Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is a breaking
Speaker 1: news update from Bloomberg, instant reaction and analysis from our
Speaker 1: three thousand journalists and analysts around the world. It is
Speaker 1: Bloomberg Business Week Daily. That's Carol Masser. I'm Tim Steneveeck.
Speaker 1: I'm watching shares at Amazon in the after hours up
Speaker 1: eight and a half percent right now. The company reported
Speaker 1: net sales for the third quarter that beat the average
Speaker 1: analyst estimates. We're talking about one hundred and eighty point
Speaker 1: one seven billion dollars. That's up thirteen percent year over year.
Speaker 1: The estimate was for one hundred and seventy seven zero
Speaker 1: point eight two billion dollars AWS coming in net sales
Speaker 1: excluding fax, up twenty percent versus nineteen percent year over year.
Speaker 1: Estimos for seventeen point nine percent. As far as that
Speaker 1: forecast looks, Seeson net sales of two hundred and six
Speaker 1: billion to twohundred and thirteen billion. The estimus for two
Speaker 1: hundred and eight billion dollars, so kind of on the high, like, yeah,
Speaker 1: some of the format.
Speaker 2: Yeah.
Speaker 1: Operating income for the fourth quarter, the company sees that
Speaker 1: at twenty one billion dollars to twenty six billion dollars
Speaker 1: the estimate for twenty three point seven eight billion.
Speaker 3: We're going to get some analysis of on on Amazon,
Speaker 3: but just want to mention Netflix soaring all of a
Speaker 3: sudden of three point two percent here in the aftermarket.
Speaker 3: This is the company announces a ten for one stocks.
Speaker 1: But keep in mind this stock.
Speaker 3: One share costs one eighty nine dollars. So we're talking
Speaker 3: about now it's going to be much more accessible to investors.
Speaker 1: Right, is going to Well don't I don't think so.
Speaker 3: At one hundred dollars this year.
Speaker 1: No, you can buy shares, you can buy pieces of stock.
Speaker 1: You don't believe that, I don't. I think back in
Speaker 1: the day, yeah, back in the day it made a
Speaker 1: big difference. But now that all these retail brokerages offer.
Speaker 3: You want to take this outside?
Speaker 1: No, I mean everyone whenever I say, these people get
Speaker 1: in touch with me online and they talk about options
Speaker 1: and like how important it is for that. But it's
Speaker 1: always weird when you do see something that's not fundamental
Speaker 1: actually moving the stock price.
Speaker 3: All right, good stuff, all right anyway, but it is,
Speaker 3: but it is moving it. Hey, let's get to back
Speaker 3: to Amazon, because that stock is soaring in the aftermarket.
Speaker 3: Put them going is Bloomberg Intelligence senior analysts for e
Speaker 3: commerce andth leisure. She joins us from the Bloomberg Intelligence
Speaker 3: Princeton Bureau. Let's go to you god, put this looks
Speaker 3: like a really strong report on a lot of metrics.
Speaker 2: It definitely is. I mean, they hit it out of
Speaker 2: the park. Sales were very get across the board, across
Speaker 2: all business segments, AWS, online advertising, even physical stores. So
Speaker 2: from a top line perspective, very very encouraging results. In
Speaker 2: fact as was probably the right spot here. Twenty percent gains,
Speaker 2: we haven't seen that in a while. On the margin side,
Speaker 2: I think AWUS did really well, but then when it
Speaker 2: came to North America margins, they were weaker than we expected.
Speaker 2: So it's the only one area that I saw some skepticism,
Speaker 2: and I think that's largely due to their ability to
Speaker 2: want to maintain low prices to make sure the consumer
Speaker 2: keeps coming back and investing in its fulfillment.
Speaker 1: So you think that margins took a hit because Amazon
Speaker 1: is keeping is low why.
