Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
We begin with a tale of two tech giants this morning, and we start with Amazon. The shares are surging eight and a half percent in early trading. The company pulled off a financial double play this earning season, generating strong revenue growth while cutting spending. Punum Goyle is senior US retail analyst for Bloomberg Intelligence.
If you think about the consumer and the consumer being stretched today, trading down, looking for value, looking for convenience, looking for speed, Amazon's getting those customers into its platform to make the transactions, and I think that's where the optimism is coming from. We saw in the quarter that online sales group five percent, which was a well ahead of expectations, and should that trend continue, the expectations for their double digit gains makes sense.
Putem Goyle with Bloomberg Intelligence says Amazon's revenue increased eleven percent to more than one hundred third four billion dollars.
Well, it's a different story at Apple this morning. Nathan shares are down almost two percent after lower than anticipated iPhone sales, and we get the details around Bloomberg's and Ludlow in San Francisco.
Overall, the top lined Wrapple beat expectations, but it was the third consecutive quarter where they saw year on year sales declined. You have to go back to twenty sixteen for the last time that happened, and particular weakness on iPhone, which missed estimates in the fiscal third quarter. For Apple, the story that Tim Cook painted was that the smartphone market is still weak in the United States.
And Bloombergs had Ludlower fors Apple revenue slipped one point four percent in the quarter.
As for some other stocks on the move this morning, Karen, shares of draft Kings are up almost fourteen percent. The online sportsbook posted sales that beat expectations. Shares of block are down five percent. The payment company's July profit forecast fell short for investors, and shares of Coinbase are up about one percent. The Crypto Exchange reported a loss, but it was less than expected, and revenue also beat estimates.
Well, Nathan, those are the market moves this morning, and now we wait for the latest reading on US jobs. The government issues payroll data for July this morning, and economists predict a gain of around two hundred thousand. Bloomberg's Michael McKee has more.
Will July be the month the labor market finally slows. Fed officials have forecasts less hiring, more unemployment, and smaller wage gains for some time, but the monthly data have generally gone the other way. Economists see only a slight drop in hiring for last month and no change in the unemployment rate. Average hourly earnings gains, though slowing, are still forecast to be rising at at unsustainable pace, and inline forecast is likely to keep upward pressure on interest rates.
Weaker than expected numbers might bring some relief, although the Fed doesn't meet again until late September. Michael McKee, Bloomberg.
Daybreak, Mike Thanks. The other major story in Washington comes at a federal courthouse. That is where former President Donald Trump entered a not guilty plea to charges he conspired to obstruct the twenty election. After his brief court appearance, the former president called it a sad day for America when you look at what's happening.
This is a persecution of a political opponent. This was never supposed to happen in America. This is the persecution of the person that's leading by very very substantial numbers in the Republican primary.
Former President Trump's next court data is set for August twenty eighth. That's when the judge is expected to set a trial date. Trump is not required to attend that hearing.
Well Nathan Reactions still pouring in following that indictment to long a shot presidential contender and former Texas Congressman Will Hurd says Trump is only running for president so he can avoid jail time.
He's a bully, he's a liar, and he's only running in order to stay out of prison. And what's even crazier is that he is using, you know, hard working Americans dollars to fund his illegal bills. Right, He's allegedly a billionaire, but he can't pay his own legal bills.
And former Texas Congressman Will heard me the comments on Bloomberg Sound on. Catch the program weekdays at one pm Eastern on Bloomberg Radio and download the show wherever you get your podcasts.
Karen, there's also news on US China relations this morning, this time involving spies. Two US sailors have been charged with selling military secrets to China. Bloomberg's Nancy Lyons has more from Washington.
Both men are Chinese born, naturalized US citizens, The Justice Department says. One of them, twenty two year old Petty Officer second Class Chin Chow Patrick Way, was arrested and charged with espionage for passing images and locations for various naval ships, as well as dozens of technical manuals. Randy Grossman is the US Attorney for the Southern District of California.
Whether it was greed or for some other reason, Way allegedly chose to turn his back on his newly adopted country and enter a conspiracy with his Chinese handler.
