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It's incredible how much tech has changed in the last few years. In the old days, enterprise software was unbeatable. Software helped you sell things better, calculate things, forecast things, even organize human resources. The whole point of it was to disrupt how we did work. And it sure did, saving companies money while making investors fortunes in the process. Enterprise software was the king of tech. It was where the money was. But times changed. Traditional enterprise software is facing new competition from the much cheaper products you can develop yourself from AI. And the enterprise software cohort, once prized for its high growth and lucrative gross margins, is now growing much more slowly than the physical side of tech: semiconductors, hardware, the tools that allow for the artificial intelligence revolution.
Listen, I haven't lost focus on other large issues: the war, oil, the price of money, also known as interest rates, or the health of the consumer. These are integral to all the averages, with the Dow surging 645 points today, the S&P jumping 1.08%, and the Nasdaq holding 1.55%.
If the war with Iran were to end, as is rumored, although I honestly can't figure out how that would happen, then you could argue this hardware versus software dynamic is really a sideshow. We'd see interest rates plummet. Worries about the consumer would wane. The Fed might even start talking about cutting rates. We'd be buying healthcare and retailers and transports, a whole other group of stocks. But it hasn't. See, as long as the Iranians are shutting down the Strait of Hormuz, or you can say we are on the other end, that's off the table. Instead, we keep coming back to what's working. And what's working are the hardware stocks that power the data center and the soon-to-be-public artificial intelligence titans like OpenAI and Anthropic.
Tonight, Anthropic looks like they're going to be wildly profitable because of a huge second quarter. Say nothing, of course, of OpenAI, Amazon, Meta, as well as the AI portion of Microsoft, not all of Microsoft, just the AI portion. And when we talk hardware, the biggest part of that is the company that just reported tonight that seems to not be able to get out of its own way right now, which is Nvidia.
Now, I've been pounding the table on Nvidia since it was trading at a split-adjusted price of just under four bucks. I've never hidden my belief in the company and its team led by Jensen Huang. Nvidia just reported a close delivery set of numbers: revenue growing 85% year-over-year, $81.6 billion, beating expectations by nearly $3 billion. Most of the growth came from the company's core data center business, with hyperscale revenues up 115% versus the prior year and up sequentially, while AI cloud, industrial, and enterprise revenue grew 74% from the prior year. Company's gross margins were in line. Oh, maybe people don't like that. And Nvidia had an 11-cent bottom-line beat off a $1.76 basis. Free cash flow came in at $10 billion, $10 billion above expectations.
Now, we're at the point where Nvidia has to look hard for places to put all of its money it's making. Every week, the company seems to be making multi-billion-dollar stakes in small component players, a new hyperscaler, perhaps optical. But after buying back nearly $20 billion of stock in the current quarter, Nvidia announced a new $80 billion share purchase program, even with close to $40 billion remaining on its previous authorization. Very bullish. Company's outlook for the current quarter looks good, too. Nvidia is guiding for $91 billion in revenue this quarter, roughly $4 billion above the expectations that were $87 billion, despite the fact that the company is still assuming no data center compute revenue from China.
It was almost exactly three years ago, in May 2023, that Nvidia shocked Wall Street with roughly $4 billion of upside in its guide for the quarter ahead, that caused a huge gap up for the stock, which never really looked back after that. But now, with the stock up over 600% since then, it's tougher for the company to surprise investors. It's gotten so big the stock's basically flattened after-hours trading, which I think is more of a reflection on how everyone who wants Nvidia already owns Nvidia than anything qualitative about the company's earnings. It's hard to get bigger when you're so huge, at north of $5 trillion.
If you're confused about any of this, I've got some terrific Nvidia coverage tonight for subscribers to the CNBC Investing Club. We do much more deep coverage than I can do here. You can join at a special rate of just $4 for your first month. Yeah, four bucks. Go to cnbc.com/cramerclub to sign up. Tell me you're... I don't know why you wouldn't.
All right, let's put Nvidia in context, though. You need a lot of things for Nvidia or its rivals to make chips, but what you don't need is big-time expensive software that this market used to love. No, AI won't put software companies out of business. That's not going to happen. They aren't going to make it so nobody uses Adobe for creativity or Salesforce for sales. But AI does threaten their primacy, their supremacy. It makes them less lucrative by putting an end to their pricing power, because Anthropic and its compadres make a very convincing case that you can help companies code something very similar practically out of whole cloth. See, it's not real coding either. See, you're just asking stuff.
