Lynn, who at one point became alarmed that President Biden might declare a narrower set of situations under which he would consider using the weapons. And again a story that we've talked about a little bit. This morning in the south Town Morning Post, they feature these comments from the Commerce Department saying semiconductor export curbs that are hitting China could be followed by biotech and AI restrictions. It's one of the top stories that they feature in today's pages.
Nine minutes before the top of the art, Rich and Dug to you. Okay, let's get to our next guests, and we're talking Amazon as it projects it's the slowest holiday quart of growth in the company's history. To discuss all this is Punam Goyle and seeing at US e commerce and retail analyst at Bloomberg Intelligence. First of all, put him give us a sense overall of what Amazon is suggesting about the quarter gone and what they're seeing
for the all important Christmas shopping period. Sure, so, I think you know, when you think of Amazon, you're really thinking of to the things. One is their aws business
and the other their retail business. So on the retail side, um, they clearly you know, are being impacted by FX rates, and we saw that they had a high single digit sales increase, which falls short of expectations, largely even though they had the benefit of Prime Day which added about four basis points to sale heading into the fourth quarter.
I think the question is they're prepared, and they said that out right, but the question really comes down to our the customers going to spend as much as or more than they spend last year, and with inflation concerns top of mind, With spending being curved across the board across many industries, we think that it will be tougher for Amazon and others to really grab share of wallet um. It will be more promotional and retailers will have to,
you know, give up margin to drive sales. So you're looking at inflation through the lens of how it may impact act the consumer. But I'm wondering how this is impacting the company. What type of cost inflation has Amazon had to deal with. I mean, inflation has been a big problem for Amazon. In fact, they expected to cut one point five billion dollars in cost from two Q
to three Q, weren't able to do that. They were able to cut one billion, so five million short and that was largely due to the fact that they couldn't really find cost savings while they were ramping up for sales events like Prime Day and early access sales. Costs are going to stay elevated. It's not going to be an easy feat for them to really bring cost down any time soon. We expect cost pressures to persist through
early one age of next year at the minimum. And the question is do they have pricing path that that's going to be crucial. But let's also look at all this punam and say and and just take a look at what the read through is overrule amongst its competitors and the industry generally. Yeah, so the industry um is taking prices up where they can, so they have been selective price increases, and I suspect that where Amazon can
do so, it will. But the question is on the promotional front, right, there's too much inventory a cross retail at Amazon and at their rivals, and as inventories continue to build, we will see a rush to drive higher promotions to really make room for new product. So margins aren't going to improve and the customer will likely pay alloy ticket and given that they'll be you know, using
promotions to really make their purchases. Back in the day when Mr Bezos was running the company, one of the things that he was criticized for repeatedly was taking them. I guess you could say what would have been profit for the company and plowing it back into build out different types of infrastructure for Amazon. Where is Amazon these days with with capex and spending. Yeah, I think they
have to rethink that capex budget today. Um, you're absolutely right that back in the days, that was something that the company strived for and named for. And it didn't matter right that that's that's a big thing here, Like it didn't matter that they were spending um on capex to really build out the future of Amazon. But at that time, growth was also more superior than it is today.
So in the face of slowing growth, I think we heard Amazon say it, and we've talked about it many times, that they really have to cut back on costs and that includes future plans and areas that aren't going to pay off anytime soon. And we saw them do this most recently when they pulled back on the drone delivery initiative. They I think we've got a grace merchandise volume of one trillion dollars as a target for about Does this
derail that? I don't think it derails it. I think it could, you know, still happen because if you look at the underlying growth, then I think that's the key here. If you look at the underlying sales growth that Amazon had even this quarter and compared to the first half, it's improved quite a lot. Taking out effects, you're still seeing double digit sales gains. So if we continue with those double digit sales gains for the next three years,
we can still hit that one trillion um dollar number. Also, keep in mind that three P sales, which is more than fifty percent of Amazon sales, did really well in the quarter. In fact, they beat consensus, and that's a function of higher spending within three P sellers as well as up rising take grade as more sellers take advantage of Amazon's growing offerings to help them support their businesses.
So away from e commerce, let's talk very briefly here about the web services division, the cloud division that Amazon runs so well, how has it been faring these days. It's you know, it's still a business that we are very optimistic about in the longer run, but in the third quarter, we saw it gained slowed sales sload, profit sload, and it's in part due to enterprise customers pulling back their own spend as they focus on their own cost
saving initiatives. So it's a temporary hiccup. We do think that will persist into early but in the long run, we are very optimistic on the A W. S business and that I will recover and margins will expand to all right, thank you, Punham. Always a pleasure. Wonderful inside from Punam Goyle, senior US e Commerce and retail analyst at Bloomberg Intelligence, talking today about Amazon, which after the Bell forecast net sales for the current quarter well below estimates.
This stock had been down by as much as in the late session. Right now, we're off, Rashad Salama, thank you for being with us the last two hours of the program. Have a good TV program and enjoy the weekend in Hong Kong. We'll get Tokyo and Soul online at the top of the hour. This is Bloomberg