The other sailor was charged with conspiracy and receipt of a broad in Washington. Nancy Lyons Bloomberg Daybreak, All.
Right, Nancy, thank you well. Back on Wall Street. Another corporate item to catch you up on. It looks like the next chapter for Simon and Schuster reads like an acquisition Bloomberg. Steve Rappaport joins us with the detail.
Steve, good morning, Karen and Nathan. It's not in the books yet, but sources tell the Wall Street Journal private equity firm kkar As in advanced talks to buy the publisher for roughly one point sixty five billion dollars. It's the second attempt by Paramount Global to offload Simon and Schuster. A potential sale to rival Penguin Random House was blocked
by a federal judge. Simon and Schuster is nearly a century old and rich in literary history, with legends like Ernest Hemingway, f Scott Fitzgerald, and Stephen King gracing its pages.
In New York. Steve Rappaport Bloomberg Daybreak Time Now to take a look at some of the other stories making news in New York and around the world with Bloomberg's John Tucker. Good Morning, John, Good.
Morning, Nathan Blong. Outland railroad service it could be delayed this morning after a dear ralman in Queens yesterday. Thirteen people were hurt. The injuries for minor. The incident involving all eight of the train's car has occurred before at noon, about a half a mile east of the Jamaica Train station. The MTA investigating, but the incident has been ruled out as speed as a factor in that derailment. The United Auto Workers is asking car makers for a forty percent
pay increase. Let's get more in that story from Bloomberg's Jeff Bellinger.
The request for forty percent pay increases over four years is part of the uaw's opening proposal and contract discussions with General Motors Ford Stilantis. The current labor pact expires September fourteenth. Along with the raises, the UAW has also said it wants cost of living allowances, improved pensions, and better treatment for temporary workers. The requests are among the
largest ever to major corporations. General Motor says the company plans to offer wage increases, but said the union is asking too much. Jeff Bullinger, Bloomberg Daybreak.
Divided Federal Appeals Court is reinstated the Biden administration's rule that limited asylum eligibility. The rule seeks to curb unlawful entries into the US by presuming certain groups of unauthorized migrants ineligible for asylum. Ten days into the coup in Niger, US defense officials eight hundreds of American military personnel remained stationed in the West African country. Pentagon spokesman Burgadier General Patrick Ryders's there have been no changes to the US military force posture.
We're continuing to monitor the situation, which remains fluid and evolving, but right now again our focus is going to continue to be on a diplomatic solution to the situation there.
Nigeria has been a key partner in the West fight against Islamic extremists. Authorities in South Jersey still searching for two people after a house explosion Thursday morning left to two others dead and two children injured in Atlantic County. The cause of the blast still unknown, but it was so intense it reduced the house to rubble and damaged other nearby holmes, and the unrelenting heat making an unwelcome
return to more parts of the nation. In Texas, Ramona and monwey Iisen were found dead inside their home outside Houston after their air conditioning failed. The great grandparents would have been celebrating their fifty second anniversary this week. Global News twenty four hours a day, powerplin more than twenty seven hundred journalists and analysts in more than one hundred twenty countries. I'm John Tucker. This is Bloomberg Nathan.
Thank you John. Time now for our Bloomberg Sports Updacod morning. John Stashauer, Good morning, Nathan.
The Yankees able to do something they failed to do in four attempts last fall in the American League Championship Series. They beat the Astros at the Stadium. They got back to back home runs with two outs in the first inning. Don Carlos stands with a man on, then Billy McKenny Kyle Tucker homer in the sixth for Houston to tie the game. Anthony Volpie's RBI single bottom of the six put the Yanks back ahead, and they won four to three. Clay Holmes working out of a jam in the ninth.
