July 31, 2025 • 35 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Apple Inc. reported third-quarter revenue that handily topped analysts’ estimates, boosted by surprisingly strong sales of the iPhone and products in China.
Revenue rose 9.6% to $94 billion in the period, which ended June 28, the company said in a statement Thursday. Analysts estimated $89.3 billion on average, according to data compiled by Bloomberg. Apple had projected a $900 million headwind from tariffs during the period, saying that revenue would grow in the low- to mid-single digits.
Though US tariffs are still expected to weigh on results in the long run, they likely provided a boon to Apple in the latest period — with consumers rushing to stores to get out ahead of expected price increases. The company also has been staging a comeback in China, a market where local phone brands have made inroads with consumers. Services were another bright spot for Apple last quarter, topping Wall Street projections.
Meanwhile Amazon.com Inc. projected operating income in the current quarter that fell short of analysts’ estimates, worrying investors that the tech giant is spending too much to keep up with competitors in the race for artificial intelligence.
Operating profit will be $15.5 billion to $20.5 billion in the period ending in September, compared with an average estimate of $19.4 billion. Sales will be $174 billion to $179.5 billion, the company said Thursday in a statement. Analysts, on average, expected $173.2 billion.
Chief Executive Officer Andy Jassy is engaged in an AI infrastructure arms race with Microsoft Corp. and Alphabet Inc. that requires heavy spending on data centers. Both of those rivals reported strong earnings earlier this week showing they are benefiting from the AI boom.
Today's show features:
- Bloomberg Intelligence Senior Technology Analyst Anurag Rana and Senior Analyst for E-commerce & Athleisure Poonam Goyal on Amazon’s earnings
- Ivan Feinseth, Chief Investment Officer and Research Director at Tigress Financial Partners, with reaction and analysis of Apple and Amazon earnings
- Jayati Bharadwaj, Director of FX Strategy for TD Securities, on the recent US dollar rally
- Bloomberg News US Legal Reporter Erik Larson on US Justice Department lawyers defending President Donald Trump's authority to impose global tariffs at a hearing in Washington
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy, plus global business finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
Amazon shares down about three percent in the after hours.
The company sees third quarter operating income fifteen and a
half to twenty point five billion dollars. I was in
line with estimates that are at nineteen point four two billion.
I guess maybe on the lower side it's not in line,
and that could be why the stock is moving a
little lower. Sad quarter operating income though blue past estimates
at nineteen point one seven billion dollars.
Speaker 3 (00:53):
Yeah, I do think that third quarter operating income could possibly,
especially the downside or the lower end of the estimate,
be problematic. Let's see what our team has to say.
It is such a massive company, as you know, we
need two Bloomberg Intelligence analysts to really break it down
with us. Is Senior technology analyst Anna rog Rana and
senior analysts. Excuse me for e commerce and at leisure,
(01:13):
Punam Goyle at a RAG out there in our Chicago bureau,
and we've got Punum in our Princeton bureau. Hey, Anag,
I want to start with you because AWS is always
so important when it comes to the top and bottom
line here at Amazon. Walk us through what we got
on that side of the business.
Speaker 4 (01:29):
Yeah, I mean, as you see, you know, they met
expectations on aw's growth of seventeen percent in constant currency.
But you know, this is where we are saying that
this is probably not good enough because Microsoft beat by
a big number, Google beat by a big number, and
the big question is going to be, you know, why
didn't Amazon beat by a big number? And I think
that's going to be probably one of the most important
(01:50):
questions on the call, and we look forward to hearing
what management has to say about it.
Speaker 2 (01:54):
I want to bring in Punham here because one thing
that I noticed when I was reading this in real
time the statement from CEO Andy Jasse also president over
at Amazon Punham how much he talked about the connection
between the shopping experience for Amazon's core customer and artificial intelligence,
because up to now and maybe I'm wrong, but I've
thought about AI and the context of AWS. But what
(02:17):
he's trying to communicate to investors is the effect that
AI is happening is having on how people are buying stuff.
Is it actually doing that?
Speaker 5 (02:26):
Yeah? Absolutely. You know, AI is a big deal in
e commerce and Amazon's been investing a lot to improve
the customer experience. It starts with search. Right when you
go to Amazon and you're searching something, They've just improved it.
And they've also launched Rufus, which is their AI or
your personal assistant, So that's really been helping shoppers and
just you know, figure out what they want to buy.
(02:48):
You want to buy a microwave, but what microwave is better?
The shopping assistant helps you not only bring choices forward,
but also helps you navigate through the descriptions of pricing, etc.
So it really helps improve conversion. And that's where AI
is helping on the shopping side.
Speaker 2 (03:03):
Are you what metrics do you look at Punham to
make sure that the investments that they're making are actually
leading me to spend more money on Amazon?
