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It is Bloomberg Business Weekdaily. That's Carol Masser, I'm Tim Steneveek. I'm watching shares at Amazon in the after hours up eight and a half percent right now. The company reported net sales for the third quarter that beat the average analyst estimates. We're talking about one hundred and eighty point one seven billion dollars that's up thirteen percent year over year.
The estimate was for one hundred and seventy seven zero point eight two billion dollars AWS coming in net sales excluding fax up twenty percent versus nineteen percent year over year. SMOs for seventeen point nine percent. As far as that forecast looks, Seeson at sales of two hundred and six billion to two hundred and thirteen billion. The estimus for two hundred and eight billion dollars, so kind of on the high like yeah, sad performance. Yeah.
Putum Goyle is Bloomberg Intelligence Senior Analyst for e commerce andth Leisure. She joins us from the Bloomberg Intelligence Princeton Bureau. Let's go to you, God Putham. This looks like a really strong report on a lot on a lot of metrics.
It definitely is. I mean, they hit it out of the park. Sales were very get across the board across all business segments, AWS, online advertising, even physical stores. So from a top line perspective, very very encouraging results. In fact, AWS was probably the bright spot here. Twenty percent gains. We haven't seen that in a while. On the margin side, I think AWS did really well, but then when it came to North America margins, they were weaker than we expected.
So it's the only one area that I saw some skepticism, and I think that's largely due to their ability to want to maintain low prices to make sure the consumer keeps coming back and investing in its fulfillment.
So you think that margins took a hit because Amazon is keeping prices low why, I.
Mean, they want to drive market share gains. Right, So if you think about what's happening in retail this year, tariffs have clearly added to costs, and many retailers have decided to offset those costs through efficiencies to try to keep an old prices steady or raise them selectively, So
that could be part of the pressure. And then also you know Amazon has stepped up its game on shipping where it was the leader and it still is the leader, but they're continuing to invest there to get items to faster, same day, etc.
Yeah, they still do it right there, definitely completing on that one. Hey Ludlow, come on into our conversation, co host of Bloomberg A B Tech on Bloomberg Television. Watching these numbers, I mean, investors are sending shares of Amazon much higher here in the aftermarket, stock up about nine percent.
The cloud computing division accounts for the majority of operating income, right, and this return to growth year and year of above twenty percent for the first time since twenty twenty two. It's absolutely timely. You know, I think Google gave us a lot of evidence that GCP, their cloud offering, has a lot of momentum at the moment, but this is a bit of a barnstormer from Amazon to say, actually, on every metric that we track, AWS is doing really well.
One of the headlines that you spotted really excellent, the appreciation in their investment on Nthropic that had a non operating income impact to the bottom line, right. But also they're talking a pretty fierce game about their custom training chip Trainium too and calling it a multi billion dollar business.
And what we've seen in the past is when Amazon hasn't necessarily put a specific dollar figure on something but said this AI thing is in the billions of dollars, the market has given them a lot of credit for giving us at least like a little bit more detail.
Ed where does the Trainium to model fit in?
Well, this is why I bring Google up.
You know, when we broke the story that Anthropic had done a deal with Google for the use of one million TPUs Google's custom AI card or accelerator, it was a bit of a black eye for Amazon because Amazon is also a major investor in Anthropic, and Amazon and Anthropic have this large project called Project Rainier, a data center in Indiana. What they're saying is that this is a multi billion dollar run rate business. The offering their
in house chip to third party customers. We don't know any more than that, but it does indicate that both Ranthropic and for other customers outside of Anthropic, that it's a viable business. You know, they've invested a lot of money on custom silicon and at least on the one headline we have on that it's paying dividends, so to speak.
He speaking of dividends and paying dividends and put them. I want to go back to you on the retail side of this. I mean, we know that Andy Jassey, the CEO of Amazon, has really been working on improving profitability.
Of that business automation.
We've had their key head of robotics talking about what Amazon continues to do at that company in terms of automation and robotics. So what else can you give us in terms of color on the retail side of the business, which is something that so many of us right identify very clearly with when it comes to Amazon.
Yeah, I think, look, they're making all the right investments to improve profitability. In the longer term, Amazon's retail businesses finally break even the profitable it took a long time to get here, and I think automation will be the
next leg of growth to drive that further. But as I mentioned, you know earlier, AWS is driving their EBIT margins, so AWS can compensate these investments to a certain extent and advertising because the margins here are just so much higher than they'll ever be able to get in the retail business.
How is how is the advertising business during PUNAM?
It's doing really well, like brow twenty two percent in constant currency in the quarter, so right where we expected. And I think you know that's a high profit business. It's about seventy five to eighty percent profit margins by our estimates, and that's flowing right to the bottom line. We see it going to one hundred million dollars. So there's a lot of improvement that they can build in advertising and really drive that business higher from here.
Where's that coming from? Is that coming from interstitials placed in Amazon Prime Video, which I think you know, cut a lot of people off guard when they started doing that. Was it last year maybe? Or yeah? Or is it or is it coming from like products that are paid for placement.
I think it's a combination of both. You're absolutely right these ads are driving incremental revenue. But if you think about the base of this revenue base. It's still coming from product advertisements. The ads do how and they will become a larger driver as the ad business grows in size, But the core of it is still product advertisement.
Hey, put them before we let you go.
What's kind of top of mind for you and the areas that you cover with Amazon that you would be asking on the earnings call.
