Welcome back, everyone. Today on the Joseph Carlson Show, we're going to be taking a look at two different companies that just reported earnings. Yesterday it was Google, today it's Amazon. Amazon reported just minutes ago. I'm going to go through the report. I'll give you my quick reaction on it. And Google reported yesterday, had more time to look at that one. I'll give you the full breakdown of that one as well.
Now to start things off, we can just take a look at what's going on with Amazon because this one literally just reported a couple minutes ago. If we look at how the stock is doing, we can bring it up here. Amazon stock will zoom into it and it's up around 9% as of now. Very good start. Obviously something went way above expectations. Amazon beat, they beat on something. My guess instantly would be AWS because it's all eyes on AWS now. There was a lot of chatter.
The AWS would come in very low that it would come in far below, you know, just dragging behind Google Cloud and Azure. Haven't you heard that? Haven't you felt that a little bit that Google Cloud and Microsoft Azure are kind of running away with it? And poor old AWS is just kind of old and bloated. It can't attract new clients. I've been resistant to that because AWS has 4 + 1,000,000
customers. They're not all going to just run away in a single day to Google Cloud or, or Microsoft Azure. And they're not. The reason that Amazon is up 9% as of right now is because if we look at their earnings report, we can go through it, they highlight a couple things and, and this all looks great. We'll go through all of it. But I just want to highlight the most important one here, the AWS segment. Where is it the revenue growth? Let's take a look right here.
We, we got it right here. AWS segment sales increased 20% year over year to 33 billion. What was that number, 20%? People are predicting like 16% or 17%. The Street had it at 18%. AWS came in and they said no, 20%. We're growing way faster than anyone's really predicting. Maybe a few small investors, but really this is fast growth. 20% is fast given the scale and size of AWS. Now again, it's not as fast as Google or Azure, but it's much larger.
This is $33 billion in 1/4. AWS is so big, it's almost as big as Microsoft Azure and Google Cloud combined. So we're working on an entirely different scale here. Now to look through the the rest of Amazon's report. And I just want to give a quick reaction here before we jump into Google. And, and I, I say this again as someone that's, I'm very invested in Amazon. I can show you my position in it right here. I have a $137,000 position, $42,000 in the green.
It's going to be up in the green if these gains stick around. So I'm in it on Amazon. If you notice in the story, fund this portfolio, Amazon is the largest position today. But I'm also in Google across 2 portfolios. When I combine Google across both portfolios, it's actually a larger position than Amazon today. But in any case, I am very invested in Amazon. I want this company to do really well and I'm really excited to
see the AWS growth. But for me, there's bigger things to focus on than even AWS. When we look at Amazon, people discount the other businesses that they're in, but they're in a lot of exceptional businesses. The retail one is one that they're in that's exceptional.
Online retail is huge. Net sales increased 13% to 180.2 billion in the third quarter compared with one 58.9 billion in the third quarter of 2024. Excluding 1.5 billion favorable impact from a year over year change in foreign exchange. So they grew from 158.9 to 180 massive growth in their total sales. North America segment sales increased 11%. International is growing faster at 14%. Then AWS of course increased by 20%. So that's lifting up the growth
rate. Overall the operating income was 17.4 billion in the third quarter compared with 17.4 a year ago. So basically the exact same, the operating income staying flat. It says it excludes 2 special charges, 2.5 billion. Some legal battle. All these companies have legal battles, something with Europe, I'm sure. Yeah, the Federal Trade Commission, $1.8 billion. North America segment operating income was 4.8 billion compared with 5.7 billion.
So their operating income actually went down year over year. They have more operational expenses. We'll probably get to that in just a minute. International segment operating income was 1.2 billion compared to 1.3 in the third quarter of 2024. The AWS segment operating income was 11.4 billion compared with 10. So AWS seems like the only part that's growing its operating income year over year out of what we're looking at.
Now. Again, when investors are looking at this, they'll look at the top and bottom line, but they're focused solely on that AWS number. That is all eyes are looking at that. The net income increased to 21.2 billion in the third quarter or 1.9 five, $1.95 per diluted share. That's crazy compared with 15.3 billion or $1.43 diluted per share last year. So I, I don't know what the growth rate is, but 143 to 195 is huge growth in net income and they're already growing net income like crazy.
If we take a look at Amazon, we'll have these numbers in, in a minute, but we can go ahead and just take a look at the growth of their net income over time. This is what the chart looks like. We can see this exponential growth. This is over a trailing year. This is still growing quickly, very impressive to see. I love seeing the net income grow. Operating cash flow increase by
16%. So we do have operating cash flow growth very fast to 130.7 billion for the trailing 12 months compared with 112 free cash flow, this is going down. Remember, free cash flow is the amount of of income from operations minus your CapEx investment. Since they're ramping up CapEx to take advantage of this unique situation we have with artificial intelligence, it naturally follows that free cash flow is declining. But free cash flow is not declining because they're
bringing in less cash. It's declining because they're out laying more cash to CapEx, a very important distinction. And you can see that through the CapEx line. You can see it through the free cash line. You kind of put those together. It decreased by 14.8 billion in the trailing 12 months, driven primarily by year over year increases of 50.9 billion in purchases of property and equipment. Purchases of property and equipment is just a euphemism for CapEx or vice versa.
