, and you've crushed it. Jason Liberty, chairman and CEO of Royal Caribbean Group. We got to wait till 2029 to find out more about this cover. That's all right. I'll wait for your ads, and then we'll book it. Thank you so much, Jason.
Everybody's back after the break.
Coming up, last night's earnings electrified the stock of IBM. So, should you plug the tech giant into your portfolio? Cramer's dissecting the data next.
Last night, while everyone was focused on the state of Microsoft or Meta and, of course, Tesla, there was another tech company that reported an impressive quarter that people weren't discussing. I'm talking about IBM, one of the great, albeit unheralded, winners of the AI era. I went positive on IBM way back in December of 2023 when it was trading at 160 bucks. Since then, this company's been reporting some of the best growth in ages, a resurgent software business that, among other things, helps customers build their own AI applications. IBM stock shot all the way to 325 at its all-time high last November. We're pulling back to the 300 area for the last couple months. The last few times I've talked about this one, I felt kind of defensive. IBM had slipped to $294 as of last night's close, but then they reported, and boy, that stock soared 5% today in response to an unambiguously good quarter. Closed at $309. IBM saw its sales grow 12% to $19.7 billion. Wall Street was only looking for $19.2 billion, thanks to the better-than-expected results from software and infrastructure businesses. On a constant-currency basis, sales were up 9%. That was still IBM's best growth rate in more than 3 years. That said, these guys are cleaning up, helped in part by a weak dollar. Their gross margin came in solidly better than expected, which helped them deliver a 21% earnings beat off a $4.31 basis. Nice. That strong fourth quarter capped off another excellent year for IBM with 12% earnings growth. Not that long ago, it seemed like IBM just couldn't grow no matter what it did. It was a stagnant business. Everyone assumed its best days were behind it. They don't think that now. Under the leadership of CEO Arvind Krishna, it's putting up double-digit earnings growth. That makes IBM one of the cheapest stocks in the entire market, not just in tech.
Digging a bit deeper into the numbers, IBM's standout software result was powered by strong growth from essentially every subsegment. Hybrid cloud, that's Red Hat, up 10%. Automation up 18%. Data up 22%. Transaction processing up 8%. Now, that Red Hat... no, their number was technically a little bit disappointing, and this is the same issue that some people quibbled with when IBM last reported in October. Initially, the stock sold off in response when people saw that again, but ultimately it started skyrocketing because the guidance was tremendous. See, this time around, nobody blinked at the Red Hat numbers. Why? First, it was well-telegraphed, but second, the shortfall was partially due to the government shutdown. That's one-off. Most importantly, though, Arvind Krishna and CFO Jim Kavanaugh explained on the conference call that while Red Hat used to be the only real growth driver for IBM's software business, it's now just one growth contributor among many, and some areas like automation and data are putting up spectacularly strong numbers. So a modest shortfall from the Red Hat enterprise software business, it doesn't even move the needle. I took heart that IBM didn't need Red Hat to grow faster because there's a real mosaic of strength now. Now, looking at the other divisions, consulting continues to look very solid, keeps driving business to IBM software and infrastructure products. Their consultants basically tell companies what technology they need. IBM can fill many of these slots themselves. Plus, there's a lot of demand for AI consulting. Companies finished 2025 with a generative AI backlog of $12.5 billion. $10.5 billion of that comes from their consulting business, with the other $2 billion being software. Finally, IBM's oft-forgotten infrastructure division is getting a big boost from what is a powerful mainframe refresh cycle. Yes, their big companies still use mainframes. Lots of them. The infrastructure division grew 21% in the fourth quarter, driven by 67% growth from IBM Z, which is that mainframe business. I think those are numbers, just stunning numbers. On the conference call, Krishna explained that this is mostly due to the excellent sales for the Z17 mainframe, which was released last summer. Apparently, this mainframe can process 50% more AI inferencing operations per day than the previous iteration. That makes it very popular with IBM customers, of course. Long story short, it was an amazing quarter, and I'm betting IBM has a lot more room to run even after today's rally. Now, some of that is simply because IBM rolled out a terrific full-year forecast for 2026 last night. This year, management expects constant-currency revenue growth of 5%. Wall Street was only looking for 4.1%. Remember, it's a big company, so that's a huge delta in revenues. IBM also guided for a $1 billion year-over-year increase in free cash flow, implying roughly $15.7 billion in free cash flow this year. Again, that was a big surprise, and I was only looking for $15 billion. As long as these guys can make the numbers, I think the future's looking real bright for Big Blue. And that's because I'm a big fan of the IBM narrative. In a nutshell, they're selling customers products and consulting