On the retail side, it's really about holiday and how that's going. The October Prime Day deals that they had, how that's going and how the customer is responding. We think the customers are still holding up. Well, are they seeing the same thing and how do they see holiday shaping out to be? Where we're entering holiday?
All right?
Love it?
Love it.
Looking out for Punham's research too. That will hit the Bloomberg Punam Oil as Bloomberg Intelligence senior hours for e commerce and at leisure. We want to go back to the co host b Tech on Bloomberg TV every day eleven am to noon on Bloomberg Television, Ed Ludlow still with us at as you continue to pour over that release, what else is catching your attention?
Yeah, I mean Punham gave us the story with Amazon dot com. Right, most of the audience are going to be more familiar with the e commerce business than they are with the cloud computing business. They are number one in cow computing, and as Punam put it so succinctly, the profit is compensated for the less profitable e commerce side through cloud. But Andy Jasse's really focused on retail
being more profitable. Tim is absolutely right that you look at advertising and the role that that's played there and it has been improved. I would also just note that in the quarter, Amazons numbers reflect almost two billion dollars in severance costs. That's the other story of Amazon right now, getting rid of the blow.
That was the previous quarter, right, not the current quarter.
Previous quarter exactly.
Yeah, is the current quarter going to take a hit right now or is it going to be the upcoming quarter. It's always tough with this stuff because we don't know how these employment agreements work.
Yeah, but the third quarter operating income was twenty one point seven billion dollars, almost twenty two billion dollars without charges when you strip the charges out, and so you know this is a profitable business overall because of cloud. It's a funny thing to say but what's a couple of billion, you know to right size the company? And that is the thing here. Amazon has been inconsistent on
this point. At one time Andy Jesse said that right sizing the company eliminating roles was because of the advent of AI. But the communication this past week when they cut fourteen thousand corporate roles was it was more about bloat and middle management, right sizing areas and simplifying the management structure more than anything. So it's hard to know which of those two stories is the predominant of prevailing
one here. But yeah, it's for Amazon, like it's a one time charge that so what all right?
We want to bring into the conversation to Eric Clark, chief investment officer at ACIVASQ Global Advisors and portfolio manager for the Alpha Brands Logo ETF, which has Amazon and Apple and Alphabet and Microsoft and Netflix in its holdings. Ed Lolo is going to stay with us. He's, of course, co host of b Tech on BTV.
Eric, come on in on Amazon. You like this?
I love it.
I mean I think the market loves it too. How are you guys? I think the setup into the quarter was pretty attractive because people were nervous about AWS and losing market share, so the stock sold off into the print and then you get some reality that Amazon is still doing Amazon.
Well, how do you read into this report in the context of the layoffs that we learned about earlier this week? Did Amazon need to do those layoffs? Do you see it as a directional shift for the company? Obviously they were doing pretty well with this same headcount.
I mean, you're going to hear more and more of this, and I don't love that as a consumer investor, But the reality is, when you're implementing AI through your business, and you're obviously serving other companies doing the same thing, right sizing of your headcount is a big part of the story. And so with robot in warehouses plus all the typical right sizing, it's a very large company, a
very large employer. So I think we're we're going to have to hear about that across most companies certainly deploying AI because they're getting a lot of efficiencies and might not need the same kind of people.
Hey, Ed, I know you're doing double duty for us and for our TV team, but you know, I'm just thinking about all these names, these hyperscalers, these big tech that have been reporting, as Zanna Agrana said, they're not apples to apples, even though we sometimes.
Get we're getting apple.
We put them together and it's going to be back to to talk Apple with us. But how are you thinking against kind of the big cap technique?
Smart question?
Yeah, this fits well.
So what they all have in common is capital expenditures. So okay, on the one hand, they will have capital expenditures. It's what they then are able to say on the other that they've been inconsistent. Meta didn't say anything about growth related to AI, and the stop fell precipitously. I go back to the trainium too headline from aws hit being a multi billion dollar business, their commitment to invest in infrastructure, but also giving us a number for what's
come online. The kind of fighting talk from Andy Jasse on the AWS growth and its ties to AI specifically, investors seem to be rewarding any more little bits of information that you can get that shows something coming out of the investment that's happened in prior quarters. And so while they all have capex in common, the story they have to tell about literal top line growth as it relates to AI has been very different, and Amazon has something to say here clearly.
All right, Ed, we know you're going to probably head over to the TV side, but you're going to come back with us a little bit later on when Apple reports in just a few minutes. Our Ed Ludlow, of course, co host of b Tech on BTV, still with us, as though.
Eric Clark, Hey, Eric, I want to bring you back into this conversation. All the companies that we love to talk about are in your Logo US fund. That's the ticker logo US. Amazon is one of the top ten holdings in there. It's about four point three percent of the portfolio. Are you buying more on this?
I don't know that I'm going to chase any because it'll be interesting to see if we get a little bit of fade. You know that some of the Bears might come out and say that, well it was a beat, but they're still losing market share to Google and to Azure, but off of such a big scale. I just don't think that's a very you know, wise decision or a wise conclusion to make. And people still give the retail
business no respect. Margins are going to keep going up with head count's going to be right size, there's just.
Yeah, why do you say margins are going to go up? They're eating tariffs right now? Well, it wouldn't.
Let's say, let's say I would bet you that there's at least a more than fifty to fifty chance that these tariffs get rolled back, whether it's the Supreme Court doing it or the administration saying that we need actual growth and tariffs might not be you know, pro growth in that perspective. I just think there are too many efficiencies to be had that will eventually lead to margin expansion.