Customers have been wasted for years about endless price increases from these kinds of companies. However, there weren't a lot of alternatives, and internal coding was too expensive. Now, you can have something cheaper and often tailor-made for you. So, it's better now. The pace of the change, though, caught a lot of portfolio managers by surprise. We got used to the same tech companies leading the way for decades. For a long time, Microsoft was the most important company in the world, the largest, best ever. Why not? Microsoft software, not hardware. And for decades, software ruled the world. Sure, Apple mattered because of the iPhone, but the App Store gave you the growth, and that's all software.
For years, the market came to love the model of a company that sold proprietary software to the enterprise for fortunes, with the price going up a little bit every single year. These companies had gigantic gross margins because you don't need expensive materials or heavy equipment to create software. That's the kind of baggage you need to make, say, semiconductors. The primacy of software goes back a long way. In 1986, Microsoft came public, bought by Goldman Sachs. The stock went to a premium and never looked back. I remember for a long time people thought it was ridiculous that some company that made unseen code, whatever that was, could be worth more than the tangible products from GE or Exxon or General Motors. Wrong.
I can't tell you how incredulous people were when, 12 years later, Microsoft became the largest company on earth. Software coding. It was hard enough to get your head around the personal computer, where so much of Microsoft's software lived. But far more ironic, the fact that Intel, the companion to Microsoft inside the PC, was never worth more than Microsoft. It often trailed its partner dramatically in valuation, despite the huge engineering feats that Intel accomplished with its ever-smaller yet more powerful chips. Microsoft produced Windows by the hundreds of millions, which gained gross margins because it cost next to nothing to produce that additional piece of software. But Intel's chips cost fortunes to make, so it was hard to get leverage.
Maybe that's why so many money managers are still at odds with Nvidia now being the largest company on earth, and troubling to them because of what we've seen for so many years. It's happening because Nvidia and its compadres, AMD, Arm Holdings, Intel, Broadcom, among so many others, are what powers AI. And with AI, software just isn't as powerful or as important. Nvidia comes loaded with its own software anyway. When it's combined with Anthropic or OpenAI, it can actually create products very similar to the traditional expensive software vendors. Incidentally, that's why Anthropic and OpenAI are numbers one and two on the CNBC Disruptor 50 list. They're disrupting traditional software by lowering its importance to corporate buyers.
You combine Nvidia hardware with Anthropic or OpenAI, you can easily create applications that are in the same league as pricey enterprise software. That's why everyone seems so scared of traditional enterprise software stocks, especially the ones that have been taken private or are now running into so much trouble with their big debt loads. Or look, even a great company like we have tonight with Intuit. People who run OpenAI and Anthropic are incredibly promotional about how their wares can help you imagine new software products that are better than what you could buy. Yeah, right off the shelf, no. You want these guys. Doesn't matter. They've sewn fear into the very fabric of the enterprise.
It's one of their biggest selling points, by the way, to Main Street and Wall Street. They've got executives asking themselves if they need to pay a lot more for enterprise software, which is so expensive, charges per user, when AI may let them lay off a bunch of those users. Maybe they can just create AI agents with hardware that can replace the work of hundreds of people. Seems logical. These are the questions that are shifting power to the semiconductor cohort. Go listen to my interview with Lip-Bu Tan, the CEO of Intel, on Monday. He's long been the biggest backer of semiconductor startups, arguing that the intellectual property in semis is worth much more than people realize. It is a new era. Semis are now in charge. Software is taking a backseat.
The biggest company is Nvidia because it's changed the world, especially the software world, with artificial intelligence and accelerated computing. Those companies that seem purpose-built for Nvidia are disrupting the old world led by Microsoft, but including so many others, almost none of which will admit they're in trouble. I mean, no. Here's the bottom line: the world has changed. It's fluid, but we're not going back to the way things were. Not now. Not ever. Let's go to Gregory in California, please. Gregory.
Jim. Jim, as a parent, I need your advice here because...
