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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is a breaking news update from Bloomberg.

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Speaker 1: Instant reaction and analysis from our three thousand journalists and

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Speaker 1: analysts around the world.

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Speaker 3: Shares of Amazon hire in the aftermarket. Let's get to

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Speaker 3: it with our team. Two members killer members, if you will,

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Speaker 3: of our Bloomberg Intelligence team. We're talking about Putnam Goyle,

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Speaker 3: She's Bloomberg Intelligence Senior analyst for e Commerce and ath Leisure.

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Speaker 3: And Anna Agrana, Bloomberg Intelligence Senior Technology analysts.

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Speaker 4: Put them.

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Speaker 3: Let me kick it off with you in terms of Amazon,

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Speaker 3: what's jumping out here for you?

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Speaker 5: Look, it looks like broadbats, Bob, broad based strength across

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Speaker 5: the board. The retail numbers were particularly good, and that

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Speaker 5: was expected because we had the prime day shift moving

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Speaker 5: in from three Q to two Q. So overall, really

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Speaker 5: nice numbers here on the retail side. Consumers came to

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Speaker 5: Amazon to shop prime day sales, and the shift to

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Speaker 5: online just continues up here, more and more apparent as

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Speaker 5: we moved through a tough consumer spending cycle.

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Speaker 1: What's this third quarter net sales miss one ninety seven

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Speaker 1: to two hundred and two billion. The estimus were two

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Speaker 1: hundred and four billion dollars poon.

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Speaker 3: Hm.

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Speaker 5: I think part of it is the prime day shift,

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Speaker 5: right when you think about.

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Speaker 2: What analysts knew about that, so they should have, but

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Speaker 2: we don't know.

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Speaker 5: How much, right, we don't know how much in dollar

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Speaker 5: volume has moved into Q If you look at the

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Speaker 5: beat that we saw, analysts were expecting revenues to be up,

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Speaker 5: but they came and even higher than that. Right, thirteen

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Speaker 5: point seven percent online revenues was the expectation and they

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Speaker 5: came in a fifteen percent, So a couple of billion

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Speaker 5: dollars there could be part of the movement that we're

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Speaker 5: seeing here in the guidance as well.

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Speaker 3: All right, Anderrok, com on in on here. Let's talk

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Speaker 3: about AWS. What doing pretty well, to say the.

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Speaker 6: Least, actually much much better than what I would have

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Speaker 6: expected them in going from to thirty seven in constant

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Speaker 6: currency is phenomenal just because the size of this business

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Speaker 6: is so large. I mean, it's so much bigger than

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Speaker 6: aud Equal and much bigger than Google. But this is

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Speaker 6: a very big beat, frankly, and the bigger thing, the

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Speaker 6: biggest surprise for me was the margins. I would have

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Speaker 6: expected margins to go down with all these investments that

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Speaker 6: actually went up. So you know, kudos to the AWS team,

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Speaker 6: and we look to hear more about guidance for a

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Speaker 6: next quarter, and you know, how much longer can these

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Speaker 6: margins hold up?

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Speaker 2: Honor Rock.

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Speaker 1: The AI and chips run rate, the ease eclipsed run

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Speaker 1: rates of over twenty five billion dollars can textualize that

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Speaker 1: for US, as Romaine said, a division of a division

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Speaker 1: with twenty five billion dollar run rates.

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Speaker 6: Yeah, I mean, to be honest, I don't really care

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Speaker 6: that much about the AI net number. The number of

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Speaker 6: the chips is the one that I find it more

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Speaker 6: exciting because here's the thing. All these big companies that

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Speaker 6: are spending all this capex, A large portion of that

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Speaker 6: capex is going to buy GPUs and video GPUs. If

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Speaker 6: Amazon can go and figure out their workloads onto their

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Speaker 6: own chips, it saves them massive amount of money and

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Speaker 6: helps them recognize the big backlock that they have without

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Speaker 6: having to spend you know, given video that cashital I

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Speaker 6: think that's one of the biggest differentiators between Google, Amazon,

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Speaker 6: and Microsoft is you know, the first to have their

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Speaker 6: own chips that people are embracing at a fast pace.

