WEBVTT - Apple Posts Massive Sales Beat While Amazon Underwhelms 0:00:02.520 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business 0:00:10.560 --> 0:00:14.720 Weekdaily reporting from the magazine that helps global leaders stay 0:00:14.760 --> 0:00:18.800 ahead with insight on the people, companies, and trends shaping 0:00:18.840 --> 0:00:23.760 today's complex economy, plus global business finance and tech news 0:00:23.800 --> 0:00:27.800 as it happens. The Bloomberg Business Week Daily Podcast with 0:00:27.960 --> 0:00:31.760 Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.240 --> 0:00:35.320 Amazon shares down about three percent in the after hours. 0:00:35.400 --> 0:00:38.240 The company sees third quarter operating income fifteen and a 0:00:38.280 --> 0:00:40.600 half to twenty point five billion dollars. I was in 0:00:40.600 --> 0:00:43.400 line with estimates that are at nineteen point four two billion. 0:00:43.440 --> 0:00:45.720 I guess maybe on the lower side it's not in line, 0:00:45.720 --> 0:00:47.760 and that could be why the stock is moving a 0:00:47.800 --> 0:00:51.200 little lower. Sad quarter operating income though blue past estimates 0:00:51.400 --> 0:00:53.480 at nineteen point one seven billion dollars. 0:00:53.560 --> 0:00:56.360 Yeah, I do think that third quarter operating income could possibly, 0:00:56.520 --> 0:00:59.000 especially the downside or the lower end of the estimate, 0:00:59.280 --> 0:01:01.600 be problematic. Let's see what our team has to say. 0:01:02.480 --> 0:01:04.200 It is such a massive company, as you know, we 0:01:04.240 --> 0:01:07.160 need two Bloomberg Intelligence analysts to really break it down 0:01:07.200 --> 0:01:10.080 with us. Is Senior technology analyst Anna rog Rana and 0:01:10.160 --> 0:01:13.480 senior analysts. Excuse me for e commerce and at leisure, 0:01:13.760 --> 0:01:16.840 Punam Goyle at a RAG out there in our Chicago bureau, 0:01:16.840 --> 0:01:19.520 and we've got Punum in our Princeton bureau. Hey, Anag, 0:01:19.560 --> 0:01:21.920 I want to start with you because AWS is always 0:01:21.959 --> 0:01:24.440 so important when it comes to the top and bottom 0:01:24.440 --> 0:01:27.520 line here at Amazon. Walk us through what we got 0:01:27.520 --> 0:01:28.720 on that side of the business. 0:01:29.040 --> 0:01:31.360 Yeah, I mean, as you see, you know, they met 0:01:31.600 --> 0:01:36.160 expectations on aw's growth of seventeen percent in constant currency. 0:01:36.200 --> 0:01:38.360 But you know, this is where we are saying that 0:01:38.400 --> 0:01:41.520 this is probably not good enough because Microsoft beat by 0:01:41.560 --> 0:01:44.039 a big number, Google beat by a big number, and 0:01:44.080 --> 0:01:45.600 the big question is going to be, you know, why 0:01:46.160 --> 0:01:48.240 didn't Amazon beat by a big number? And I think 0:01:48.400 --> 0:01:50.200 that's going to be probably one of the most important 0:01:50.280 --> 0:01:52.760 questions on the call, and we look forward to hearing 0:01:52.800 --> 0:01:54.240 what management has to say about it. 0:01:54.760 --> 0:01:56.880 I want to bring in Punham here because one thing 0:01:56.880 --> 0:01:58.920 that I noticed when I was reading this in real 0:01:58.960 --> 0:02:02.920 time the statement from CEO Andy Jasse also president over 0:02:02.960 --> 0:02:06.200 at Amazon Punham how much he talked about the connection 0:02:06.320 --> 0:02:11.760 between the shopping experience for Amazon's core customer and artificial intelligence, 0:02:11.800 --> 0:02:14.399 because up to now and maybe I'm wrong, but I've 0:02:14.400 --> 0:02:17.600 thought about AI and the context of AWS. But what 0:02:17.760 --> 0:02:20.440 he's trying to communicate to investors is the effect that 0:02:20.480 --> 0:02:24.000 AI is happening is having on how people are buying stuff. 