This is part of a much bigger conversation. But those tariffs are supposed to at least partially offset the revenue decreases coming from the One Big, Beautiful Bell Act. So thanks cuts right that are included as part of that. So how do how does that square for the fiscal I mean, look, this is not a conversation about the fiscal health, but this all affects the consumer at the end of the day, and that's what you look at
it does it does? I mean, the smaller companies don't have as many levers to pull to try to to keep prices where they are, and I think this massive headcount is being underappreciated too, because that's a pretty large number that ultimately will have an effect on their ability to keep prices which drives traffic.
And Amazon, Walmart, you know, Costco. There's still the three brands that people are turning to when they're looking to save money. So there's at this amount of scale globally, there's a lot of operating efficiencies that keep margins higher. And I still think the cost to serve goes down and continues to go down, which pushes margins up over time. And I just don't think the tariffs are pro growth.
And it's midterm elections next year. Pro growth is going to get a lot more focus as we head into twenty twenty six.
Hey, if you're just joining us. Amazon out with earnings. Just shortly after the market closed, Amazon's cloud unit posted the strongest growth rate in almost three years, so reassuring investors concerned that the largest seller of rented computing power was losing ground to rivals AWS. Amazon Web Services posted revenue of thirty three billion dollars, an increase of twenty percent from the prior year and the biggest year over year rise since the end of twenty twenty two, analysts
on average had estimated about eighteen percent growth. We are still looking at this stock up about nine point two percent in the after market. We've seen it up as much as ten percent, but again, investors definitely all.
In on what they got.
Okay, So Eric on the AWS side is I know, you look at the consumer, but AWS powers this company from a profitability perspective. Still more room in your view for AWS to get market share. That was a question that a lot of people had going into this call.
You know, I mean, I've been listening to a bunch of calls from a bunch of different tech companies and retail companies. There is so much demand for these products and services and tools that I think there's enough business to go around for everybody. And you know, I understand that Google has Gemini and Azure has open ai and chat youpt, but you know, don't underestimate anthropic and its role.
Every company is going to do things a little bit differently, and the inference is obviously the most important part long term. So I think there's enough business to go around, and I have learned not to underestimate Amazon's management team. The stock can lag when they're in these big capex cycles and then it plays WI could catch up with with
the monetization part of it. But they've said now for two quarters that they their business is stable enough at the retail and at aws that they can fund the growth while not you know, spending too much. Meta got crushed because the expense structure is out of control, and I don't see that here with Amazon.
So to be fair, alphabet is your fifth biggest holding in your logo ETF, so you are able to kind of get exposure to both. We do, we do.
I mean the Google the Google quarter was was was stellar. Growth is strong, and that you know clearly with that big acquisition on cybersecurity that that is the next phase of Google rather than search, because we know search might be a bit of a melting ice cube over time, but it is a slow moving melting ice cube, and so they're they're doing exceptional things and clearly underestimated looking at the stock over the you know, over the last couple months, Erica.
Do you want to go back to Amazon again? Still up about nine percent here in the aftermarket. You know, you mentioned anthropic and in the release I did a search as soon as it came out because investors and analysts were curious about that net income increased to twenty one point two billion in the third quarter for Amazon compared with fifteen point three billion in the third quarter one year ago.
Third quarter twenty twenty five.
Net income includes pre tax gains of nine and a half billion included in non operating income from their investments in Anthropic, so that investment paying off.
Very much so, and the same thing could be said about Microsoft and and open Ai. So you know, they've picked a bunch of the megacaps have all picked a handful of these companies, And obviously it's about computing, power and energy because the demand is clearly there. They just need to be able to serve the demand. And the good news is they don't do it all in one or two quarters. This is probably sustainable demand and sustainable growth for the next couple of years for all these companies.
Stay with us. More from Bloomberg Business Week Daily coming up after this.
You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five Easter and listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Apple is out. Let's get to it, folks.
Okay, well, there were some beats and there were some misses. Let's start with the missus fourth quarter Greater China revenue a big, big miss there, fourteen point four nine billion dollars. The stimus for sixteen point four to three billion dollars overall revenue, though coming in above one hundred billion dollars that for the first time ever. For the September quarter Greater China revenue twelve percent below CONCESSUS estimate. Services came
in with a nice beat. Another miss, surprisingly, the iPhone forty nine point zero three billion versus forty nine point three billion dollars.
Yeah, Mark Kerman saying operating expensive expenses which everyone is now closely watching. Things to meta came in line with expectations of fifteen point nine one billion. I'm sure we will hear more about investing on the call that's coming from our Markerman, who covers Apple so closely and looks at consumer tech overall.
Let's get to it with Jay Goldberg.
He's senior alys Semiconductors and Electronics at Seaport Research Partners. He's got to buy on Apple, joining us from San Francisco.
Take it away, Apple, what do you think?
Yeah, it looks it looks okay.
It's it's not perfect, it's not totally clean, but it's it's got some good stuff.
It's got some you know, okay stuff.
The yeah, go ahead, Carol, Well what's good?
What's okay?
I mean, just go on.
Against my numbers, it looks like services is much stronger than I expected. iPhone was good. iPad was surprisingly good. I don't know if anyone tracks that anymore, but iPad was good, and gross margins were better than expected. I've been a little cautious about gross margins and consumer companies lately because memory prices are going up. But that's not I don't see that in Apple's numbers. So, you know, the China stuff. You pointed that out.
I think that's that's concerning, not entirely surprising.