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Speaker 4: Meanwhile, that's not the case with Microsoft.

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Speaker 3: Yeah, I think it's just fascinating. As I said, I

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Speaker 3: don't always think about Amazon as a chip company, but

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Speaker 3: you got to remember that they are doing this, and

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Speaker 3: increasingly these big tech guys are doing it. Put them

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Speaker 3: Come on back in here. Anything here, I know we're

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Speaker 3: still getting information. There's still stuff we're going to get

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Speaker 3: on the analysts called anything though, that you find is

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Speaker 3: maybe something that's worth digging a little bit deeper into

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Speaker 3: and asking about.

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Speaker 5: I think the advertising business saw a nice pickup, right,

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Speaker 5: twenty six percent growth rates this quarter is a is

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Speaker 5: a step up from the close to twenty percent that

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Speaker 5: they've been recording for the past few quarters. Was that

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Speaker 5: also led by the prime day shift? Given such a

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Speaker 5: big event moved into the second quarter to advertising dollars

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Speaker 5: shift too, and we will we see that slowed down

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Speaker 5: a little in the next quarter. So I'm looking to

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Speaker 5: better understand how this prime day shift affected and helped

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Speaker 5: to queue across the board and what it really does

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Speaker 5: to three Q. They've never quantified it, so we're hoping

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Speaker 5: to get some color.

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Speaker 1: Well, how big is prime like how big is Prime Day?

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Speaker 1: Because I know we know from a metrics perspective, but

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Speaker 1: prime day kind of started a few years ago as

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Speaker 1: this offshoot of what was it Ali Baba doing Singles Day?

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Speaker 1: Is that what sort of inspired it years ago?

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Speaker 5: That could have inspired it? But you know Prime Day

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Speaker 5: was a once a year phenomenal.

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Speaker 2: Yeah, I know, it's like holiday right a week.

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Speaker 5: It's now twice a year, right, So it's really just

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Speaker 5: a move to pull shoppers to spend earlier. So if

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Speaker 5: you think about the timing of Prime Day, right this time,

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Speaker 5: they moved it into June, usually in July, so really

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Speaker 5: capturing spend for back to school, for these peak holiday

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Speaker 5: moments where consumers are looking to stretch their dollars. They're

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Speaker 5: they're essentially taking the dollars up front and trying to

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Speaker 5: get the consumers to spend it with them versus elsewhere.

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Speaker 5: Does that happen? Yes and no, because around Prime Day,

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Speaker 5: it's not just Amazon that's striking the deals. It's also Walmart,

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Speaker 5: it's also Target, it's also Best Buy. Everyone is having

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Speaker 5: their own version of deals around this day.

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Speaker 3: Anything to get us to buy. I know how that works. Hey,

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Speaker 3: just to remind you everybody, we're talking with Punamgoyle, Bloomberg Intelligence,

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Speaker 3: senior analysts for e Commerce and at Leisure Aragrana Bloomberg

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Speaker 3: Intelligence senior technology analyst joining us. If you have a question,

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Speaker 3: let us know. We'd love to bring you into the conversation.

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Speaker 3: For those who are Bloomberg dot com subscribers and terminal clients,

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Speaker 3: ask a question of our panelists. Just submit questions for

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Speaker 3: our team to answer live on air Bloomberg dot com

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Speaker 3: slash ask Radio. Send them to Bloomberg dot com slash

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Speaker 3: ask Radio and then you can certainly catch their answers

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Speaker 3: live on air with us.

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Speaker 1: Hey, I want to just look at shares of roadblocks

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Speaker 1: real quick. The gaming company down about eleven percent in

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Speaker 1: the after hours, just taking a look at what exactly

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Speaker 1: is happening. Second quarter daily active users came in below

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Speaker 1: estimates one hundred and twenty three million. The SMOs for

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Speaker 1: one hundred and twenty eight point seven million dollar million users.