So we have the CapEx right there. This is the commentary from the CEO, Andy Jassi, who he's taken a lot of trash over the past five years. People have really trashed his name across the Internet. Nobody likes it when a stock stays flat for a wonderful company. I've defended Andy Jassi only because I'm following the fundamentals. Amazon. Amazon's gaining in revenue. They're gaining, gaining in operating cash flow. They're gaining in AWS. Like he's actually running the
business really well. The stock price is just the issue, he says. Quote, we continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of the business, said Andy Jassi, president and CEO. AWS is growing at paces we haven't seen since 2022, re accelerating to 20.2% year over year. That's right, Andy Jassi, lay it down for him, lay down that 20 plus percent. Incredible to see him be able to to drop that in an earnings
report. We continue to see strong demand in AI and core infrastructure and we've been focused on accelerating capacity adding more than 3.8 gigawatts in the
past 12 months in stores. We continue to to realize the benefits of innovating in our fulfillment network and we're on track to deliver to Prime members the fastest speeds ever again this year, expanding same day delivery of perishable groceries to over 2300 communities by the end of the year and double the number of rural communities with access to Amazon same day and next day delivery.
Now I just want to mention something I've I've gone over Amazon a number of times and we went over this report. If you recall, it was a semi analysis report and their reporting showed that Amazon has a lot of capacity coming online soon. Their report showed that Amazon would re accelerate, AWS wouldn't be going down, it would reaccelerate. They were right their their
analysis was correct. Amazon is reaccelerating and like we discussed in previous episodes, if they accelerate and they reaccelerate AWS, the stock's going up. There's this no way around it. If AWS grows faster and that narrative of AWS falling behind gets diminished, Amazon stock will go up. Now, there's other things, and this report, Amazon's is so long, we can't possibly go through all of it. It's literally like 20 pages long. It's just a library of content
that you can go through. But in the report, what I'd be looking for over the next couple of years with Amazon and what I'll be paying attention to is, of course, the AWS business is great and we want to pay attention to that. But Amazon's solved that. Like that's old news. That's what Wall Street is focused on.
You don't want to be focused on the exact same thing that Wall Street is. What we should focus on as individual investors looking forward with Amazon is the story of automation, of robotics, of their 1.5 + 1,000,000 employee workforce. They have an enormous workforce now. Tesla's great at creating automation. They're great at robotics, but Tesla doesn't have as many employees. Tesla's already highly efficient, Amazon is not.
When it comes to to robotics and automation, Amazon has far more low hanging fruits to be able to refine their business and raise margins than Tesla does. And that's because if they create a robot that can do simple, repetitive tasks, they have the opportunity to replace millions of employees. So like a million employees now that sounds terrible. And it, you know, I hope all these employees find wonderful
jobs. I think they'll find better ones with other companies that are being started and created. So that that's one perspective. But as an investor, we have to look at reality, not how we want things to be. I'd love for everybody to never lose a job, but this is the reality that we're working with. Automation is a real thing. Many jobs will be automated and there's ways that we can benefit and we can invest accordingly. For companies that will raise
margins over time. I've argued, and I'll still continue to argue that Amazon is the best equipped to be able to benefit from ongoing automation. So while these results, I, I think are exciting and I love seeing the AWS growth. I love seeing Andy Jassi just dropped that #20 plus percent growth. Amazon stock is up 8 to 9% right now. It could go up even further. The only thing that could take it down is commentary on the call that that shows a future that's less bright.
Maybe they bring down guidance or something. But it also could even go higher if they say AWS is going to continue to accelerate. So investors will be looking at that. We'll see how it trades. So overall, again, this this week has been quite the week. I thought I was having a good week with Google. To me, that was a massive victory. You know, as Google investors, we can take a victory lap. We deserve it. Google investors have have taken
some crap over the past year. There's many big investors saying that Google is going to fail, that it was the next Kodak. There were big investors that said that about Google, not ironically, and here we are. Google is at all time highs, the company reported yesterday and it's it's just right up there, right close to its all time highs, $282 per share or almost 300. This stock is going above $300. Now.