0:02:24.400 --> 0:02:25.400 Is it actually doing that? 0:02:26.360 --> 0:02:29.040 Yeah? Absolutely. You know, AI is a big deal in 0:02:29.080 --> 0:02:32.480 e commerce and Amazon's been investing a lot to improve 0:02:32.520 --> 0:02:35.160 the customer experience. It starts with search. Right when you 0:02:35.240 --> 0:02:38.560 go to Amazon and you're searching something, They've just improved it. 0:02:38.639 --> 0:02:41.679 And they've also launched Rufus, which is their AI or 0:02:41.720 --> 0:02:45.800 your personal assistant, So that's really been helping shoppers and 0:02:46.080 --> 0:02:48.040 just you know, figure out what they want to buy. 0:02:48.080 --> 0:02:50.760 You want to buy a microwave, but what microwave is better? 0:02:51.440 --> 0:02:54.720 The shopping assistant helps you not only bring choices forward, 0:02:54.800 --> 0:02:58.239 but also helps you navigate through the descriptions of pricing, etc. 0:02:58.800 --> 0:03:01.919 So it really helps improve conversion. And that's where AI 0:03:02.040 --> 0:03:03.680 is helping on the shopping side. 0:03:03.760 --> 0:03:05.680 Are you what metrics do you look at Punham to 0:03:05.680 --> 0:03:08.200 make sure that the investments that they're making are actually 0:03:08.280 --> 0:03:10.160 leading me to spend more money on Amazon? 0:03:11.120 --> 0:03:13.600 So Amazon doesn't share all the metrics that we'd like 0:03:13.680 --> 0:03:16.079 to see, but we know that they've talked about conversion 0:03:16.080 --> 0:03:18.639 and how that's improving. So I think that's the number 0:03:18.680 --> 0:03:21.519 one metric to any extent when we get color around that, 0:03:21.919 --> 0:03:25.080 I think that is what's most important. If you think back, 0:03:25.560 --> 0:03:28.359 online conversion just broadly speaking, is in the load to 0:03:28.440 --> 0:03:32.440 miitsigledgit range. So only about five percent of shoppers that 0:03:32.480 --> 0:03:36.480 go online to shop actually transact. It's very very low 0:03:36.480 --> 0:03:39.440 compared to a brick and mortar store, and every little 0:03:39.480 --> 0:03:42.080 that Amazon does on AI or anything else is going 0:03:42.120 --> 0:03:44.360 to help boost that conversion. It's higher on Amazon. 0:03:44.400 --> 0:03:47.760 Of course, Let's remind everybody that in the aftermarket following earnings, 0:03:47.800 --> 0:03:50.800 Amazon down about two point six percent. Here it's only 0:03:50.920 --> 0:03:54.000 up about seven percent year to date. Ada rog you know, 0:03:54.040 --> 0:03:57.040 you talked about, you know, the blow out numbers that 0:03:57.040 --> 0:03:59.880 we've gotten from the likes of Alphabet and others. When 0:03:59.880 --> 0:04:03.320 it comes to cloud aws, as we said, the growth 0:04:03.400 --> 0:04:05.280 was in line with what the street was expecting. What 0:04:05.400 --> 0:04:09.080 might why might they not have outperformed what we got 0:04:09.080 --> 0:04:10.600 from some of the other hyperscalers. 0:04:12.200 --> 0:04:14.600 You know, the first thing is they are much larger 0:04:14.640 --> 0:04:16.680 than all the others. Their run rate is over one 0:04:16.720 --> 0:04:19.280 hundred billion dollars, so you know, that's one factor, and 0:04:19.320 --> 0:04:21.880 you know, to be very honest, growing seventeen eighteen percent 0:04:21.920 --> 0:04:24.279 at one hundred billion is not a bad deal. But 0:04:24.360 --> 0:04:26.359 the second part is when you look at somebody like 0:04:26.360 --> 0:04:29.320 a Microsoft, they are getting a bit the benefit of 0:04:30.000 --> 0:04:33.680 you know, chat GPT transactions being run on their cloud. 0:04:33.760 --> 0:04:36.720 So you know, that's that's a huge benefit for them. 0:04:36.960 --> 0:04:40.280 Amazon doesn't have that option, frankly, because they don't have 0:04:40.320 --> 0:04:41.760 a chat gipt like you know. 0:04:41.760 --> 0:04:42.880 Application that's running. 