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Speaker 1: That was really that what missed the average analyst estimate,

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Speaker 1: and that is what has has investors concern. Bookings came

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Speaker 1: in a little shy, hours, engaged came in shy. Revenue

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Speaker 1: did come in higher than expected, though a loss per

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Speaker 1: share at twenty six cents. The estimos for a lost

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Speaker 1: percent at thirty four cents lost per share, rather shares

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Speaker 1: down eleven and a half percent from the after hours.

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Speaker 3: All right, so getting hammered going in the other direction,

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Speaker 3: shares of Amazon continuing to rally. Our spencer soper out

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Speaker 3: with his story. Amazon reported cloud computing revenue that beat

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Speaker 3: analyst estimates, with booming demand for artificial intelligence services accelerating

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Speaker 3: sales for the fifth straight quarter, revenue jump thirty seven

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Speaker 3: percent to forty two point two billion at Amazon Web Services,

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Speaker 3: which generates about a fifth of the company's revenue and

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Speaker 3: most of its operating profit. It was the fastest pace

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Speaker 3: of growth since the fourth quarter of twenty twenty one. Analyst,

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Speaker 3: on average forecast sales of forty point six billion, according

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Speaker 3: to data compiled by Bloomberg. You know, Ana Rag, you

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Speaker 3: have Amazon against the other hyperscalers. What is it that's unique?

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Speaker 3: I mean, you talk a little bit about the chips,

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Speaker 3: and that certainly kind of keeps a lid on some

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Speaker 3: of their costs and their access situation among the chip

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Speaker 3: demands that we've seen out there. But what is the

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Speaker 3: special sauce of Amazon?

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Speaker 6: So the first and foremost, it is the largest public

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Speaker 6: cloud provider, It has a much longer history of working

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Speaker 6: with enterprises. So remember when we talk about AI adoption,

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Speaker 6: you think about chat GPT app, it's primarily hosted on

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Speaker 6: Microsoft as here.

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Speaker 4: That's a consumer app.

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Speaker 6: But now you think about AWS and enterprise AI adoption,

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Speaker 6: that's where a lot of large companies around the world

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Speaker 6: would be building their application or they would be infusing

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Speaker 6: AI into their older application. So that's a big difference,

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Speaker 6: is the enterprise presence as well as that. And you know,

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Speaker 6: for the Microsoft is on the consumer side. Microsoft does both,

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Speaker 6: but for Amazon that's primarily the bread and butter. The

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Speaker 6: other thing is they're also the key or the preferred

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Speaker 6: cloud provider for anthropic and we have seen a massive

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Speaker 6: boost in and thropics use for coding agents, and I

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Speaker 6: think that's also helping AWS in that case. And then

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Speaker 6: if you think you know the future of AI is

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Speaker 6: enterprise adoption, you know Amazon has a lot of data,

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Speaker 6: it has a lot of services, so it's right in

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Speaker 6: the middle of this entire I would say air diffusion

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Speaker 6: within companies.

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Speaker 1: I want to bring in ed La look to the conversation.

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Speaker 1: He's the host of Bloomberg Tech out there in San Francisco,

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Speaker 1: and what sticks out to you Amazon's numbers up the

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Speaker 1: stock up eight point nine percent in the after hour.

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Speaker 2: Yeah, what's sticking mean you.

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Speaker 7: And Anna Rag will forgive me because I missed the

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Speaker 7: first part of your conversation.

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Speaker 2: I was on the phone with the CFO.

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Speaker 7: But I mean, this is a beat on every metric

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Speaker 7: where AWS absolutely matters most. You know, thirty seven percent

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Speaker 7: growth against street expectation of thirty one percent. You know,

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Speaker 7: it's it's a pretty straightforward set of numbers where you

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Speaker 7: know they will be peppered with questions on the call

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Speaker 7: for the same magic formula that we discussed in the

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Speaker 7: last few afternoons, capital expenditure, direction of travel, and other

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Speaker 7: points of tangible evidence that the AI from Amazon is

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Speaker 7: gaining traction in its different guises.