It's not surprising. Back twelve percent below consensus. Why so it surprised some people.
Yeah, I mean, just given the state of the world, I think expecting too much from an American company selling it to China right now is going to always disappoint. But you know, hopefully we have a trade deal and that all goes away.
It's a trade truce, I think is the way that we heard about it today. Trade is a trade truce, and not for that to go away.
I think.
So I think more and more practically what was going on in China is the iPad, the iPhone err is not available there.
It's hard to get here.
Production I hasn't fully ramped yet, and I think that's going to be the real hit, right, And this is Apple. They know how to get their supply chain in time for the year end holiday shopping season. And I don't think I've had I don't think the iPhone Air is readily available in China, So I think that will that will help. And so if you're a Chinese consumer, you're looking at it, you see the iPhone air coming, You're going to hold off on your iPhone purchases now and wait for that, all right.
Shares of Apple now up about one percent here in the aftermarket, So bounce it around, no doubt about it.
Are Mark German on our live.
Blog, who covers Apple and often is breaking exclusives on the company, noting that while China is harsh, they are.
Likely pleased investors.
They are likely pleased with the overall revenue growth of eight percent, the giant services number, that's something Jay just pointed out, and the six percent year over year iPhone growth overall a solid quarter, So top of mind for you, like, what is it that you would what do you want to know more from when it comes to Apple here, Jay, I.
Think I'm willing to wait on the AI story. I know your previous guest was talking about that, and he's absolutely right. The AI story is important for Apple, but I don't think it's important today.
I can wait six months, nine more. It's a year for them to sort it out.
Right When remember when Apple Maps launched whatever ten years ago, it was terrible, it was a joke. Now I use Apple Maps more than I use Google Maps. It's gotten it's gotten better. Sometimes Apple just takes a while to get there. So I'm okay waiting with it. They need to solve it, that's really important, but they don't need
to solve it this quarter. I would like to just hear them talk about supply chain and what's going on in China, and you know what's driving What are the dynamics of the iPhone business?
I think that's the most important.
Is there a compelling reason for people to upgrade to seventeen, to the iPhone seventeen.
I think the air is pretty intriguing. I'm on the fence. I usually upgrade every year. I think I'm gonna hold OUTO because I'm pretty sure they're gonna have a foldable phone next year, so that'll be exciting. But I think that, you know, everyone I talked to has the air is just it raves about it, like they're enthusiastic about this iPhone in a way that I haven't heard people be enthusiastic about an iPhone in many years.
Just a rehash.
We've got now of Apple up about one point eight percent here in the after market. So this is despite those disappointing sales in China which did fall short of analyst estimates, but strong over sales in the overall sales in the period. Hey, let's go to our LA bureau for a moment. We're going to come back to Jay Goldberg in just a minute or two. Marcus Bloomberg, news Managing editor for Global Consumer Technology.
He is out there in our LA.
Bureau mark fascinating in a short period of time, twelve minutes to see the stock being sold off a little bit to now rallying almost two percent walk us through this quarter.
What stands out here.
Yeah, what stands out here is iPhone obviously grew tremendously six percent year over year. They beat in nearly every product category except the iPad. Had an extremely slight miss on Wall Street forecast, and again those are just forecast numbers that get made up anyways, so I don't think too big of a deal there. The big one, though,
is a big line and miss in Greater China. I think some of that can be attributed to the iPhone Air delay, which was not expected, and they originally announced the iPhone Air they anticipated a September release alongside the other models. That model has been doing decently in China since it was released just about a week ago.
Now.
The other thing to point out is the seesaw you saw. Originally, the stock dipped on the China development, and maybe iPhone sales weren't as strong as some had anticipated. But Tim Cook told news outlets that got pre briefed on the Apple earnings results earlier today that the December quarter would grow ten to twelve percent on an annual basis, which
is obviously a fantastic jump for them. That is a year over year growth on holiday period we have not seen for a very long time, and Apple hasn't provided guidance in a very long time because of COVID and everything that's happened since then.
So it's pretty signific.
Yeah, shares up two point nine percent as we speak right now. Mark, just one more question for you, and then I know you got to run on China, and the big miss on China you said it's not too surprising yet still came in twelve percent below consensus estimates is I'm not going to say Apples should throw in the towel in China, but how vulnerable is Apple in China?
They're certainly vulnerable in China, but they have obviously a big retail portfolio there of about fifty stores. As I've said multiple times, they need to start launching products that are specific to the Chinese market. They still don't have their AI strategy together in China, and so we'll see once AI is implemented in iPhones in China next year, if that begins helping turn some things around, and we'll see.
You know, we're going to have some pent up demand in China now for the current court or the first court or the holiday period because the iPhone Air didn't go on sale in September during the September period.
All right, Mark, we know you get to run over to the TV side, so appreciate you jump on with us. Mark German, he's Bloomberg News Managing editor for Global Consumer Tech. Really, as we remind everybody, our go to on Apple breaking all these exclusives, and right now the stock is trending higher now, up about three point five percent. I will point out that Mark mentioned some news that the chief
financial officer had shared with some various media outlets. I'm just looking at the Financial Times and again just going back to that Apple gave a bullish outlook for its crucial holiday sales period, reported record annual profit today, the CFO Kevin Perrick saying Apple expects total company revenue to grow ten to twelve percent year over year in the three months to December, with iPhone revenue growing double digits.
So that's what Mark was talking about, and that is probably why we are seeing Apple shares do that turnaround now up almost four percent in the after market.