I have a naughty, naughty kid called Astera. She's barely 10 years old and she went public two years ago. And now I have to give you credit because you gave us the green light on this AI infrastructure play right after their IPO. Now, when it pulled back to 40 bucks, I bought a full position and then sold half when it doubled. So, I'm playing with the house's money. So, I feel...
Well, then Gregory, we have nothing to worry about. You're playing with the house's money. You can never lose money. You can make a lot of money. I say you hold on. Be very happy as always. You're one of my smartest, if not smartest, of our incredibly smart cohort of viewers. And you've done this thing very right. I say you stand pat with what's left. And that's what we're trying to do with the club. It's so hard, but we take out our money, we win. It's a new world. Semis are in charge of this market and software's taking a backseat, even if not doing anything tonight.
Can we take a little longer-term view, please? On Mad Money tonight, VF Corp is undergoing a major turnaround, and I'm checking in with the CEO in a post-earnings exclusive. Then Databricks came in third on CNBC's Disruptor 50 list, and I'm sitting down with the CEO to find out more about the path forward for this AI data company. And with tax season in the rearview mirror, how is Intuit faring on Wall Street? Do not miss my exclusive with the CEO, Sasan Ghahramani.
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All right. What the heck happened to the stock of VF Corp, the apparel company you know as The North Face, Vans, Timberland, among many other brands? This point in the report, what I thought was a terrific set of results. Stock surged in pre-market trading, but their outlook was basically in line, and the stock got slammed. It finished today down 3%. You know what? I think this could be a fantastic buying opportunity. Earlier today, we got a chance to speak with Bracken Darrell, the turnaround artist, president and CEO of VF Corp, who is so darn smart. Take a look.
Well, Bracken, let's start with the quarter that just ended. I thought the quarter was magnificent. You're really getting some momentum here. Now, the street may not be awarding it yet, but I can see the turn. Tell us about it.
Well, I'm super excited. You know, we just... you know, in Q3 we started to see Vans coming back on e-com. Q4 it grew in total DTC, both in the Americas and our total business grew for the full year. So we had our strongest quarter of growth in three years for the total company in Q4. So we're finishing strong coming out of the year, had our first full year of growth in three years. And we just guided growth again next year. So I'm... yeah, I'm super excited. I feel like we're kind of closing one chapter, which was the total company is declining. Now we're back into growth mode. We're not going to look back.
And granted, I thought that the brands were in growth mode, obviously North Face and Timberland too, but I cared more about the fact that it's no longer Vans bringing you down.
Yeah. I mean, our DTC, which is in the Americas, which is where we're focused because that's really leading, it's 40% of our global business, is growing. So, and it's going to keep growing. So, we feel really, really good about that. Vans, we've got great products coming out. You know, I took this off for you, Jim, so you can see this really... I know everybody's going to want to buy that, that's not available, but I've got another one back there that is. But we've got so much cool stuff coming that it's just... you know, it's great. And the heat has started.
Well, I think people don't understand the kind of makeup of the company because if I see North Face go big and Vans isn't keeping me down anymore, I got a possibility. Not yet, because you're conservative. You said the turn is going to be long. I see high single digit if you get Vans with a little more momentum and you keep going with North Face, which is a big brand.
Yeah, I'll raise your bid. I'll call that and raise it. You know, I think it's not going to be this year, but in one of the years out, maybe it's next year, the year after that, we're going to get back to high single-digit growth, and we're at some points going to touch double-digit growth because we've got so much room to grow in all of our brands. As you said, North Face can double from here. Absolutely. Timberland's got strong growth potential. I mean, we've never really exploded beyond the yellow boot, and we're really working hard on that. As you said, Vans used to be a $4 billion brand, now went back to a $2 billion brand. It's got a lot of room to run above that. And then you've got Altra. I mean, Altra just grew 45% this quarter. 45%. It's only a $270 million business, but you pile up a few of those and you're going to have a big business.
Yeah, I saw that. I thought that we don't talk enough about Altra. But you know what else we don't talk about? There's 50% of people in the world, right, that you're not really appealing to. You know who those 50% are?
You're not doing it with women. And you made that point at the end. And it said to me, wait a second, that we got Greenfield coming if you just strike gold with women.