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Speaker 2: What did you hear from the c CFO.

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Speaker 7: That, as I suppoke to the CFO of a different company,

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Speaker 7: describe your kind of things?

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Speaker 2: Which CFO? Which CFO were you talking to?

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Speaker 7: Sorry, I was talking to the I was talking to

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Speaker 7: the Rivian's okay, we're going to get to get that data. Okay, great,

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Speaker 7: But yeah, like again, you know, an Ana Rag like,

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Speaker 7: I'm such a massive Anaag fan, and so if I

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Speaker 7: say something and he's like that's dumb. Let him say

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Speaker 7: it's dumb. But you know, operating income also like a

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Speaker 7: huge beat. And you know, if the concern of the

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Speaker 7: market for the hyperscalers is that they want to see

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Speaker 7: free cash flow and profit and a commitment to spend

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Speaker 7: and continue top line growth, they kind of got all

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Speaker 7: of that. There's not a lot left to complain about.

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Speaker 2: Is there an rag you want to come in now

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Speaker 2: on that?

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Speaker 6: No, I absolutely agree with that. In fact, that's what

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Speaker 6: I was trying to figure out. Can I find any

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Speaker 6: mistakes over here? But we don't.

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Speaker 4: And in fact, which is why I said, you know, when.

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Speaker 6: You think of enterprise adoption and AI, you really cannot

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Speaker 6: think of anybody better than AWS because of given that

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Speaker 6: how much of world applications the house already you know,

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Speaker 6: within their ecosystem. So the big question now is how

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Speaker 6: much they have to spend for the next twelve months

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Speaker 6: to get this kind of rate going. We saw the

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Speaker 6: AWUS growth rate jump to thirty seven percent. You know,

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Speaker 6: next quarter, is it going to be faster than that

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Speaker 6: or do we see some moderation in that? So now

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Speaker 6: we are really getting into, to be honest, fifty basis

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Speaker 6: points here or one hundred basis points here, it's a

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Speaker 6: you're nitpicking at this point.

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Speaker 1: Frankly, Hey, we're getting some questions from viewers and listeners

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Speaker 1: around the world.

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Speaker 2: Just a reminder.

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Speaker 1: Subscribers to Bloomberg dot com and terminal subscribers can ask

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Speaker 1: questions Bloomberg dot com slash ask radio. I want to

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Speaker 1: throw this one. This is from Connor in Auckland, New Zealand.

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Speaker 1: Thanks for stand up late, I guess early in the

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Speaker 1: morning for us, Connor, Microsoft and Amazon are making good

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Speaker 1: progress in enterprise AI. How sticky are their product offerings?

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Speaker 1: Will there be big swings in market share going forward?

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Speaker 6: On a rock?

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Speaker 2: I think this is a good question for you.

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Speaker 4: So the way we think about it is the pie

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Speaker 4: is growing at such a fast space.

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Speaker 6: They will all make money. I'm fairly confident about it.

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Speaker 6: But the question is what kind of money they will

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Speaker 6: be making. Are they making money renting GPUs and training

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Speaker 6: models or are you building AI applications on top of it.

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Speaker 6: We like the second kind of business better because in

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Speaker 6: the long run, it's very difficult to take it off.

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Speaker 6: So let's say go back, you know, twenty years or

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Speaker 6: fifteen years. If lift or Uber started their application on AWS.

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Speaker 6: That's a cloud native application. As the application is growing,

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Speaker 6: AWS makes more money. If you are developing a brand

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Speaker 6: new AI application today, if you pick one of these

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Speaker 6: three or four cloud platforms, as you as those apps

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Speaker 6: get bigger, you're going to make money. So it's a

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Speaker 6: perpetual revenue email. It's very difficult to take that out

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Speaker 6: and move it somewhere else. But if you're only training models,

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Speaker 6: that's a very different revenue stream.