Yeah, yeah, pretty remarkable to see the turnaround, but you know that's what happens, and you get more detail from executives. The call hasn't even started yet, so we'll wait for the call also to start, and maybe we'll see some more movement there too. Just to repeat. Fourth quarter i'pad revenue coming in ever so slightly below estimates at six point nine to five billion dollars. Products revenue coming in
above estimates. Greater China revenue a big miss there, fourteen point four nine billion dollars, twelve percent below consensus estimates of sixteen point four to three billion dollars. Fourth Quarter earnings for share coming in above estimates at one dollar and eighty five cents. MAC revenue beating at eight point seven three billion dollars. Fourth Quarter services revenue also a beat there, twenty eight point seventy five billion dollars.
Try to turn around in the after market trade. Let's go back. We've got still with us.
Jay Goldberg, senior analyst Semiconductors and Electronics. He's got a buy rating on Apple. He's over at Seaport Research Partners. He's there in San Francisco. Also in San Francisco at the Bloomberg News Bureau, Ed Ludlow co host a b Tech joining us. Of course, that airs on Bloomberg Television. I do want to ask you, ed, since you've had
some moments to look at that Apple release. We just talked with Mark German about what the CFO has said to I guess sharing with some media outlets about Apple revenue growing ten to twelve percent per year our year over year excuse me, in the final quarter of twenty twenty five, and what he sees with iPhone revenue growing double digits. I mean, that sounds pretty optimistic.
We can explain this.
The orders for the iPhone seventeen started on September twelfth, The iPhone seventeen went on sales September nineteenth. They've just reported a quarter that ended on September twenty seventh, so they had eight days of data for the iPhone seventeen generation. There is another outlet that clearly has had a briefing or an interview, and the CFO has guided very clearly on the trajectory of the iPhone seventeen and its sales into the December quarter.
And that's kind of what always happens.
It doesn't explain necessarily or explicitly the Greater China numbers though, And you know Mark, I think he forgive me.
I was covering for him. I was doing the blog and he was running on the If.
You said Apples now up three percent, markets are weird.
Markets are weird. But that's before I read the ft. But the on Greater China, Yes, the iPhone seventeen air did not go on sale because of the regulatory restriction on a handset that has USUM design. Does that explain the full thing really, because you know, the most bullish estimates for Greater China saw revenue from that country of seventeen billion dollars. You know, that's quite a gap to
where they landed, and so maybe it's something else. But right now, I think we've discussed this with this program before. Right it applies to both Tesla and Apple. If you're a consumer and you're faced with the choice of buying a domestic product or an American product, there is a pressure and it's part of the calculus you have to make. We know that from the data.
We're speaking with Ed Ludlow. He's the cost of Bloomberg Tech on Bloomberg TV eleven o'clock Wall Street Time. I want to bring in back Jay Goldberg, Senior analysts Semiconductors and Electronics with Seaport Research Partners. You's had some time to take a breath and look at some of these numbers, and I'm wondering if you've also had a time, Jay to see that shares now up close to three point
three percent or three point four percent. In the after hours, apparently executives, including the company's CFO, telling the Wall Street Journal that total company revenue will increase ten to twelve percent in the holiday quarter. Was that above your estimate? Was that above your expectations?
Meaningfully above my estimate? That's pretty encouraging.
Why is that so encouraging to you? And why was it so far? Why is that so far? But why is that meaningfully above your estimate?
I think it comes down as simple as the seventeen and the air are good phones. And as much as we want to talk about services and AI and all that, sometimes just as simple as make good phone number go up.
You make it sound so easy, make it.
There's a take up that we just marched that we make up estimates.
So you know, I think it's that easy to tell if you said that. No, But but in all seriousness, the seventeen, so you see that you see the seventeen. You see the eighteen, or I don't want to call it the eighteen, but you see the foldable being a much much bigger opportunity. That's where the supercycle, in your view, is going to come from.
I don't know. I get a little wary of using the term supercycle.
I'm not sure in today's market, where everybody has a cell phone that we and they cost one thousand plus dollars, I don't know if we're going to have supercycles anymore. I do know there's a pretty substantial installed base of older phones like fifteens and fourteens.
Even those people are probably going to look to upgrade.
You made a point earlier that Apple's always a little bit late to the game and some of these developments. And I think one of the one of the big ones they missed a few years ago was large large screens. Right, This is a big debate. They didn't want to make it too big, and then they made them and they did really well. It took them three years to get in that market, and I think we're going to see
the same thing with foldables. That's gonna be a big category, but that's going to be an expensive phone and in the interim, there's a really good alternative on the market right now for you know, and you and I know about the foldable because I talk about this stuff all day. But I think the average consumer isn't you know, isn't that forward looking, and it's pretty happy with what's in front of them now, and that's that's that's compelling a compelling buying proposition for them.
So Ed loud Low, come on back in here.
I mean, everybody's kind of keying in on this outlook, and obviously with good reason. Again, I kind of think to the call with investors and analysts, I mean, are people going to be asking all about that outlook?
Is that what's at this point got to be the focal point?
Yeah, I mean I compared and contrast with law school, so we were still asking about pool forward and the tariff effects of consumers going out buying handsets. Again, that is not the same and does and explain behavior in sales data where the quarter they just reported was just eight real days of sales for the September quarter, and they're telling us via interviews with the FTN the Wall Street Journal that they're looking at ten percent to twelve percent.
I think is the range increase in sales in the holiday quarter.
Where were those sales?