0:04:43.240 --> 0:04:45.760 A lot of what they're doing is on the enterprise side, 0:04:45.800 --> 0:04:49.920 and those applications are currently in the build phase, which 0:04:49.960 --> 0:04:52.440 means over the next several years we should see the 0:04:52.800 --> 0:04:56.400 trickle down effect of those usage you know, driving up awis. 0:04:56.400 --> 0:04:58.680 So I think there is a timing mismatch. I don't 0:04:58.720 --> 0:05:01.520 see you know, them as being inferior in any way 0:05:01.560 --> 0:05:02.080 to some of. 0:05:02.080 --> 0:05:03.080 The other cloud providers. 0:05:03.120 --> 0:05:05.279 In fact, as I said, they are the largest with 0:05:05.640 --> 0:05:07.400 probably the most services out there right. 0:05:07.320 --> 0:05:10.120 Now, do they stay the largest? I mean, they certainly 0:05:10.240 --> 0:05:12.360 were early into this. I think you could say that 0:05:12.839 --> 0:05:15.320 they helped invent this. I mean Andy Jasse certainly, that's 0:05:15.360 --> 0:05:19.800 why he's CEO. After heading up the eight Amazon Web 0:05:19.839 --> 0:05:23.839 services and then being picked by Bezos to take this job. 0:05:24.240 --> 0:05:27.000 Would you say that they're comfortably in first or is 0:05:27.960 --> 0:05:32.679 Azure at Microsoft on Iraq? And also is Google Cloud 0:05:32.720 --> 0:05:34.000 doing a good job of catching up? 0:05:35.560 --> 0:05:37.560 They're both doing a very good job of catching up. 0:05:37.560 --> 0:05:39.599 And as I said, you know, Microsoft has an inherent 0:05:39.600 --> 0:05:40.400 advantage there. 0:05:40.520 --> 0:05:42.520 So maybe down the road, you know, several. 0:05:42.279 --> 0:05:44.320 Years from now, let's say three to four years, they 0:05:44.360 --> 0:05:46.080 would be neck to neck. But you know, one of 0:05:46.160 --> 0:05:48.159 the things is this is a market where we think 0:05:48.160 --> 0:05:50.839 the entire market is growing much bigger. You know, we 0:05:50.920 --> 0:05:53.200 don't see five years from now ew as being a 0:05:53.240 --> 0:05:55.440 smaller business than where it is right now. 0:05:55.560 --> 0:05:57.440 The rate of growth depends. 0:05:57.000 --> 0:06:00.560 On the propensity of enterprises to spend on technology, but 0:06:00.760 --> 0:06:04.080 we think all three of them will benefit with cloud 0:06:04.120 --> 0:06:06.640 becoming much bigger over the next three to five years. 0:06:06.760 --> 0:06:09.560 We should point out some more of the statistics on 0:06:09.600 --> 0:06:13.400 Amazon online stores net sales sixty one point five billion, 0:06:13.480 --> 0:06:16.320 up eleven percent year over year, physical stores net sales 0:06:16.360 --> 0:06:18.240 about five point six billion, up seven and a half 0:06:18.240 --> 0:06:21.320 percent year over year. Third party seller services net sales 0:06:22.320 --> 0:06:25.560 forty point three five billion, that's up eleven percent year 0:06:25.640 --> 0:06:30.080 over year. Put them, you know, they also say in 0:06:30.120 --> 0:06:32.640 some of the commentary or conviction that AI will change 0:06:32.640 --> 0:06:36.279 every customer experience is starting to play out. So we 0:06:36.360 --> 0:06:38.120 talked about it a little bit earlier. I mean, what 0:06:38.200 --> 0:06:40.440 they are doing in terms of getting people to spend 0:06:40.480 --> 0:06:42.920 more time on the platform, spend more time on the platform, 0:06:43.120 --> 0:06:44.320 it's all happening. 0:06:45.400 --> 0:06:47.240 Yeah, it's happening. I mean all the numbers that you 0:06:47.320 --> 0:06:50.680 just cited, they have performed expectations. So whatever they're doing, 0:06:50.720 --> 0:06:53.159 and they're doing a lot, they're doing it right. We 0:06:53.279 --> 0:06:56.320 think that Amazon is making the right moves to expand 0:06:56.360 --> 0:06:59.640 their retail footprint online. Once again, you know, it comes 0:06:59.640 --> 0:07:02.680 back to what a customers want. They want everything and 0:07:02.720 --> 0:07:05.680 Amazon's a marketplace that really sells a lot of different 0:07:05.680 --> 0:07:08.080 types of goods and they want the speed and speed 0:07:08.200 --> 0:07:10.760 is key here because you can get things same day 0:07:10.840 --> 0:07:13.920 or next day from Amazon without paying a fee being 0:07:13.920 --> 