Speaker 2: I mean, they want to drive market share gains, right,
Speaker 2: So if you think about what's happening in retail this year,
Speaker 2: tariffs have clearly added to costs, and many retailers have
Speaker 2: decided to offset those costs through efficiencies to try to
Speaker 2: keep an hold prisis study or raise them selectively, so
Speaker 2: that could be part of the pressure. And then also,
Speaker 2: you know, Amazon has stepped up its game on shipping
Speaker 2: where it was the leader, and it still is the leader,
Speaker 2: but they're continuing to invest there to get items to faster,
Speaker 2: same day, et cetera.
Speaker 3: Yeah, they still do it right there, definitely completing on
Speaker 3: that one. Hey Ludlow, come on into our conversation, co
Speaker 3: host of Bloomberg a b Tech on Bloomberg Television. Watching
Speaker 3: these numbers, I mean, investors are sending shares of Amazon
Speaker 3: much higher here in the aftermarket stock up about nine percent.
Speaker 4: The cloud computing division accounts for the majority of operating income,
Speaker 4: right and this return to growth a year and year
Speaker 4: of above twenty percent for the first time twenty twenty two.
Speaker 4: It's absolutely timely. You know, I think Google gave us
Speaker 4: a lot of evidence that GCP their cloud offering, has
Speaker 4: a lot of momentum at the moment. But this is
Speaker 4: a bit of a barnstormer from Amazon to say, actually,
Speaker 4: on every metric that we track, AWS is doing really well.
Speaker 4: One of the headlines that you spotted really excellent, the
Speaker 4: appreciation in their investment on Entthropic that had a non
Speaker 4: operating income impact to the bottom line, right. But also
Speaker 4: they're talking a pretty fierce game about their custom training
Speaker 4: chip Trainium too and calling it a multi billion dollar business.
Speaker 4: And what we've seen in the past is when Amazon
Speaker 4: hasn't necessarily put a specific dollar figure on something but
Speaker 4: said this AI thing is in the billions of dollars,
Speaker 4: the market has given them a lot of credit for
Speaker 4: giving us at least like a little bit more detail.
Speaker 1: Ed where does the trainum to model fit in?
Speaker 4: Well, this is why I bring Google up. You know,
Speaker 4: when we broke the story that Anthropic had done a
Speaker 4: deal with Google for the use of one million TPUs
Speaker 4: Google's custom AI card or accelerator, it was a bit
Speaker 4: of a black eye for Amazon because Amazon is also
Speaker 4: a major investor in Anthropic and Amazon Anthropic have this
Speaker 4: large project called Project Rainier, a data center in Indiana.
Speaker 4: What they're saying is that this is a multi billion
Speaker 4: dollar run rate business offering their in house chip to
Speaker 4: third party customers. We don't know any more than that,
Speaker 4: but it does indicate that both for Ranthropic and for
Speaker 4: other customers outside of Anthropic that it's a viable business.
Speaker 4: You know, they've invested a lot of money on custom
Speaker 4: silicon and at least on the one headline we have
Speaker 4: on that it's paying dividends so to speak.
Speaker 3: Hey, speaking of dividends and paying dividends and punum, I
Speaker 3: want to go back to you on the retail side
Speaker 3: of this. I mean, we know that Andy Jasse, the
Speaker 3: CEO of Amazon, has really been working on improving profitability
Speaker 3: of that business automation. We've had their key head of
Speaker 3: robotics talking about what Amazon continues to do at that
Speaker 3: company in terms of automation and robotics. So what else
Speaker 3: can you give us in terms of color on the
Speaker 3: retail side of the business, which is something that so
Speaker 3: many of us right identify very clearly with when it
Speaker 3: comes to Amazon.
Speaker 2: Yeah, I think, Look, they're making all the right investments
Speaker 2: to improve profitability. In the longer term, Amazon's retail businesses
Speaker 2: finally break evento profitable. It took a long time to
Speaker 2: get here, and I think automation will be the next
Speaker 2: leg of growth to drive that further. But as I
Speaker 2: mentioned you know earlier, AWS is driving their EBIT margins.
Speaker 2: So aws can compensate these investments to a certain extent,
Speaker 2: and so can advertising because the margins here are just
Speaker 2: so much higher than they'll ever be able to get
Speaker 2: in the retail business.
Speaker 1: How is how is the advertising business during PUNAM?