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Speaker 4: Yeah.

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Speaker 3: It's interesting too because I was just looking at Spencer Soaper,

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Speaker 3: the story that he's got on the Bloomberg Terminal or

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Speaker 3: Bloomberg Spencer Soaper. He says the company lacks a hit

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Speaker 3: consumer AI product on par with open ais chatchypt and

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Speaker 3: Anthropics Claude, but has ink Deals, committing both AI labs

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Speaker 3: to spend at least one hundred billion dollars in services

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Speaker 3: from the Amazon Web Services cloud unit in the coming years.

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Speaker 3: I mean ANTAOG.

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Speaker 2: That's a big deal.

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Speaker 4: Yeah.

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Speaker 6: So one of the things that mikel Microsoft said yesterday

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Speaker 6: was the sequential increase in commercial real performance obligations or

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Speaker 6: the backlock that they had. I think it was about

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Speaker 6: forty five billion. All of that was from non frontier

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Speaker 6: model companies, which is that is not anthropic, that is

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Speaker 6: not opening eye because remember, what is the biggest fear

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Speaker 6: right now in the market is what if open EI

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Speaker 6: is not able to take care of the commitments or

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Speaker 6: entropic and so forth. But what they're saying is the

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Speaker 6: business now they're coming in in their backlocker and they're

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Speaker 6: bookings is from non frontier models. And that's really I

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Speaker 6: think one of the most important questions that we want

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Speaker 6: to ask the company today is if they talk about

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Speaker 6: cloud commitments, where are those cloud commitments coming in.

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Speaker 4: Is it the three or four companies or is it

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Speaker 4: more diversified.

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Speaker 3: Right exactly in terms of exposure to maybe just a

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Speaker 3: few big customers put them on I want to bring

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Speaker 3: you back. We spent We talked so much about AWS

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Speaker 3: and I know we do that with you as well.

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Speaker 3: It's so important in terms of what really makes money

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Speaker 3: for Amazon. But you think about I mean, they sell

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Speaker 3: a lot of stuff, so many of us relate to

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Speaker 3: Amazon as a retailer. How do they think about increasingly

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Speaker 3: using AI to kind of juice the numbers and maybe

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Speaker 3: improve the profitability on the retail side of things.

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Speaker 5: Yeah, AI has been a big push on the retail side,

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Speaker 5: and actually I think Amazon does the best better than anyone.

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Speaker 5: When they introduced Alexa for Shopping, for example, Alexa plus,

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Speaker 5: it's pretty clever. You know, you go to the search bar,

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Speaker 5: you can compare pricing. You can say I'm looking for

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Speaker 5: this item and when was it priced, and if it

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Speaker 5: drops to that price, buy it for me. I mean,

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Speaker 5: just that simple, and it'll show about your door. So

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Speaker 5: I do think that they're gaining traction there. In fact

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Speaker 5: and the release, I believe they said that interactions and

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Speaker 5: active users doubled over second quarter just with AI adoption

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Speaker 5: and Alexa for Shopping, So they're making momentum here. We

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Speaker 5: do think that the investments that they make in Alexa

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Speaker 5: for Shopping and AI will continue to not only help

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Speaker 5: them with customer service and conversion online, but also improve

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Speaker 5: margins on the retail side, which are slimmed to none.

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Speaker 7: As you know, I find that data so amazing. Puma,

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Speaker 7: I didn't know you were with us. It's so good

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Speaker 7: to see you. By the way, every morning when I

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Speaker 7: wake up for Bloomberg surveillance, it's because my Eco device works,

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Speaker 7: I ask Alexa to set an alarm and it's very

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Speaker 7: reliable for that, But for ages, I've been thinking, what

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Speaker 7: am I going to use this for? The data you're

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Speaker 7: pointing to is amazing though, Alexa for shopping right if

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Speaker 7: their shop is on prime, use Alexa more than forty

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Speaker 7: percent more per order if they involve the A in

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Speaker 7: the transaction. I find that amazing. But it doesn't move

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Speaker 7: the needle on the financials right for Amazon at the stage.