Also, like a lot of the optimism and maybe your guests can weigh on on this, but a lot of the optimism about the third party or soft data for
the iPhone seventeen generation was about asps and mix. So yes, okay, the iPhone seventeen Air wasn't on sale in China, but there was a lot of evidence that people were going for the Pro and Pro Max, the more expensive rather than the base version, which is really good for Apple's print, right, and it's financials, But we don't have anything to go on in the statement to support that, you know, generally speaking, because they didn't in real terms raise prices or they
didn't put higher price points on the iPhone seventeen necessarily. One way to get around that is to say, look, how great the pro version of this is. It's really great, it's just a lot more expensive, and then encourage people to buy that. You know, that's an interesting story to dig into.
Yeah, Jay, dig into it for us. Anything on that.
So one of the things I'm sort of teasing through with my numbers is earnings are much higher than expected, right, And I mentioned earlier gross margins were better than expected, and I think some of that is Apple has effectively put a price increase in place.
You can't necessarily see it.
Obviously, the cheapest phone is still pretty expensive, but the way they segment the market and the way they put the seventeen, they price the pro the air and the seventeen, they've effectively raised prices one hundred dollars this quarter or this this cycle. And I think that that has helped a lot, right, And in terms of what I was saying about China, the consumer there, I think consumers there are actually very very trend conscious, especially the iPhone consumer there.
They have a pretty good idea of what's available and may they may wait.
As a result, Jay explain that the segmentation when it comes to pricing, though consumers might not see it, analysts certainly know. And how did how did Apple do it this time around? Oftentimes they do it with the memory with storage.
Yeah, so the lowest, the cheapest phone there is one hundred dollars more than it used to be effected. Okay, I don't like for like basis that you know that they didn't actually raise prices of the old phones, but they didn't lower them as much as they usually do. In the price of the new one one hundred bucks higher than the old lower level.
That's the segmentation.
Hey, I just want you to come back in with a final thought, certainly on these Apple results.
Yeah, I think all of the long term questions still linger. You know, Apple continues to get a lot of criticism for innovation. You know, this is a really basic argument, but on Bloomberg Tech every single day, and like all of the investors I speak to on the phone, they make the very simple argument that why is it that Amazon, Alphabet, Meta, Microsoft have capital expenditures nearer to one hundred billion per
annum and Apple has ten? When is Apple going to take some risk and throw crazy money behind either talent or literal capital expenditures to do something like that. Apple doesn't do that necessarily, But the world is a different place, and you know, maybe it's pine the sky thinking that a cell side analyst on the call is going to ask that, But they might, and then it might get an answer, and then you know, that's kind of where we're at in this cycle.
All right, gentlemen, I'm going to leave it on that note.
Jay Goldberg, Senior analyst semiconductors and Electronics at Seaport Research, joining us from San Francisco. Thank you so much, Ed Ludlow. Be sure to catch all of his coverage on b Tech tomorrow at eleven am Wall Street Time. He is co host of b Tech on BTV every Monday through Friday. He's too out there in San Francisco at the Bloomberg News Bureau.
Stay with us more from Bloomberg Business Week Daily coming up after this.
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five Eastering. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
So much happening when it comes to Big Farmer today, it's not just about the big tech shares. The clinical stage biotech company met Sarah, surging more than twenty five percent at one point today. This after Novo Nordisk made an unsolicited bid for it smarking a heated battle with Pfizer to get their hands on weight loss treatments that both drugmakers want in order to regain lost ground in
the booming market. Speaking of that, Eli Lilly raised its full year guidance as revenue from its blockbuster weight loss and diabetes drugs. Merk also shaved the top end of its twenty twenty five revenue guidance, now expect sales between sixty four and a half and sixty five billion dollars. So that's just some of what's happening when it comes to big pharma. For more, we're joined by Jessica Nicks. She's a Bloomberg News health reporter. She joins us here
in the Bloomberg Interactive Brokers studio. I want to start with this fight for Metsarah. Yeah, not every day we see sort of like a company being the bell of the ball like this.
Oh, it has been quite the drama for a Thursday, and quite a lot of news out of big pharma today. So overnight, Nova Nordisk, the Danish GLP one drug maker, has made a bid for this biotech company, met Sarah, trying to go after its new GLP one drug. Interestingly, Pfizer made a bid for it back in September for about five billion. Things were, you know, clean cut, with that deal ready to go. We thought Nova's come in with this unsolicited bit. Pfizer's been trying to get in
on this GLP one and weight loss drug action. It's a market that's expected to grow by one hundred billion by twenty thirty.
It's huge.
It's the thing right now is these weight loss drugs, and so Pfizer's trying to get in and now Nova's sweeping out under from them.
Wait, so we're mind. So Piser doesn't have anything yet in.
This Piser does not have anything in the weight life drug space. They've tried and then they failed with their first drug, and so they were looking at that. Sarah is their way in on this fight. But Novo interestingly is also kind of losing in the weight loss drug fight. Just because your first to market doesn't mean you're going.
To be why.
I mean, the last couple of years there were stories about how important this company was to the Danish economy. I mean, is it just because of Eli, Yes, it is.
It's because Eli Lilly has come in. Guns are blazing and storming through the weight loss drug space. So Novo started with ozembic. Obviously everyone knows ozempic. Now Eli Lilly has now come in with that same class of GLP one drugs and their zepbound prescriptions are rising even today and their earnings guidance, they said that those prescriptions were increasing. So everyone's going towards Eli Lilly right now instead of Novo Nordoice. Nova has been falling behind.
