Bloomberg Audio Studios, podcasts, radio news. This is a breaking news update from Bloomberg, instant reaction and analysis from our three thousand journalists and analysts around the world. It is Bloomberg Business Week Daily. That's Carol Masser. I'm Tim Steneveeck. 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. Estimos for seventeen point nine percent. As far as that forecast looks, Seeson net sales of two hundred and six
billion to twohundred and thirteen billion. The estimus for two hundred and eight billion dollars, so kind of on the high, like, yeah, some of the format.
Yeah.
Operating income for the fourth quarter, the company sees that at twenty one billion dollars to twenty six billion dollars the estimate for twenty three point seven eight billion.
We're going to get some analysis of on on Amazon, but just want to mention Netflix soaring all of a sudden of three point two percent here in the aftermarket. This is the company announces a ten for one stocks.
But keep in mind this stock.
One share costs one eighty nine dollars. So we're talking about now it's going to be much more accessible to investors.
Right, is going to Well don't I don't think so.
At one hundred dollars this year.
No, you can buy shares, you can buy pieces of stock. You don't believe that, I don't. I think back in the day, yeah, back in the day it made a big difference. But now that all these retail brokerages offer.
You want to take this outside?
No, I mean everyone whenever I say, these people get in touch with me online and they talk about options and like how important it is for that. But it's always weird when you do see something that's not fundamental actually moving the stock price.
All right, good stuff, all right anyway, but it is, but it is moving it. Hey, let's get to back to Amazon, because that stock is soaring in the aftermarket. Put them going is Bloomberg Intelligence senior analysts for e commerce andth leisure. She joins us from the Bloomberg Intelligence Princeton Bureau. Let's go to you god, put this looks like a really strong report 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 as was probably the right spot here. Twenty percent gains, we haven't seen that in a while. On the margin side, I think AWUS 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 is 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 hold prisis study 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, et cetera.
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 a year and year of above twenty percent for the first time 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 Entthropic 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 trainum 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 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 offering their in house chip to
third party customers. We don't know any more than that, but it does indicate that both for 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.
Hey, speaking of dividends and paying dividends and punum, I want to go back to you on the retail side of this. I mean, we know that Andy Jasse, 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 evento 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 so can 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 brew twenty two percent in and 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 billion 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 help 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 in 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 analysts for e commerce and ath Leisure. We want to go back to the co host BTech 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 Punham put it so succinctly, the profit is compensated for the less profitable e commace side through cloud. But Andy Jasse's really focused on retail being more profitable.
Tim is absolutely right that you look at advertising in the role that that's played there, and it has been improved. I would also just note that in the quarter, Amazon numbers reflect almost two billion dollars in severance costs. That's the other story of Amazon right now, getting rid of the bloat.
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 court 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 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 predominantly 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 Acivasque 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. Edla, though, is going to stay with us. He's, of course, co host of BTech 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 robox in warehouses plus all the typical right sizing, it's a very large company, a
very large employer. So I think we're going to have to hear about that across most companies certainly deploying AI because they're 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 we're getting Apple. We put them together and it's going to be back to to talk at 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 all 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 stock fell precipitously. I go back to the trainium to headline from AWS it 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 AWA 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 had 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 Lolow, of course, co hosts of b Tech on BTV