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Speaker 5: It doesn't move the need because you have to think

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Speaker 5: about how big Amazon is. Right, We're approaching a trillion

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Speaker 5: dollars in GMB this year based on our estimates, so

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Speaker 5: that's a sizeable number. So when we see these growth

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Speaker 5: rates with the online business up fifteen percent, it's a

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Speaker 5: big number to move. That said, I do think it

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Speaker 5: does move the needle on conversion. I do think the

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Speaker 5: aluxafer shopping is helping it's prime customers more notably really

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Speaker 5: engage and purchase things even quicker because now you're just

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Speaker 5: talking to someone, you're talking to this agent, and you're

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Speaker 5: setting expectations on what you want and things will just

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Speaker 5: show up to your door. So now you don't need

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Speaker 5: to go back and keep going back to see, okay,

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Speaker 5: did the price drop? Is this the best price is

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Speaker 5: this what I need. Do I need something else? It's

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Speaker 5: doing the work for you, So I do think over

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Speaker 5: time that will help boost sales and really help Amazon

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Speaker 5: continue to maintain its lead in the online world.

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Speaker 1: I want to throw one to add and back to

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Speaker 1: the technology side of things, and I want to talk

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Speaker 1: a little bit about the company's chips and business. We

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Speaker 1: got some data about annual revenue run rates on a

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Speaker 1: rug said he's not as interested in the AI side

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Speaker 1: of it.

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Speaker 2: He's more interested in the chip side of it. But

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Speaker 2: me too.

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Speaker 1: You know, they've got the what is it the trainum

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Speaker 1: Is that what they're talking about here.

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Speaker 7: Well, it's multifaceted. But the chips business has revenue run

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Speaker 7: rate twenty five billion dollars, as does the AI business.

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Speaker 7: It's a run rate figure, but it is amazing how

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Speaker 7: quickly they've kind of turned it around from the in

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Speaker 7: house R and D to like they got a lot

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Speaker 7: of questions from what's the point of trainium, like who's

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Speaker 7: using it? They had a lot of early success with

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Speaker 7: saying Athropic will use Trainium, but and throp it quickly

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Speaker 7: followed up with some big TPU deals twenty five billion dollars.

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Speaker 7: You know, for context, AMD did thirty five billion dollars

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Speaker 7: of revenue all told in its last fiscal year, and

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Speaker 7: it's likely to do fifty billion dollars this year. But

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Speaker 7: it's oh, they're moving pretty quickly on it, you know,

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Speaker 7: across those It's not them literally a bag of chips

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Speaker 7: here you go. You know, it's still then renting capacity

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Speaker 7: specifically to their own silicon, but to third party customers.

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Speaker 7: And like, yeah, you know, if if Google gets all

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Speaker 7: the credit for TPU, then should Amazon get some credit

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Speaker 7: for those trainium chips too?

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Speaker 3: Some would say, yes, we were talking about anarak. Come

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Speaker 3: on back, we were talking about chips with you and

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Speaker 3: Amazon earlier.

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Speaker 6: Yeah, I think that's exactly what you know Ed is

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Speaker 6: talking about here, because remember it's the capic side of

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Speaker 6: it also, that's important. First of all, if customers are

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Speaker 6: embracing Cranium along with Amazon Cloud, I mean, it's really

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Speaker 6: good for them because guess what, they get to keep

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Speaker 6: a lot of that gross margin that they don't have

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Speaker 6: to pay in video for those ships.

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Speaker 4: So I think sooner or later, the game.

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Speaker 6: The big game in this case is going to be

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Speaker 6: who has the lowest you know cost per token within

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Speaker 6: the all the hyperskailled cloud providers, and that's where Google

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Speaker 6: and amaz z On may have a lego verted our

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Speaker 6: Microsoft

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Speaker 4: M mm hmm