services that help them profitably embrace AI. While there are plenty of companies offering AI tools and services at this point, there's a much smaller set of companies offering AI products that can actually help customers save money. IBM's right at the tip of the spear. These guys have extra credibility here because when it comes to their various AI products, IBM's not just the vendor, it's the client. It's like that old Hair Club for Men ad. Oh, and last night, Krishna explained that back in 2023, the company set out to achieve $2 billion in productivity savings, mostly through internal AI adoption, by the end of 2024. And as they came out of 2025, that had grown to $4.5 billion in annual run-rate savings. Beyond that, everything else, though, IBM's the rare AI winner with a fairly low price-to-earnings multiple. Sometimes you got to find some of those. Even after today's rally, the stock sells for a little more than 25 times this year's earnings estimates. And the estimates may well prove to be too low, as IBM has beaten the earnings estimate for 17 consecutive quarters. Of course, 25 times earnings is still a bit of a premium to the broader market. The S&P trades at 22 times this year's earnings estimates, but I'm happy to pay a premium for such a high-quality story. It's still below these big software-as-a-service companies' multiples. So, here's the bottom line. IBM's nearly doubled since I started recommending it just over two years ago. And after last night's quarter, I think this rally is far from over. The company's just got so much growth coming from mainframes and software and consulting. Best of all, the stock still isn't expensive here. I say buy some IBM if you don't already, and recognize that CEO Krishna has turbocharged the sales and earnings so much that it would be a gift if this $399 stock were to fall below $300.
Jerry in Missouri. Jerry.
Jim, thanks for taking my call.
Oh, of course. What's up, Jerry?
Jim, I bought this stock when it was around $130. That was when you said it would go to $150, and it did. So you changed your narrative a little, and you said it'd go to $200, and it did. Then you said it'd go to $250, and it went back down to $150. And you can't stop saying it. So, do you still like Palantir?
Yes, I like Palantir. Now, Palantir is trading right now with the cohort that is ServiceNow and Salesforce. By the way, those are great companies. But I think that, right, you look at everything I hear, when you hire them, business does better. And that's why I liked it. Not momentum. So I can't back away from it right here. If anything, I would say great opportunity to buy Palantir. And it's not like I talked to Dr. Alex Karp. He and I... well, you never know. You never know. Well, no, you kind of know. Anyway, IBM has got so much growth ahead of it. And I don't think the stock's done rallying, but that's a cheaper stock than Palantir, just so you know. I think it's a buy now. Much more Mad Money, including my exclusive with elevator maker Otis. Falling after earnings, investors getting a buying opportunity in the stock. I'm going straight to the source for answers. Then I'm sharing the one number you need to know when trying to figure out what a stock should be worth. And of course, all your calls, rapid fire. Today's edition of the lightning round. So stay with Cramer.
What do we make of yesterday's results from Otis Worldwide? That's the dominant maker of elevators and escalators. This time, the company missed earnings expectations by a penny off a $1.04 basis, with sales also coming a tad light. That's softer orders from America and China. Management's full-year forecast was a bit surprising. Otis is projecting earnings growth in the mid-to-high single digits. Wall Street was somehow looking for 10%. In response, the stock dropped 2% yesterday and then lost another 1.6% today. It is down 18% from its all-time high last March. That's in keeping with a lot of other companies that are in the industrial sector. So, is this an attractive entry point for a company that gets most of its business from servicing existing machinery, which is really stable, or are we supposed to be a little more worried? I don't know. Let's check in with Judy Marks, the chair, president, and CEO of Otis Worldwide. Get a better sense of the quarter and what comes next. Ms. Marks, welcome back to Mad Money.
Thanks, Jim. I got to tell you, I'm not worried, but I look forward to our discussion.
Okay. Well, that's good because what happens is sometimes, Judy, I think people say, wait a second, our rates are too high, they're not building much here, we hear about all these problems in China. I always come back and say, look, I like the service business. There's nothing that's changed with the service business. It seems just as strong as ever. I don't care so much about the new builds at this point. Am I looking at it correctly?
Jim, the main thing at Otis is service. In the quarter, our service revenues organically were up 5%. Our service margins were up 100 basis points. It was 93% of our profit in the quarter and 91% of our profit for the year. Repair, maintenance, and now this emerging but really growing, fast-growing demand for modernization and refurbishment of older elevators and escalators really puts us in a strong position for 2026. That helped us an 11% EPS increase in the fourth quarter and record cash. We've never been able to generate this much cash to help share with our shareholders since our spin 24 quarters ago.