Speaker 5 (03:11):
So Amazon doesn't share all the metrics that we'd like
to see, but we know that they've talked about conversion
and how that's improving. So I think that's the number
one metric to any extent when we get color around that,
I think that is what's most important. If you think back,
online conversion just broadly speaking, is in the load to
miitsigledgit range. So only about five percent of shoppers that
(03:32):
go online to shop actually transact. It's very very low
compared to a brick and mortar store, and every little
that Amazon does on AI or anything else is going
to help boost that conversion. It's higher on Amazon.
Speaker 3 (03:44):
Of course, Let's remind everybody that in the aftermarket following earnings,
Amazon down about two point six percent. Here it's only
up about seven percent year to date. Ada rog you know,
you talked about, you know, the blow out numbers that
we've gotten from the likes of Alphabet and others. When
it comes to cloud aws, as we said, the growth
was in line with what the street was expecting. What
(04:05):
might why might they not have outperformed what we got
from some of the other hyperscalers.
Speaker 4 (04:12):
You know, the first thing is they are much larger
than all the others. Their run rate is over one
hundred billion dollars, so you know, that's one factor, and
you know, to be very honest, growing seventeen eighteen percent
at one hundred billion is not a bad deal. But
the second part is when you look at somebody like
a Microsoft, they are getting a bit the benefit of
you know, chat GPT transactions being run on their cloud.
(04:33):
So you know, that's that's a huge benefit for them.
Amazon doesn't have that option, frankly, because they don't have
a chat gipt like you know.
Speaker 6 (04:41):
Application that's running.
Speaker 4 (04:43):
A lot of what they're doing is on the enterprise side,
and those applications are currently in the build phase, which
means over the next several years we should see the
trickle down effect of those usage you know, driving up awis.
So I think there is a timing mismatch. I don't
see you know, them as being inferior in any way
to some of.
Speaker 6 (05:02):
The other cloud providers.
Speaker 4 (05:03):
In fact, as I said, they are the largest with
probably the most services out there right.
Speaker 2 (05:07):
Now, do they stay the largest? I mean, they certainly
were early into this. I think you could say that
they helped invent this. I mean Andy Jasse certainly, that's
why he's CEO. After heading up the eight Amazon Web
services and then being picked by Bezos to take this job.
Would you say that they're comfortably in first or is
(05:27):
Azure at Microsoft on Iraq? And also is Google Cloud
doing a good job of catching up?
Speaker 4 (05:35):
They're both doing a very good job of catching up.
And as I said, you know, Microsoft has an inherent
advantage there.
Speaker 6 (05:40):
So maybe down the road, you know, several.
Speaker 4 (05:42):
Years from now, let's say three to four years, they
would be neck to neck. But you know, one of
the things is this is a market where we think
the entire market is growing much bigger. You know, we
don't see five years from now ew as being a
smaller business than where it is right now.
Speaker 6 (05:55):
The rate of growth depends.
Speaker 4 (05:57):
On the propensity of enterprises to spend on technology, but
we think all three of them will benefit with cloud
becoming much bigger over the next three to five years.
Speaker 3 (06:06):
We should point out some more of the statistics on
Amazon online stores net sales sixty one point five billion,
up eleven percent year over year, physical stores net sales
about five point six billion, up seven and a half
percent year over year. Third party seller services net sales
forty point three five billion, that's up eleven percent year
over year. Put them, you know, they also say in
(06:30):
some of the commentary or conviction that AI will change
every customer experience is starting to play out. So we
talked about it a little bit earlier. I mean, what
they are doing in terms of getting people to spend
more time on the platform, spend more time on the platform,
it's all happening.
Speaker 5 (06:45):
Yeah, it's happening. I mean all the numbers that you
just cited, they have performed expectations. So whatever they're doing,
and they're doing a lot, they're doing it right. We
think that Amazon is making the right moves to expand
their retail footprint online. Once again, you know, it comes
back to what a customers want. They want everything and
Amazon's a marketplace that really sells a lot of different
(07:05):
types of goods and they want the speed and speed
is key here because you can get things same day
or next day from Amazon without paying a fee being
a Prime member. So that's really key here. And the
numbers in the second quarter were actually quite impressive on
the retail side. They did do really well. Prime Day
sounds like it was a great success. We'll hear more
(07:26):
on the call, but the numbers outperformed on the retail side.
Speaker 3 (07:29):
Is there a read a follow through, if you will.
When it comes to what this tells you about kind
of consumers and the US economy.
Speaker 5 (07:37):
Yeah, I think consumers are focused on value, and I
think Amazon does give you value. They are trying to
keep prices low, and this may be a function of
that where you know, as consumers shop around and they're
seeing price hikes due to tariffs, either they've already started
or they're coming up, they're finding deals on Amazon. So
they're going there and that's a nice place for Amazon
(07:58):
to be as we move forward into the second half.