We've talked with our Madison Mueller Lumber News, who's covered this space kind of from the beginning here too, and you are covering it as well. I'm always like, well, what's the difference. I do know people who have taken the drug and gone from a zepic to another brand or another name drugs because they're similar, but they're not all the same. You do see patients. Is Eli Lily's offerings better, Is zepbound better, Is Munjaro better.
It's just a matter of what works better for your body. So Eli Lilly works with an ingredient called trizeppetide, Novo Nordis works with semaglue tide, and so it's just a matter of what works better for the patient. But Eli Lilly has been able to really market and go to physicians with these drugs as well and move ahead. Novo interestingly also has a new CEO who's trying to shake things up to be able to bring Novo up to the forefront. Of this spike.
It's own the space like it felt like right tim out of the block. What's the special sauce that matsarah has?
Like?
What is it? What is it that they are offering up?
They are offering a new type of drug that's also an injectable, but it's targeting a different hormones. The hormone that's targeted right now with the current weight loss drugs is something called a GLP one. You hear that term a lot when we talk about way Moss drugs. With Metsarah's new drug, it's a hormone called ammelin, and it also includes less side effects when you take their drugs, You're not going to be getting those nasty like nausea, vomiting side effects that you get with a GLP one.
So it sounds like a better deal.
Why would I.
Take anytime you can avoid vomiting?
I think is right exactly.
You said something that's interesting, which is still it's an injectable. And as mat sim Miller reminds us all the time, the real golden goose here is the pill.
It is the pill, and so Eli Lilly has been working on its pill. It is a head in marketing and in development for its pill, and they're saying, you know, by the end of the year they're going to go to the FDA for approval.
And this would be a GLP one pill.
This would be a GLP one pill.
Correct, Well, how do you make a pill? I mean, we're getting into the nitty gritty a little bit here, but how can you do something that is traditionally an injectable and make it pill form and have it still be effective.
That is a really great question, and people much smarter than me.
Are well, but it's got to be really tough because if it were easy, then Nova would have this. They would just put this in pill form. And I think that and when I heard you talk about Metsara and this idea of it it going after something different than a GLP one, I was surprised that it was still in injectable because I think that would hold a lot of people back from actually using a drug.
And it does. And that's part of the reason why these companies want to go into the pill space, because a lot of people who are interested in taking a weight loss drug for whatever reason. As we're saying, it's it's tackling a lot of different problems that people are having sleep at in me a heart disease.
What have you?
Pills now are a new way that people would be wanting to get into on this space.
So let's just talk.
Novo shares are down about two point three percent. Pfizer's up about one third of one percent. It was up as much as one point seven percent earlier in this session. And then of course you've got Mitsarah, which is just off and running like crazy, that stock which is the target twenty two percent, yeah.
And continuing to hold on to that. Who has more to lose?
It sounds like Pfizer because they just they're not in this game yet.
Pfizer definitely has a little more to lose here. Pfiser is not in on the game right now. They've been losing since you know, COVID. They were big during COVID, they made the shots, they really turned things around for the company there. They've been looking for their next big thing and they thought this was it. So they do have a little bit more to lose. But interestingly, the
shares are mostly unchanged today. Pfizer does have four days to respond to this bid to see if they can come in a little bit higher and start this this bidding war, and who knows. Pfizer also made a deal with the Trump administration earlier this year, so they might be trying to use some of their their White House connects because they claimed that this bid is against antitrust law in the US.
I guess what I would say.
Right now, the market cap is about six point seven billion, So I don't know if that's a great gauge of kind of where investors think this.
Cuah, yeah, So in other words.
Which is up now twenty three percent? As Yeah?
I mean, if Novo's offered to you know, Sis a half billion dollars deal.
And they think it's then they think there's going to be in someone else coming in. I'll bring potentially more.
It's just a little bit higher, right, Like, it doesn't feel like it's off and running that they think there could be even somebody else coming in.
It is kind of fascinating.
The market for GLP ones or this class of drugs, even if the underlying agent is changing, it just continues to grow and grow.
It completely continues to grow and grow. We expect by twenty thirty that the market's going to reach one hundred billion.
Where are we today?
Oh?
That is a great question. I don't know where we are at today, but I mean it's only going to grow from here. It is the drug to watch.
So you said we're well. I said that we had a big news, a lot of big news in big pharma today. I mentioned Mark shaving the top end of its twenty twenty five revenue guidance, literally raising its full year guidance. We talked about that. What else does our investing audience need to know about what we've heard thus far?
I think this deal is probably driving the news today. Everyone's talking about it. We've got, you know, clocks on for the four days. Interestingly, Albert Borla, the Pfizer CEO, was supposed to have here at a conference here in Manhattan with some other pharma executives, including a MERC CEO as well, ended up pulling out of the conference, and the chief scientific officer went on instead, and even said at the conference that he only had an hour to prepare before going on.
So we're still figuring out.
Yeah, he might have a little bit happening, but we don't know for sure. So it is this deal that is definitely going on today, not necessarily investor related, but down in DC, the Surgeon General nominees. Hearing was supposed to happen today with Casey Means, she ended up going into labor and so they're having to delay the hearing.
Yeah, there's a lot going on in this space. It's kind of wild, fascinating space. I really just it just blows my mind. Jess Thank you so much. Jessica Nick's health reporter at Bloomberg, and he's joining us in our Bloomberg Interactive Broker Studio.