Speaker 2: It's doing really well, like brew twenty two percent in
Speaker 2: and currency in the quarter, so right where we expected.
Speaker 2: And I think, you know, that's a high profit business.
Speaker 2: It's about seventy five to eighty percent profit margins by
Speaker 2: our estimates, and that's flowing right to the bottom line.
Speaker 2: We see it going to one hundred billion dollars. So
Speaker 2: there's a lot of improvement that they can build in
Speaker 2: advertising and really drive that business higher from here.
Speaker 1: Where's that coming from? Is that coming from interstitials placed
Speaker 1: in Amazon Prime Video, which I think you know, cut
Speaker 1: a lot of people off guard when they started doing that.
Speaker 1: Was it last year maybe? Or yeah? Or is it
Speaker 1: or is it coming from like products that are paid
Speaker 1: for placement.
Speaker 2: I think it's a combination of both. You're absolutely right,
Speaker 2: these ads are driving incremental revenue, but if you think
Speaker 2: about the base of this revenue base, it's still coming
Speaker 2: from product advertisements. The ads do help and They will
Speaker 2: become a larger driver as the ad business grows in size,
Speaker 2: but the core of it is still product advertisement.
Speaker 3: Hey put them before we let you go. What's kind
Speaker 3: of top of mind for you in the areas that
Speaker 3: you cover with Amazon that you would be asking on
Speaker 3: the earnings call.
Speaker 2: On the retail side, it's really about holiday and how
Speaker 2: that's going. The October Prime Day deals that they had,
Speaker 2: how that's going, and how the customer is responding. We
Speaker 2: think the customers are still holding up. Well, are they
Speaker 2: seeing the same thing and how do they see holiday
Speaker 2: shaping out to be where we're entering holiday?
Speaker 3: All right?
Speaker 5: Love it?
Speaker 2: Love it?
Speaker 3: Looking out for Punham's research too. That will hit the
Speaker 3: Bloomberg punam Oil as Bloomberg Intelligence senior analysts for e
Speaker 3: commerce and ath Leisure. We want to go back to
Speaker 3: the co host BTech on Bloomberg TV every day eleven
Speaker 3: am to noon on Bloomberg Television, Ed Ludlow still with
Speaker 3: us at as you continue to pour over that release,
Speaker 3: what else is catching your attention?
Speaker 1: Yeah?
Speaker 4: I mean Punham gave us the story with Amazon dot Com. Right,
Speaker 4: most of the audience are going to be more familiar
Speaker 4: with the e commerce business than they are with the
Speaker 4: cloud computing business. They are number one in cow computing,
Speaker 4: and as Punham put it so succinctly, the profit is
Speaker 4: compensated for the less profitable e commace side through cloud.
Speaker 4: But Andy Jasse's really focused on retail being more profitable.
Speaker 4: Tim is absolutely right that you look at advertising in
Speaker 4: the role that that's played there, and it has been improved.
Speaker 4: I would also just note that in the quarter, Amazon
Speaker 4: numbers reflect almost two billion dollars in severance costs. That's
Speaker 4: the other story of Amazon right now, getting rid of
Speaker 4: the bloat.
Speaker 1: That was the previous quarter, right, not the current quarter.
Speaker 4: Previous quarter exactly.
Speaker 1: Yeah, is the current quarter going to take a hit
Speaker 1: right now or is it going to be the upcoming quarter.
Speaker 1: It's always tough with this stuff because we don't know
Speaker 1: how these employment agreements work.
Speaker 4: Yeah, but the third court operating income was twenty one
Speaker 4: point seven billion dollars, almost twenty two billion dollars without
Speaker 4: charges when you strip the charges out, and so you
Speaker 4: know this is a profitable business overall because of cloud.