Speaker 3 (08:00):
I want to ask both of you, and let me
start with you put them. I mean, what are you
thinking about that you want to listen for on the
call that the company does with analyst and investors top
of mine or what you would be asking?
Speaker 5 (08:13):
Yeah, for me on the retail side, it's really the
terror of question and the diminimus question. You know, we
know we're losing the dominamous exemption, so how should we
think about that in terms of their third party, especially
where they do rely on some of those drop shipping,
especially Hall. And then the second thing I'm looking for
is just how they're going to be pricing the goods
as we move into the second half, because for now
(08:33):
we have been somewhat insulated with a ten percent pause
on most goods outside of China, but that we know
is changing in the back half.
Speaker 2 (08:42):
A honorock, come on back in here, because one thing
that we're I'm looking at the write ups right now,
and it does seem like, you know, what we said
at the beginning that this operating profit estimate for the
current quarter really underwhelmed. Why is it that Amazon doesn't
get rewarded for being less profitable the same way that
(09:04):
other companies are rewarded for this or maybe the better
way to ask it would be, you know, the measure
of capex and why you know, investors are so okay
with meta platforms spending so much money, but Amazon's operating
profit not coming in as high as they thought it would.
Is it because metas just printing money and has a
higher margin business.
Speaker 4 (09:26):
I mean, you have to remember, you know, Amazon has
a lot of retail footprint also, so you can't really
equate them to a tech company as is.
Speaker 6 (09:32):
I mean, it's only the aw as part of it.
Speaker 4 (09:34):
But frankly speaking, if you go back to the history
of Amazon for probably ten fifteen years, you know, they
did were extremely unprofitable, and people you know, still rewarded
for them. You know, in our view, profitability story has
been amazing over the last three to four years. Look
at where AWSS gone from low twenties to the thirties.
Now today, it was a bit lower than what consensus
were anticipating, but you know, it ebbs and flows because
(09:57):
of the capex that they are investing in throughout their ecosystem.
Speaker 6 (10:01):
Imagine a business.
Speaker 4 (10:02):
I mean last quarter their AWS profit or our operating
margins were thirty nine point five percent. I mean, that's
a forty percent margin business. That's that's pretty impressive across
any you know, tech platform. So again it is lumpy,
but that's because of investments, that's because of how they hire.
You know, we think longer term, that is still a
forty percent margin business.
Speaker 3 (10:22):
So I want to put the same question I asked
a punam Anag what you are thinking that you want
to know a little bit more about when the company
gets on the calls with analysts and investors.
Speaker 4 (10:32):
Yeah, the two things that we want to know is
what's happening to your capex. Now, my gut feel is
they will want to take the capex up because all
the other cloud providers have done it, so they can't
really be left behind. But then the second question is, well,
can you give me an idea for all the capecks
that's going in? What kind of AI workloads are you seeing?
And if you are seeing some AI workloads, you know,
why not disclose that number and you know, talk about
(10:53):
it openly as Microsoft has done in the past, you know,
one and a half to two years.
Speaker 2 (10:58):
Hey, Punam Guile, I want to bring you back in
here because you cover e commerce and ath leisure. Carol
asked you a really good question about if we can
get any insight into the consumer and the health of
the consumer by reading into these numbers, would you say
that Amazon is well positioned if you indeed believe that
we could be entering a downturn. We did see this
question asked yesterday at the Federal Reserve by one of
(11:20):
our own reporters, and referencing that vantage score report that
high income consumers are actually missing on their bills right
now when it comes to autos and credit cards? Is
Amazon well positioned to be a player if we do
see a downturn.
Speaker 5 (11:36):
I think if we see a downturn Amazon's not going
to escape the ramifications of that. But that said, compared
to everyone else in retail, I do think Amazon will
fare better than the rest, and I do think that
they will continue to attract the value customer who's just
looking for deals and looking for value. Because at the
end of the day, when you think about how retailers buy,
(11:58):
those with scale have buying power, and Amazon has over
seven hundred billion dollars in GMB based on our estimates,
I can't think of a retailer bigger than that in
the US that has buying power.
Speaker 3 (12:09):
All right, put them, We're going to let you go.
Put them go. Our senior analyst for e commerce and
at leisure, we're going to be watching out for her
research and commentary. Also following the company call, she is
of course with our Bloomberg Intelligence an rug before you go,
at least for this moment, Apple should be crossing in
less than ten minutes time. What will you be looking
out for here?
Speaker 4 (12:29):
We really want to know what commentary they have around
AI initiatives and what is the policy at this point
in terms of adding you know, other third party models
onto the ecosystem. When we look at the results, we
think we're going to get a push or a pull
forward of demand from you know, the loss for the
last quarter, but next quarter guidance is extremely important, which
we don't think is going to be that great.