Stay with us. More from Bloomberg Business Week Daily coming up after this.
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So let's get to that US China meeting earlier today in South Korea between President Trump and President g deal. No deal, how about that one year truce, that's what they're calling it. The two did meet on the sidelines of the Apex summit, US cutting the fetanyl tariff, extending the existing truth and reciprocal tariffs, China resuming soybean sales and rare earth flows. But maybe just a stabilization of relationships. Nothing more dramatic here, Tim, I don't know.
Let's ask Caroline Freud. She's dean of the UC San Diego School of Global Policy and Strategies, former Senior Fellow at the Peterson Institute for International Economics. She's Global Director of Trade, Investment and Competitiveness, formerly at the World Bank, and earlier did time at the FED and the IMF. She's out there in beautiful La Joya, California. So the
news today the year one year truce. Where does that bring us in the context of the real relationship in the between the US and China from a trading perspective before President Trump took office for the second time. Is it back to what it was then or is there still tension from when he from from his policies early on.
Look, we have the world's top producer in the world's top consumer meeting, and they both have market power in their own way, and they need each other.
And that's what we saw.
It was effectively a game of chicken. Trump started it and she stayed in the battle, and both just put on the brakes. I think we're close to pre Liberation day tariffs, not necessarily close to where Trump came in. There are a few tweaks because we still have some of the fentanyl tariffs. US firms are still facing this licensing regime on magnets, so there's still some things that are in place, but we're pretty close to the pre Liberation Day tariffs, Caroline.
What is more significant what they did talk about?
What they didn't talk about, meaning Taiwan TikTok and videos, high tech chips, those Blackwell chips, China Boying, buying oil perhaps from Russia. Like, there's some really important issues out there that felt like they were missing.
Yeah, and I think we're going to see that going forward. There's going to be ambiguity on all of those difficult issues. But I also think there's market discipline on the worst case scenario of an escalating trade war. So they both realized how much they need each other. The US market is just impossible to replace. We account for fifteen percent of total global imports. There just is no one else who's going to take that. China counts for the same
fifteen percent of global exports of goods. Who's gonna who? We can't completely replace China, So the countries have settled the deals that are in areas that really matter for them right now, for their economies. But we're going to see a lot of ambiguity on those much more complex issues.
So we're we played, we're citizens of both countries played, we're investors, played like it did we kind of start at point A and go through the whole alphabet and then come back to point A.
Yes, I think Trump has tried the kind of bullying technique and it's worked with everyone else. Early on it looked like EU would also retaliate, but they're just too dependent on the US for security and that's very important right now, so they didn't. China is equivalent to the US, and China said, no, we're not going to be bullied. We also have things you absolutely need. And now there's kind of a truce, and I think we'll see this
muddling along with market discipline on both sides. It'll hurt the US too much to really do a lot more on China. It'll hurt China too much to do a lot more on the US.
But in this.
Period, in this period of truth, the most important thing is that we work with our allies to develop secure supply chains.
So we are not dependent on China.
For rare earth in the way we are now.
So those allies, including Australia, Canada, where else.
Yeah, exactly.
So the agreement with Australia is fantastic, and we should be looking for more agreements like that. Latin America has a lot of rare earth that could be explored that we were part of the Western Hemisphere.
We have a complicated relationship with some Latin American countries currently.
Yeah, that's absolutely right.
And so the strategy we can't take on everyone at once, and China is the biggest competitor, the biggest strategic threat to the US, and we should be working to have agreements with countries where we can both pull them out of the China sphere and where they have things we might need.
It couldn't possibly be thinking about the US shooting on Venezuela and ships.
Can you make that I'm thinking about Yeah, yeah, I'm absolutely thinking about it.
It's funny, not funny, right.
I'm also thinking about Argentina. Yeah, yeah, exactuated in a different way, well.
Carolyn, And you know, I do think about the US's position in the world at large, like we still have trade agreements to be worked out with what used to be a big friend of ours called Canada, and yet that is still up in the air. What is how does the rest of the world feel about the United States right now against China? Because I do feel like there is this thinking about China domination and so people trying to do alliances to combat that.
So is the.
US as we see it, do that deal with Australia and maybe reaching out realizing it can't do things alone.
Are things changing a little bit in terms of the US perception by the rest of the world, You know, I hope so.
And I think if Trump leans into these agreements where countries haven't retaliated and goes forward in a respectful way, we could see that and we could see a lot more cooperation. But the problem is that so far the US has proven to be a kind of unreliable trade partner. Deals are made and then we back off from them, and then new threats come up, and that's really problematic. So I think there's a lot of distrust, a lot of dislike with the US, and that's going to be
a hurdle to overcome. At the same time, other countries need the US market again or the world's top consumer and they need the defense from the US, so.
They will play.
But it will work a lot better if we work on cooperative agreements than purely in this kind of bullying mentality.
We're gonna hopefully talk to you a lot more between now and one year from now, but just make a prediction for us for one year from now. Will this truce hold?
Yeah?
I think it will.
There might be little glitches along the way, but again the market will discipline Trump, whether it's the stock market, bond yields, companies complaining. And similarly the China. Chinese economy isn't that strong we saw, you know, BYD Tank today or recently, because there's just not enough demand for Chinese goods. So I absolutely think it will hold, but we won't get a lot more.
It'll hold.
The muddle along and kinda continues to try and get that domestic economy going.
But it's really been a strike.
Caroline Frauinch's Dan of the see San Diego School of Global Policy and Strategy.
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