Speaker 4: It's a funny thing to say, but what's a couple
Speaker 4: of billion, you know to right size the company? And
Speaker 4: and that is the thing here. Amazon has been inconsistent
Speaker 4: on this point. At one time, Andy Jesse said that
Speaker 4: right sizing the company eliminating roles was because of the
Speaker 4: advent of AI. But the communication this past week when
Speaker 4: they cut fourteen thousand corporate roles was it was more
Speaker 4: about bloat and middle management, right sizing areas and simplifying
Speaker 4: the management structure more than anything. So it's hard to
Speaker 4: know which of those two stories is the predominantly of
Speaker 4: prevailing one here. But yeah, it's for Amazon, like it's
Speaker 4: a one time charge that so what all right?
Speaker 3: We want to bring into the conversation to Eric Clark,
Speaker 3: chief investment officer at Acivasque Global Advisors and portfolio manager
Speaker 3: for the Alpha Brands Logo ETF, which has Amazon and
Speaker 3: Apple and Alphabet and Microsoft and Netflix in its holdings. Edla, though,
Speaker 3: is going to stay with us. He's, of course, co
Speaker 3: host of BTech on BTV. Eric, come on in on Amazon.
Speaker 2: You like this.
Speaker 1: I love it.
Speaker 5: I mean I think the market loves it too, How
Speaker 5: are you guys? I think the setup into the quarter
Speaker 5: was pretty attractive because people were nervous about AWS and
Speaker 5: losing market share, so the stock sold off into the
Speaker 5: print and then you get some reality that Amazon is
Speaker 5: still doing Amazon Well.
Speaker 1: How do you read into this report in the context
Speaker 1: of the layoffs that we learned about earlier this week.
Speaker 1: Did Amazon need to do those layoffs? Do you see
Speaker 1: it as a directional shift for the company. Obviously they
Speaker 1: were doing pretty well with this same headcount.
Speaker 5: I mean, you're going to hear more and more of this,
Speaker 5: and I don't love that as a consumer investor, but
Speaker 5: the reality is, when you're implementing AI through your business,
Speaker 5: and you're obviously serving other companies doing the same thing,
Speaker 5: right sizing of your headcount is a big part of
Speaker 5: the story. And so with robox in warehouses plus all
Speaker 5: the typical right sizing, it's a very large company, a
Speaker 5: very large employer. So I think we're going to have
Speaker 5: to hear about that across most companies certainly deploying AI
Speaker 5: because they're they're getting a lot of efficiencies and might
Speaker 5: not need the same kind of people.
Speaker 3: Hey, Ed, I know you're doing double duty for us
Speaker 3: and for our TV team, but you know, I'm just
Speaker 3: thinking about all these names, these hyperscalers, these big tech
Speaker 3: that have been reporting, as Zanna Agrana said, they're not
Speaker 3: apples to apples, even though we sometimes we're getting Apple.
Speaker 3: We put them together and it's going to be back
Speaker 3: to to talk at Apple with us. But how are
Speaker 3: you thinking against kind of the big cap technique?
Speaker 1: Smart question? Yeah, this fits well.
Speaker 4: So what they all have in common is capital expenditures.
Speaker 4: So okay, on the one hand, they all have capital expenditures.
Speaker 4: It's what they then are able to say on the
Speaker 4: other that they've been inconsistent. Meta didn't say anything about
Speaker 4: growth related to AI, and the stock fell precipitously. I
Speaker 4: go back to the trainium to headline from AWS it
Speaker 4: being a multi billion dollar business, their commitment to invest
Speaker 4: in infrastructure, but also giving us a number for what's
Speaker 4: come online. The kind of fighting talk from Andy Jasse
Speaker 4: on the AWA growth and its ties to AI specifically,
Speaker 4: investors seem to be rewarding any more little bits of
Speaker 4: information that you can get that shows something coming out
Speaker 4: of the investment that's happened in prior quarters. And so
Speaker 4: while they all have capex in common, the story they
Speaker 4: had to tell about literal top line growth as it
Speaker 4: relates to AI has been very different. And Amazon has
Speaker 4: something to say here clearly
Speaker 3: All right, ed, we know you're going to probably head
Speaker 3: over to the TV side, but you're going to come
Speaker 3: back with us a little bit later on when Apple
Speaker 3: reports in just a few minutes, our ed Lolow, of course,
Speaker 3: co hosts of b Tech on BTV