Absolutely. You know, and I put three of my top... of my four presidents, those four big brands we just mentioned, three of the four are women. So, believe me, we're on it. We've been focused for Vans so far on men to make sure we get our mojo back. But the unlock beyond that is so big when we get women going. North Face, we barely scratched the surface on women, honestly. Timberland, too. And Altra is probably 60-40 men, women. So all of them have potential.
Now, I think when I hear the numbers high single digit or double digit, I think, you know what, the man did what he said he was going to do first when he came on our show. When you came on immediately, was you fixed the balance sheet. The balance sheet is no longer the question. You took off, first of all, you took off any of like, wow, existential worries. Then you got rid of the stuff which made me feel like, I don't know, it looks like I'm not going to... it won't hurt him. You've got a growth-mode balance sheet. Now, tell me who you're looking at. What do you want to buy that would augment?
You know, we're going to... I committed to investors publicly the first day I got here, we'd get that leverage ratio down below two and a half before we'd look at investments to grow again. And we have so much organic growth potential, we won't need it for a while. But at some point, you know, we go below two and a half, which we committed in '28. Now, even this year, we're guiding 2.6 to 2.9. So this is our '27. So we're almost a year ahead of schedule here. But if we get... once we get below two and a half, we will be looking. You obviously... I'm not ready to talk about who it would be today, but there's certainly things out there. But the most important thing is we really have a lot of growth in our existing businesses. Jim, I don't feel the need to buy anything, but that's gravy on top of everything else.
I totally hear that, and I think people should recognize that it wasn't like you had a smooth year. You had tariffs, which I think were very hard to comprehend, particularly, by the way, among investors who just said, you know what, it's too complicated, I don't want to touch it.
Yeah. Yeah. There were tariffs and there was the war at the end of the year. There's all the fears of AI wiping out jobs and hurting the GDP and driving higher unemployment. All those things are always in play. But you know, I told you this last time I was on. We have so many things in our control. You know, one of the things I love about coming into a company like I did when I did, which was deep turnaround mode, and now we're in growth mode, is that we had so many variables to play with. Now we're exploiting all those variables. So we're in growth mode, and we're going to blow that all through all of them to get to higher and higher growth.
Did you keep the cachet? I mean, I always felt that Timberland had much bigger cachet than people realize. North Face, tremendous potential for cachet with the celebs, with the social media people. Where are you?
Yeah. Yeah. I mean, that's the most appealing thing about this particular company in this particular space. We have brands that have the cachet of luxury but the price of Main Street, you know, and that is a beautiful place to be. I mean, all of our prices, all of our products are affordable. We can sell elevated product up to higher and higher price points. And we can collaborate with people like, you know, the really top of the fashion world. And we are, because they do have that kind of cachet.
Well, you mentioned the affordable brand. The consumer, alternately, depending upon the day, seems to be wavering. I guess maybe the instant DTC would give you the numbers, but where do you see the consumer, someone who would be willing to pay 120 for Timberland, whatever, what is your max price? Because I'm getting worried that your priciest stuff won't move.
You know, the coolest thing about this brand is we have price. We have, even in Timberland, which is the highest-priced footwear we sell on average, which they can sell for $220, and they're selling very well at 220. We've got things you can buy all the way down to $120, $100. In Vans, you can buy down to $60 or even $50, but you can also pay up to $120 and beyond. If you don't catch a collaboration early enough, like our Satoshi that just launched, you might have to pay $600, and we will, and people are. So there's a wide range on all of our brands of price points. You know, that's one of the strategies we have is we can elevate up while we continue to sell at the mainstream price point.
And last thing, America's... you've turned... international looks very tough from here. What can you do to make it so that that's next?
You know, I really think we just got to execute really, really well in our wholesale channels. We've got a lot of improvement to do there, and we are working hard on it. We've just changed our leader who was running the Americas, who drove the turnaround there, is now taken over the total commercial globe as of the end of last year. So we're excited about him. He's excited about his team. We've got a really great team. We've got a lot of great products coming internationally, too. So it'll take time, but we'll get there.
Well, you've been consistent. Everything you promised on the show has been right. Other people have gotten ahead of the turn. I rely on what you say because you have been straight with us the whole way. Bracken Darrell, president and CEO of VF Corp, where I think the turn is going exactly as you predicted. Thank you.