0:07:16.800 a Prime member. So that's really key here. And the 0:07:16.920 --> 0:07:20.280 numbers in the second quarter were actually quite impressive on 0:07:20.320 --> 0:07:23.200 the retail side. They did do really well. Prime Day 0:07:23.280 --> 0:07:25.960 sounds like it was a great success. We'll hear more 0:07:26.040 --> 0:07:28.960 on the call, but the numbers outperformed on the retail side. 0:07:29.360 --> 0:07:31.720 Is there a read a follow through, if you will. 0:07:32.280 --> 0:07:34.520 When it comes to what this tells you about kind 0:07:34.560 --> 0:07:36.320 of consumers and the US economy. 0:07:37.480 --> 0:07:40.160 Yeah, I think consumers are focused on value, and I 0:07:40.160 --> 0:07:43.440 think Amazon does give you value. They are trying to 0:07:43.560 --> 0:07:46.360 keep prices low, and this may be a function of 0:07:46.360 --> 0:07:48.520 that where you know, as consumers shop around and they're 0:07:48.520 --> 0:07:51.720 seeing price hikes due to tariffs, either they've already started 0:07:52.040 --> 0:07:55.200 or they're coming up, they're finding deals on Amazon. So 0:07:55.480 --> 0:07:57.960 they're going there and that's a nice place for Amazon 0:07:58.000 --> 0:07:59.920 to be as we move forward into the second half. 0:08:00.080 --> 0:08:01.520 I want to ask both of you, and let me 0:08:01.520 --> 0:08:03.000 start with you put them. I mean, what are you 0:08:03.040 --> 0:08:06.560 thinking about that you want to listen for on the 0:08:06.600 --> 0:08:10.640 call that the company does with analyst and investors top 0:08:10.680 --> 0:08:12.160 of mine or what you would be asking? 0:08:13.040 --> 0:08:14.960 Yeah, for me on the retail side, it's really the 0:08:15.080 --> 0:08:17.760 terror of question and the diminimus question. You know, we 0:08:17.800 --> 0:08:20.360 know we're losing the dominamous exemption, so how should we 0:08:20.400 --> 0:08:23.200 think about that in terms of their third party, especially 0:08:23.600 --> 0:08:25.960 where they do rely on some of those drop shipping, 0:08:26.040 --> 0:08:28.840 especially Hall. And then the second thing I'm looking for 0:08:29.000 --> 0:08:31.080 is just how they're going to be pricing the goods 0:08:31.080 --> 0:08:33.640 as we move into the second half, because for now 0:08:33.679 --> 0:08:36.560 we have been somewhat insulated with a ten percent pause 0:08:36.559 --> 0:08:39.080 on most goods outside of China, but that we know 0:08:39.400 --> 0:08:40.839 is changing in the back half. 0:08:42.000 --> 0:08:45.719 A honorock, come on back in here, because one thing 0:08:45.720 --> 0:08:48.319 that we're I'm looking at the write ups right now, 0:08:48.360 --> 0:08:51.320 and it does seem like, you know, what we said 0:08:51.320 --> 0:08:54.920 at the beginning that this operating profit estimate for the 0:08:55.000 --> 0:09:00.800 current quarter really underwhelmed. Why is it that Amazon doesn't 0:09:00.800 --> 0:09:04.080 get rewarded for being less profitable the same way that 0:09:04.120 --> 0:09:07.280 other companies are rewarded for this or maybe the better 0:09:07.280 --> 0:09:09.520 way to ask it would be, you know, the measure 0:09:09.559 --> 0:09:13.200 of capex and why you know, investors are so okay 0:09:13.240 --> 0:09:17.880 with meta platforms spending so much money, but Amazon's operating 0:09:17.920 --> 0:09:20.760 profit not coming in as high as they thought it would. 0:09:20.800 --> 0:09:24.040 Is it because metas just printing money and has a 0:09:24.120 --> 0:09:25.600 higher margin business. 0:09:26.160 --> 0:09:28.280 I mean, you have to remember, you know, Amazon has 0:09:28.280 --> 0:09:30.720 a lot of retail footprint also, so you can't really 0:09:30.920 --> 0:09:32.640 equate them to a tech company as is. 0:09:32.679 --> 0:09:34.400 I mean, it's only the aw as part of it. 0:09:34.720 --> 0:09:36.600 But frankly speaking, if you go back to the history 0:09:36.600 --> 0:09:39.520 of Amazon for probably ten fifteen years, you know, they 0:09:39.559 --> 0:09:43.360 did were extremely unprofitable, and people you know, still rewarded 0:09:43.360 --> 0:09:45.840 for them. You know, in our view, profitability story has 0:09:45.880 --> 0:09:48.200 been amazing over the last three to four years. Look 0:09:48.200 --> 0:09:51.800 at where AWSS gone from low twenties to the thirties. 