It's always exciting when a stock goes up that you're invested in. But I will say, and I'll admit this selfishly, this one's particularly exciting for me because I've put my neck out for Google. I, I've really made a lot of content about this one. When I figured out that Google was going to win, when I came to that conclusion months ago, I leaned in big time on this company. I've believed for months that it is the best risk adjusted reward company, the best risk reward
stock in the market. I made that message very clear. And as a content creator, that's a little bit more risky, I think then even when you just have an individual hidden investment that nobody else knows about. Because it's not just win or lose, make money on the stock or lose money on the stock. For me, it's my brand value, it's my reputation.
It has downstream effects. So if I'm really leaning in on a company, if I feel really bullish about it, I'm putting my reputation and long term trust with you at stake. So I love seeing that pay off. The fact that this has been a huge winning stock, that's part of the reason why I'm excited about it. I'll admit it's selfishly because I just think it's great for my brand. It's great to have a win. I love winning with stocks and making money on them. That's just a a selfish
perspective. But the non selfish perspective and the reason that I'm actually even more excited about this company doing so well is that when I was invested in company like Netflix and that one was a big comeback and it had a great report. It was very exciting for me, but there weren't that many people to share it with. I feel like I was alone with Netflix. Like there's like 10 other people invested in it. There's really no Netflix investor community.
There's a small one now, but it's it's nothing notable. The community for Google and the amount of individual investors like me that are in the stock is massive. And I like seeing them make money. It's great when individual investors have a thesis. They're head of Wall Street, they don't buy into the fair and the Kodak and that ChatGPT is going to destroy the company. They stay invested, they build a position and they reap the rewards. So this is a shared V1 that I
see the community buzzing about. People are making money. Google's such a fun investment because it's done so well and it still remains at a reasonable valuation. So I've gone over the thesis many times and nothing has really changed with Google. It's just performing exactly how I expected it to. I made a video earlier this week saying I think that this earnings report will crush it, and they did. It wrote up 2.5% on the day into earnings and it was up another 2 1/2% after earnings.
This stock has been on a tear up 50% year to date and just the past week. It's up 9%, the past month 15%, the past three months, 47%. Incredible performance by this company and there is more to go in terms of where Google sits now. I think I have like an 80,000, maybe $85,000 gain in the stock. It's about $170,000 position. It's the biggest position in My Portfolio. As of right now. I am not selling a single share because I've seen what happens when you want to lock in gains
of a big winner. You want to lock in gains, but big winners happen in most cases because things are going well for the company. Companies aren't static. They're not fixed. It's not just a set of numbers. Companies evolve. They change strategically over time. They get stronger or they get weaker. Google's stronger today than it's ever been before, by far stronger than it's ever been before. Management can't say it because they'll be worried that regulators will use that against
them in the future, but I can. I'm not worried about what regulators are going to say about Google in the future. This company is stronger today than ever before. They have more things aligned for it. There's more things moving in the right direction. YouTube reached record highs that grew like 14 percent, 15%. YouTube Premium and Google One subscriptions passed 300 million, an all time high. Waymo's expanding international Google search grew up 14 1/2 percent, a percent higher than
Wall Street estimates. It's growing super fast, like Google search is a fast growing company. Everything we're seeing with Google right now points to a company that's incredibly strong. And again, when we look at the valuation, we try to, we try to be careful and conservative as investors and sell companies when they get to unreasonable valuations.
For a company with this many bullish catalysts, with this much strength, this well positioned for the future, with its own AI models leading the market, is a 27 PE ratio really that expensive? I argue that it's not. It's not the cheapest it's ever been. I don't think Google's cheap per SE, but I also don't think it's expensive. To me, it's entering into that category where it becomes a hold. And if you choose to sell, that's a fine decision.
You're right. You can make your money and you can exit and look for different opportunities, but opportunities as good as Google, as good as this company is today, are few and far between. There's not many companies in the world. In fact, I think Google's very unique in the world owning the assets that they own. There's other investors that wanted to lock in gains when they made money with Netflix, and you can see what happened
there. You can look over the past five years, investors wanted to lock in gains from buying it at $200 per share and selling it at 400. They got a double, but they forgo the gains that they got when it traded the 600. Now Netflix went from $600.00 U to 900 from 900 U to 1100. If you sold at the reasonable valuations when the gains had already been had, you missed out big time. I hold on to companies that I believe are trading at
reasonable valuations. They have very bright futures that are getting fundamentally stronger over time. I sell companies that are getting weaker over time, their markets getting clouded, and the developments look like they're going in the wrong direction. The quality overall is being lowered and with Google, the quality is higher now than ever before. The valuation is reasonable and I continue to hold, so I'll have a more in depth report on these
companies. We'll have more content in the future, especially on Amazon's report. I'll be diving into that one and the earnings call. But as of now, I think it's time to celebrate. We have so many investors that are in Google and Amazon. Congrats to all of you. You deserve it. You put your money at risk. If you've worked for your money and you've invested it, you deserve the gains. That's going to be it for this time. Hope you enjoyed, see you in the next one.