They won without Anthony Rizzo. He's on the injured list with a concussion that likely dates back to a collision back in May. At that point, Rizzo was batting over three hundred. Since then one seventy two, Domingo Herman season is over. He's in alcohol rehib SNY reported Herman was
drunk in the clubhouse before Tuesday's game. Matts swept in Kansas City, lost again to the lowly Royals nine to two, and after three losses to a team forty games under five hundred, the Mets now play three in Baltimore, who's twenty five games over Max Scherzer, debuted for Texas, pitched the Rangers to victory. The Angels lost on a Seattle Grand Slam of the ninth Ennis Show. Heyo Tani in
defeat to his fortieth home run. Preseason football Canton, Ohio Jets had leads of thirteen to nothing sixteen to seven at the half. The Browns, who had two long touchdown drive second half to win twenty one sixteen. Former Jets, Joe Cleco and Derel Reebis among nine to be inducted to the Hall Tomorrow. Easy went for the Phoenix Mercury as Forty one year old Diana Tarrossi scored forty two points, a WNBA record thirty two in the second ALP Tarrosite won over ten thousand points for her career.
JNS Dashaward. Bloomberg Sports.
From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on SYRIASXAM, the Bloomberg Business app, and Bloomberg dot Com.
This is Bloomberg Daybreak. Good morning, I'm Nathan Hager. Tech earning season is wrapping up with mixed results from two of the biggest names in the digital economy. Amazon delivered a strong performance in its latest quarter, while Apple's third quarterly revenue decline cut a little bit deeper than many investors may have expected. Let's get some insights now from one of the top tech analysts on Wall Street and outlook for how the digital economy could go from here.
Gene Munster is with us this morning, the managing partner at Deepwater Asset Management. Gene, it's great to speak with you on this Friday morning. Let's start off with Amazon, because it really did seem to come in a lot better than expected, not just on the e commerce side, but on the cloud as well, all while cutting costs. What stands out to you from Amazon's results, well.
Two things stand out. First is the pressure point.
So every company has really one or two pieces that investors hyper focus around in earnings. And the pressure point, of course was AWS and it was slightly better after being worse for the past year, so it grew by twelve percent. Investors were looking for plus eleven percent, so that was positive and the majority of their profit comes
from AWS, and so that stood out. The second piece related to profit is the retail profitability bumped up for the first time in four quarters and so that had a margin of about two and a half percent, and that said, it's been negative and retail is seventy five percent of Amazon's business. So you put those two together and what you get is upside on their profitability.
And not only that, that carries forward into the September quarter.
So when they gave guidance, guidance was up called the midpoint of their operating income was twenty seven percent higher than what the street was expecting for September.
So all good when it comes to profitability.
And actually even revenue for September is going to be up slightly higher than what the street, four percent higher than.
What investors were expecting.
So a good day for Amazon after a long time of having some difficult reports and guidance.
Yeah, particularly when the focus coming into this year had been on pretty extreme cost cutting measures from Amazon. Do you expect that to continue? Gene? What was the bigger driver as well for this revenue beat on the e commerce side? Was it more sales to customers or more cost cutting?
It was sales to customers In terms of the cost cutting. Is it going to continue? The answers It's part of I guess an efficiency piece of Amazon a lot of big tech companies are talking about this, but we're through the big cuts that we've seen over the past year, so don't expect headlines about Amazon cutting people. And then what drove that the retail upside was paid units, that's
the number of items that they sell online. Surprisingly accelerated in the quarter, was up nine percent year of year versus up eight percent in the March quarter.
And so that was a surprise.
And why was it a surprise is because the consumer has been more sluggish, and you'd have expected those numbers to continue to cliine off of larger numbers, the law of large numbers. So the paid numbers suggest that the breadth of Amazon's retail business continues to be healthy.
Will it continue to be healthy if we do continue to see consumer sluggishness into the rest of this year, I.
Think that it will decline.
Those growth rates will decline, will go from nine percent to eight to seven. But I think that the bigger picture is that it's still going to grow faster than broader retail. When we think about bricks and mortar, it's still depending on the numbers that you look at, sixty to eighty percent of what we buy is bought and physical, and so I think that yes, it will accelerate, but it's still going to be much better than what the
alternative is for investors. And separately, as we fast forward and look at how this plays out over the next many years, we still have a large growth opportunity around e commerce. It's a part of the Amazon story that is surprisingly not talked much about, the retail piece. But I think that even though if it slows in the near term for a few quarters, I think it's still in a great place longer term.