Absolutely. I want to be back in...
You want to get a read on AI? It's not enough to follow publicly traded companies because many of the most important players in the space are still private. Take Databricks, which helps companies take messy, fragmented data, organize it, analyze it, build AI on top of it, and frankly figure out what you have. As of February, this company had a $5.4 billion annual revenue run rate, and by now it's got to be substantially higher than that, as these guys are growing like a weed. Databricks is free cash flow positive. It's bringing in tons of business. There's a reason this company got a $134 billion valuation last private fundraising round. All that helps send Databricks to the number three spot on this year's CNBC Disruptor 50 list. Now that AI has entered the agentic era, this one's become a heavy hitter. So let's take a closer look with Ali Ghodsi. He's the co-founder and CEO of Databricks to learn more. Mr. Ghodsi, welcome back to Mad Money.
Thank you so much. Always great to be on.
Hey, Ali, great to see you. First of all, I got to go through this rig and roll. I'm sorry, but you know, we got all these people, you know, when is Anthropic going to come up and OpenAI? Is it filed at SpaceX? A lot of those companies need money. When I look at your company, I say to myself, here's someone who's in the driver's seat. You can come public, not come public. Is that not a better way to look at Databricks than the other guys where we play the guessing game all the time?
Yeah. I mean, the way to think about it is that if you're burning huge amounts of capital, like 10, 20, 30, 40 billion, you need the capital. You need to be in the public markets. You have no choice. At Databricks, we don't burn any money at all. Zero. So for us, we can choose the timing. I think this is a good year to be private because I think this is a good year where you want to be building because we're going through a huge transition in the market, in public, in private, all enterprises. This AI revolution is happening. So it's better to build in private right now, and we will be public, and we will go public, but I don't think this year is a good time for us.
All right. So when I first met you, I said, well, wait a second, I see what's going on here. You can take the... here's the data, but it's your data. You can process it. You can answer questions. You can inquire things. It seems like ever since AI, now there's like a hundred things you could do if there were five things before. Do you advise your clients, look, you can do this now, that, and do they avail themselves of it?
Yeah, look, I think the thing that is top of mind right now for every CEO on the planet, not just in tech, any CEO is, wow, these AIs are so amazing. They can do so amazing things, but secretly, and they don't want to admit this, my organization has none of the AI. It's not established. We don't have agentic co-workers doing lots of work. How do I get AI into my organization? And they have plenty of intelligence in the AIs, but why are the agents not working in the enterprise? What's going on? And the simple answer to that is the AIs, if you give them all the data and the context, if you perfectly ask the question with all the context, they will nail the answer every time. So the big question is, AI doesn't have an intelligence problem. AI has a context problem. How do we feed it that context? And that context is in the data. So that's top of mind. Everyone wants to solve this problem. No one on the planet right now doesn't want to have this problem nailed.
All right. So how about if I had Genie, what would I do with it?
Yeah. So Genie has built into it something called Genie Ontology. So Genie Ontology data.
So you're talking... that's what Palantir taught me with the word ontology.
Yeah, they have it too, and they're a great partner. But the way Genie works is that automatically we already have all the data in what we call the database lakehouse. That data is sitting there, but it's a lot of data, structured and unstructured. So we don't want to have the AIs just go loop through the code and just loop through all the data and search for nuggets. That's what happens today. Today people use a cloud code or they use some other agent, and it just goes through and loops through. It costs a lot of money to loop through all the data. So what we do is we automatically in Genie have constructed the graph. So ontology is a graph, and it has these little snippets of nuggets of information, like, you know, revenue is calculated this way. Number of employees is found over there. Product categories is here. And when you ask a question, it uses this ontology inside Genie to answer those questions. So I personally, every meeting I'm at, I'm using Genie. Like anything that comes up, I'm asking the question in Genie. It's giving me the answers. A lot of the things that otherwise I would have to wait two, three days or have someone go look up the numbers, because, you know, you really want numeracy and you want analytical, quantitative accuracy here, right? This is not about producing text. You want it to produce for you what are the different revenue categories, and you want those numbers to be accurate. So Genie really excels at that, and a lot of that is thanks to this ontology graph.