0:09:52.040 --> 0:09:54.679 Now today, it was a bit lower than what consensus 0:09:54.720 --> 0:09:57.760 were anticipating, but you know, it ebbs and flows because 0:09:57.800 --> 0:10:01.040 of the capex that they are investing in throughout their ecosystem. 0:10:01.600 --> 0:10:02.559 Imagine a business. 0:10:02.559 --> 0:10:06.000 I mean last quarter their AWS profit or our operating 0:10:06.040 --> 0:10:08.640 margins were thirty nine point five percent. I mean, that's 0:10:08.640 --> 0:10:12.120 a forty percent margin business. That's that's pretty impressive across 0:10:12.240 --> 0:10:16.000 any you know, tech platform. So again it is lumpy, 0:10:16.120 --> 0:10:18.720 but that's because of investments, that's because of how they hire. 0:10:19.360 --> 0:10:21.360 You know, we think longer term, that is still a 0:10:21.400 --> 0:10:22.679 forty percent margin business. 0:10:22.880 --> 0:10:24.640 So I want to put the same question I asked 0:10:25.000 --> 0:10:27.640 a punam Anag what you are thinking that you want 0:10:27.640 --> 0:10:29.760 to know a little bit more about when the company 0:10:29.800 --> 0:10:32.040 gets on the calls with analysts and investors. 0:10:32.400 --> 0:10:33.959 Yeah, the two things that we want to know is 0:10:34.000 --> 0:10:36.400 what's happening to your capex. Now, my gut feel is 0:10:36.440 --> 0:10:38.400 they will want to take the capex up because all 0:10:38.400 --> 0:10:40.520 the other cloud providers have done it, so they can't 0:10:40.559 --> 0:10:43.319 really be left behind. But then the second question is, well, 0:10:43.320 --> 0:10:45.760 can you give me an idea for all the capecks 0:10:45.800 --> 0:10:48.560 that's going in? What kind of AI workloads are you seeing? 0:10:48.880 --> 0:10:51.640 And if you are seeing some AI workloads, you know, 0:10:51.679 --> 0:10:53.920 why not disclose that number and you know, talk about 0:10:53.960 --> 0:10:56.640 it openly as Microsoft has done in the past, you know, 0:10:56.679 --> 0:10:57.920 one and a half to two years. 0:10:58.040 --> 0:11:00.120 Hey, Punam Guile, I want to bring you back in 0:11:00.120 --> 0:11:02.760 here because you cover e commerce and ath leisure. Carol 0:11:02.800 --> 0:11:05.040 asked you a really good question about if we can 0:11:05.080 --> 0:11:07.680 get any insight into the consumer and the health of 0:11:07.720 --> 0:11:10.640 the consumer by reading into these numbers, would you say 0:11:10.679 --> 0:11:14.160 that Amazon is well positioned if you indeed believe that 0:11:14.200 --> 0:11:16.360 we could be entering a downturn. We did see this 0:11:16.480 --> 0:11:20.720 question asked yesterday at the Federal Reserve by one of 0:11:20.760 --> 0:11:25.680 our own reporters, and referencing that vantage score report that 0:11:25.920 --> 0:11:30.400 high income consumers are actually missing on their bills right 0:11:30.440 --> 0:11:33.000 now when it comes to autos and credit cards? Is 0:11:33.040 --> 0:11:35.600 Amazon well positioned to be a player if we do 0:11:35.640 --> 0:11:36.360 see a downturn. 0:11:36.760 --> 0:11:39.720 I think if we see a downturn Amazon's not going 0:11:39.760 --> 0:11:43.800 to escape the ramifications of that. But that said, compared 0:11:43.840 --> 0:11:47.120 to everyone else in retail, I do think Amazon will 0:11:47.120 --> 0:11:49.040 fare better than the rest, and I do think that 0:11:49.080 --> 0:11:52.640 they will continue to attract the value customer who's just 0:11:52.679 --> 0:11:55.360 looking for deals and looking for value. Because at the 0:11:55.440 --> 0:11:58.640 end of the day, when you think about how retailers buy, 0:11:58.840 --> 0:12:02.480 those with scale have buying power, and Amazon has over 0:12:02.559 --> 0:12:05.800 seven hundred billion dollars in GMB based on our estimates, 0:12:06.120 --> 0:12:08.000 I can't think of a retailer bigger than that in 0:12:08.040 --> 0:12:09.720 the US that has buying power. 