Gene monsters with us this morning. The managing partner in deep Water Asset Management is these earnings not just from Amazon, but from Apple. Want to turn to the iPhone maker now, because we were expecting going into this reporting cycle, Gene, that Apple was going to report a third straight quarter of revenue declines. But it seems like those iPhone sales numbers came in a little bit worse than a lot of analysts were expecting. Did Apple's results meet your expectations?
They did?
In terms of the June quarter. I generally think about this is you got to look at this in the sum of the parts. There's some quarters where iPhone does a little bit better and carries the story, and that's been the case over the last few quarters. And then sometimes other parts of the business carry the story. In this case it was services, which is twenty percent of their business. When you put it together, the reason why I wasn't surprised is the June quarter effectively was inline,
and that's not why the stock is down. It is at all time highs and so there's some expectations built in there. But I think that what stood out to investors on this was that their expectations for the September quarter was a little bit muted versus where I would have been at. So they guided to revenue being down one percent year every year, and investors were expected to
be up one percent. So in the case when Apple, whenever you have that small deviation off of those high expectations, you get this reaction of the stock being down a little bit.
But that's what stood out to me from the quarter. But I don't think that was what was most important about the outlook.
What was most important about the outlook for you.
The most important part was this active base of devices, and they led the press release off and talked about this this is a theme that they've been talking more about and speaks to an investor shift. What it is is the number of devices that are used on a monthly basis. So they said that number grew. They didn't give the percentage growth, but it grew. It's continued to grow. Now it's over two billion devices. It hit that two
billion number back in December, but continues to grow. Why that's so important is that's really the flywheel, and that is this concept that consumers buy one Apple product, they fall in love with it, they buy another product, they add a service, they upgrade, and this process just repeats over years. That's what keeps investors, gives them the ability to sleep well at night, and that's why Apple's multiple
I think has been going up. But that all important piece, this active install base continue to do well.
And then separately, how you continue to grow.
More specifically is the India opportunity is significant, and Cook talked as much about that. I think you're gonna hear a lot more about India related to Apple and the years to come.
There's been a lot of attention, of course, as you know, on artificial intelligence throughout this year. When it comes to the tech story, did Tim Cook say enough about AI in the call.
He didn't say much at all about it, and it has been kind of representative how Apple has approached to this mega theme is not to say much about it, kind of just more speaking in terms of their products, and Apple's AI approach is more based on how AI impacts their hardware. The vision pro the new device that they have coming out next year is there's a lot of AI that goes into building that. But there's an opportunity that wasn't talked as much about. And I refer
to this as personalized AI. Not just the ability of AI to answer a question for you, but to actually do a task, to book a flight, to book a reservation, to help move some money around, whatever it may be.
There's opportunities for AI to do that.
Apple has a great position because of their view on privacy and security.
They didn't talk much about that.
I do think that is something you'll hear more about from Apple AI in the future.
Do you think we're going to hear more about AI from Amazon as well? It seems like Amazon's kind of playing catch up a little bit when it comes to some of these other companies that put so much attention on this technology, like Microsoft, and Alphabet.
Definitely.
If you're going to kind of put a grid together or kind of rank the big tech companies in terms of how much they're talking about AI, probably apples at the bottom of the list, and then the one up from that is Amazon. Not to say they don't have opportunities, they just haven't been talking as much about it. But Amazon does talk about a relative to different ways that they are hosting these models and specifically the opportunity.
That they have around AWS.
And that's one of the reasons why I think that the stock is doing well today is this positive commentary related to AWS and how it's going to start to grow a little bit faster than the back half of the year.
And so, yes, Amazon has a lot to say.
About AI, not as much as Microsoft's and Google. Google mentioned AI fifty three times on their prepared remarks on their joom call hard to keep up with that pace, but Amazon clearly has an opportunity in AI.
Is there still room for this tech rally that is dominated this year to continue?
Yes.
The reason is that our dependency on these companies has always been high, it's been growing, and now we're at the kind of the front. The first six months of what's going to be a decade shift around AI. I believe it will exceed the hype, and I think that these big tech companies will be some of the biggest beneficiaries of it.
This is Bloomberg day Break Today, your morning brief on the stories making news from Wall Street to Washington and beyond.
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