0:12:09.880 --> 0:12:11.160 All right, put them, We're going to let you go. 0:12:11.160 --> 0:12:13.120 Put them go. Our senior analyst for e commerce and 0:12:13.160 --> 0:12:14.880 at leisure, we're going to be watching out for her 0:12:14.920 --> 0:12:18.880 research and commentary. Also following the company call, she is 0:12:18.920 --> 0:12:22.000 of course with our Bloomberg Intelligence an rug before you go, 0:12:22.520 --> 0:12:25.920 at least for this moment, Apple should be crossing in 0:12:26.000 --> 0:12:28.640 less than ten minutes time. What will you be looking 0:12:28.679 --> 0:12:29.320 out for here? 0:12:29.960 --> 0:12:32.200 We really want to know what commentary they have around 0:12:32.240 --> 0:12:34.840 AI initiatives and what is the policy at this point 0:12:34.840 --> 0:12:37.640 in terms of adding you know, other third party models 0:12:37.640 --> 0:12:40.640 onto the ecosystem. When we look at the results, we 0:12:40.640 --> 0:12:42.680 think we're going to get a push or a pull 0:12:42.760 --> 0:12:45.439 forward of demand from you know, the loss for the 0:12:45.520 --> 0:12:49.000 last quarter, but next quarter guidance is extremely important, which 0:12:49.000 --> 0:12:50.839 we don't think is going to be that great. 0:12:51.360 --> 0:12:52.920 I feel like we keep saying we want to know 0:12:52.960 --> 0:12:54.560 more about AI. What do you do? And what do 0:12:54.600 --> 0:12:56.839 you do? And Ana rug Rana, thank you so much, 0:12:56.880 --> 0:13:00.800 senior tech analyst at Bloomberg Intelligence. They're in our Chicago. 0:13:01.880 --> 0:13:05.720 You're listening to the Bloomberg Business Week Daily podcast. Catch 0:13:05.800 --> 0:13:09.000 us live weekday afternoons from two to five eastering. Listen 0:13:09.040 --> 0:13:12.640 on Applecarplay and Android Auto with the Bloomberg Business app, 0:13:12.800 --> 0:13:15.360 or watch us live on YouTube. 0:13:15.679 --> 0:13:18.439 I want to bring in Ivan fine Seth, research director 0:13:18.480 --> 0:13:21.800 and chief investment officer at Tiger's Financial Partners. The firm 0:13:21.880 --> 0:13:24.400 is more than five hundred million dollars in assets under management. 0:13:24.600 --> 0:13:27.320 They've got both Apple and Amazon stock for clients. He 0:13:27.400 --> 0:13:30.160 joins us from New York City. What do you make 0:13:30.200 --> 0:13:32.320 of this? It was a pretty massive beat on the 0:13:32.320 --> 0:13:36.600 top line, really a massive beat across every category. Slight 0:13:36.640 --> 0:13:40.640 beat when it came to China, iPad revenue slightly below expectations. 0:13:40.640 --> 0:13:42.120 What are your first impressions? 0:13:42.440 --> 0:13:45.520 Well, I think there was a lot of caution going 0:13:45.600 --> 0:13:48.840 into the quarter, and they were strong on revenue, definitely 0:13:48.880 --> 0:13:52.720 strong on iPhones and strong on iPhone sales in China. 0:13:52.800 --> 0:13:56.560 Those are the key concerns. I think that even Tim 0:13:56.600 --> 0:14:00.280 Cook just commented that pull forward sales based on tear 0:14:00.400 --> 0:14:02.600 on tariffs were only a small part from what they 0:14:02.640 --> 0:14:03.120 were seeing. 0:14:03.320 --> 0:14:05.120 So then why do you think the iPhone beat was 0:14:05.160 --> 0:14:05.640 so big? 0:14:07.400 --> 0:14:10.920 It just could be where we are in the upgrade cycle. 0:14:11.360 --> 0:14:13.600 But we're in a time where people hold onto their 0:14:13.600 --> 0:14:16.040 phones for longer and wait to buy it because that 0:14:16.120 --> 0:14:18.719 new one comes out traditionally in September late September. 0:14:19.640 --> 0:14:22.480 There's still a lot of you know, twelves out there, 0:14:22.680 --> 0:14:25.800 so people may you know, can't maybe hold off or 0:14:27.080 --> 0:14:30.040 the promotion. We're still seeing a lot of promotions from 0:14:30.120 --> 0:14:35.760 the carrier providers like AT and T, T Mobile and Verizon, 0:14:35.960 --> 0:14:40.840 so the promotions drive sales. Maybe it is, like Sarah said, 0:14:40.960 --> 0:14:45.760 concerns over higher tariff driven prices and people are upgrading now. 0:14:47.400 --> 0:14:51.600 So either way, there was a lot of concern that 0:14:52.240 --> 0:14:54.200 it could have been a weaker than expected quarter, and 0:14:54.240 --> 0:14:57.000 it was a much stronger than expected quarter, especially in 0:14:57.040 --> 0:15:01.280 three key areas overall revenue, iPhone sales and China iPhone sales. 0:15:01.480 --> 0:15:06.200 All Right, so you've got Tim Cook saying today Apple 0:15:06.240 --> 0:15:09.920 is project Reporter Jude quarter revenue record with double digit 0:15:10.000 --> 0:15:12.760 growth and iPhone Mac and services and growth around the 0:15:12.760 --> 0:15:16.640 world and every geographic segment. So highlighting that, you know, 0:15:16.680 --> 0:15:18.840 the big question that we had ivan they're going into it. 0:15:18.840 --> 0:15:20.200 And one of the things that was top of mind 0:15:20.280 --> 0:15:22.760 is AI. Right in a week, in a couple of 0:15:22.840 --> 0:15:26.760 weeks where we've been looking at the hyperscalers, the big spend, 0:15:27.080 --> 0:15:31.520 the return on investment as a result of that, what 0:15:31.600 --> 0:15:34.080 about on AI? How big a deal is that for you? 0:15:34.160 --> 0:15:37.800 When you look at Apple, it is a big deal. 0:15:38.080 --> 0:15:42.280 And they still really have not like wowed on ai yet, 0:15:42.480 --> 0:15:47.040 and you know, they're talking about partnering working with other 0:15:47.080 --> 0:15:50.800 AI providers. I mean, Siri still needs a lot of improvement. 0:15:51.840 --> 0:15:54.280 A lot of the functionality that is out there is 0:15:54.320 --> 0:15:59.960 pretty good as far as pictures and text and email 0:16:00.160 --> 0:16:06.200 messages to integrate AI, to help facilitate the you know, 0:16:06.560 --> 0:16:09.920 editing of pictures and sending texts and emails. But I 0:16:09.920 --> 0:16:11.960 think they still have a long, you know, a long 0:16:12.000 --> 0:16:15.320 way to go. Because Apple has always had a tremendous 0:16:15.320 --> 0:16:18.600 wow factor, and you know, AI has really not been 0:16:18.800 --> 0:16:22.760 at the level that everybody is expecting from Apple, So yeah, 0:16:22.800 --> 0:16:26.040 that is an opportunity. But services revenue did increase nicely, 0:16:26.200 --> 0:16:28.520 which is another key point. So those I think are 0:16:28.560 --> 0:16:32.200 really that's the fourth of the total four key points 0:16:32.240 --> 0:16:34.080 that everybody was focusing on are. 0:16:34.000 --> 0:16:36.640 Ian King sharing with the team on the live blog service. 0:16:36.680 --> 0:16:42.520 Revenue up thirteen percent, Wearables provided sales that actually showed 0:16:42.520 --> 0:16:45.920 a contraction of about eight point six percent. Max sales 0:16:45.960 --> 0:16:48.440 an increase of fifteen percent. I've had revenue a decline 0:16:48.480 --> 0:16:52.080 of eight percent, and iPhone had revenue an increase of 0:16:52.440 --> 0:16:56.480 thirteen percent. AI. Why is it so tricky for Apple? 0:16:56.520 --> 0:16:58.840 They're continuing to lose some top talent. Why is it 0:16:58.920 --> 0:17:01.600 so tricky for them ivan that they can't seem to 0:17:01.600 --> 0:17:02.480 get it together. 0:17:03.840 --> 0:17:08.240 Maybe the conundrum because Apple is viewed as an incredibly 0:17:08.320 --> 0:17:12.760 innovative company, and while they're never the first mover. They 0:17:12.840 --> 0:17:16.080 didn't invent the smartphone, but they took it to the 0:17:16.119 --> 0:17:18.719 next level. They didn't invent the iPod, took it to 0:17:18.760 --> 0:17:23.600 the next level. So each thing that they address, they 0:17:23.640 --> 0:17:25.480 take it. They're not the first mover but they do 0:17:25.560 --> 0:17:28.160 take it to the next level. So everybody has high 0:17:28.200 --> 0:17:32.080 expectations as far as Apple and intelligence or AI, so 0:17:32.160 --> 0:17:33.920 I think that is part of it, and they really 0:17:33.960 --> 0:17:36.760 haven't come out and wowed everybody. The other area that 0:17:36.840 --> 0:17:40.160 I think is important, well, I think the Vision Pro 0:17:40.640 --> 0:17:44.399 as a concept was really great, but I didn't think 0:17:44.400 --> 0:17:46.520 they were going to sell that many of those headsets 0:17:46.560 --> 0:17:49.800 at thirty four hundred dollars, and I expected at some 0:17:49.880 --> 0:17:52.399 point they would come out with a more streamlined version, 0:17:52.680 --> 0:17:57.520 a much more cost competitive version. And I also am 0:17:57.560 --> 0:18:00.800 a big believer at the in the smart glass concept 0:18:00.800 --> 0:18:03.760 that Meta is doing very well with, and I think 0:18:03.760 --> 0:18:06.680 we will see some type of smart glass concept from 0:18:07.040 --> 0:18:10.480 Apple that integrates across all of its devices as far 0:18:10.480 --> 0:18:12.879 as the phone and the watch, where you could you 0:18:13.080 --> 0:18:15.280 keep the phone in your pocket and do a lot 0:18:15.320 --> 0:18:18.119 of things as far as communication, make and receive calls 0:18:18.240 --> 0:18:21.959 and you know, video and pictures in real time and 0:18:22.320 --> 0:18:26.920 communicate just like you would on FaceTime through the pair 0:18:26.920 --> 0:18:28.480 of Apple smart glasses. 0:18:28.800 --> 0:18:31.080 Oh yeah, I already talk to myself with my phone 0:18:31.119 --> 0:18:32.600 all the time. I can just talk to myself more 0:18:32.600 --> 0:18:35.400 in glasses. That's that's totally fine. Certainly You're right, I've 0:18:35.440 --> 0:18:37.679 in the form factor for the vision Pro much different 0:18:37.720 --> 0:18:44.080 than metas ray Ban Sunglasses. Hey aarn Mark German repeatedly 0:18:44.160 --> 0:18:46.840 saying essentially this, and I'll read it right from the 0:18:46.840 --> 0:18:49.320 live blog. This is nothing new to our audience because 0:18:49.400 --> 0:18:51.600 Mark says it all the time. He writes, as I've 0:18:51.600 --> 0:18:54.720 been saying, despite concerns about the performance of Tim Cook 0:18:55.560 --> 0:19:00.320 from some analysts, there is no universe in which the 0:19:00.320 --> 0:19:02.680 board will replace him with this type of quarter. It's 0:19:02.760 --> 0:19:07.399 essentially impossible. Do you agree with Mark's assessment there Ivan 0:19:07.560 --> 0:19:10.680 that Tim Cook is there to stay despite the challenges 0:19:10.680 --> 0:19:13.960 of the company's experience. When it comes to AI, he. 0:19:13.920 --> 0:19:18.040 Has done a phenomenal job. He's created tremendous shareholder value 0:19:18.080 --> 0:19:24.040 in returns since his tenure as the CEO. Companies hit bumps, 0:19:24.720 --> 0:19:31.399 Apple has innovated tremendously under his time as CEO. So 0:19:31.720 --> 0:19:34.760 he's done a great job. And I don't think any 0:19:35.080 --> 0:19:39.120 of the issues that have investors that are concerns right 0:19:39.160 --> 0:19:43.199 now are really you know, being could be tied to 0:19:43.520 --> 0:19:46.440 some kind of fault of his. So I think it's 0:19:46.520 --> 0:19:50.320 highly unlikely that they will replace him, and I think 0:19:50.400 --> 0:19:54.600 that Apple will come back strong in AI, and I 0:19:54.640 --> 0:19:57.800 think we will see the next generation of some kind 0:19:57.800 --> 0:20:01.639 of you ar VR headset moving more toward the glasses 0:20:02.119 --> 0:20:04.760 type of form factor of which you look. They have 0:20:05.840 --> 0:20:09.000 a billion and a half iPhone users. They have a 0:20:09.119 --> 0:20:15.800 over two billion ecosystem of Apple product users that are 0:20:16.040 --> 0:20:19.080 eager to adopt Apple products and buy Apple products. The 0:20:19.080 --> 0:20:23.720