Speaker 3 (12:51):
I feel like we keep saying we want to know
more about AI. What do you do? And what do
you do? And Ana rug Rana, thank you so much,
senior tech analyst at Bloomberg Intelligence. They're in our Chicago.
Speaker 1 (13:01):
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Speaker 2 (13:15):
I want to bring in Ivan fine Seth, research director
and chief investment officer at Tiger's Financial Partners. The firm
is more than five hundred million dollars in assets under management.
They've got both Apple and Amazon stock for clients. He
joins us from New York City. What do you make
of this? It was a pretty massive beat on the
top line, really a massive beat across every category. Slight
(13:36):
beat when it came to China, iPad revenue slightly below expectations.
What are your first impressions?
Speaker 7 (13:42):
Well, I think there was a lot of caution going
into the quarter, and they were strong on revenue, definitely
strong on iPhones and strong on iPhone sales in China.
Those are the key concerns. I think that even Tim
Cook just commented that pull forward sales based on tear
on tariffs were only a small part from what they
(14:02):
were seeing.
Speaker 2 (14:03):
So then why do you think the iPhone beat was
so big?
Speaker 7 (14:07):
It just could be where we are in the upgrade cycle.
Speaker 2 (14:11):
But we're in a time where people hold onto their
phones for longer and wait to buy it because that
new one comes out traditionally in September late September.
Speaker 7 (14:19):
There's still a lot of you know, twelves out there,
so people may you know, can't maybe hold off or
the promotion. We're still seeing a lot of promotions from
the carrier providers like AT and T, T Mobile and Verizon,
so the promotions drive sales. Maybe it is, like Sarah said,
(14:40):
concerns over higher tariff driven prices and people are upgrading now.
So either way, there was a lot of concern that
it could have been a weaker than expected quarter, and
it was a much stronger than expected quarter, especially in
three key areas overall revenue, iPhone sales and China iPhone sales.
Speaker 3 (15:01):
All Right, so you've got Tim Cook saying today Apple
is project Reporter Jude quarter revenue record with double digit
growth and iPhone Mac and services and growth around the
world and every geographic segment. So highlighting that, you know,
the big question that we had ivan they're going into it.
And one of the things that was top of mind
is AI. Right in a week, in a couple of
(15:22):
weeks where we've been looking at the hyperscalers, the big spend,
the return on investment as a result of that, what
about on AI? How big a deal is that for you?
When you look at Apple, it is a big deal.
Speaker 7 (15:38):
And they still really have not like wowed on ai yet,
and you know, they're talking about partnering working with other
AI providers. I mean, Siri still needs a lot of improvement.
A lot of the functionality that is out there is
pretty good as far as pictures and text and email
(16:00):
messages to integrate AI, to help facilitate the you know,
editing of pictures and sending texts and emails. But I
think they still have a long, you know, a long
way to go. Because Apple has always had a tremendous
wow factor, and you know, AI has really not been
at the level that everybody is expecting from Apple, So yeah,
(16:22):
that is an opportunity. But services revenue did increase nicely,
which is another key point. So those I think are
really that's the fourth of the total four key points
that everybody was focusing on are.
Speaker 3 (16:34):
Ian King sharing with the team on the live blog service.
Revenue up thirteen percent, Wearables provided sales that actually showed
a contraction of about eight point six percent. Max sales
an increase of fifteen percent. I've had revenue a decline
of eight percent, and iPhone had revenue an increase of
thirteen percent. AI. Why is it so tricky for Apple?
(16:56):
They're continuing to lose some top talent. Why is it
so tricky for them ivan that they can't seem to
get it together.
Speaker 7 (17:03):
Maybe the conundrum because Apple is viewed as an incredibly
innovative company, and while they're never the first mover. They
didn't invent the smartphone, but they took it to the
next level. They didn't invent the iPod, took it to
the next level. So each thing that they address, they
take it. They're not the first mover but they do
(17:25):
take it to the next level. So everybody has high
expectations as far as Apple and intelligence or AI, so
I think that is part of it, and they really
haven't come out and wowed everybody. The other area that
I think is important, well, I think the Vision Pro
as a concept was really great, but I didn't think
they were going to sell that many of those headsets
(17:46):
at thirty four hundred dollars, and I expected at some
point they would come out with a more streamlined version,
a much more cost competitive version. And I also am
a big believer at the in the smart glass concept
that Meta is doing very well with, and I think
we will see some type of smart glass concept from
(18:07):
Apple that integrates across all of its devices as far
as the phone and the watch, where you could you
keep the phone in your pocket and do a lot
of things as far as communication, make and receive calls
and you know, video and pictures in real time and
communicate just like you would on FaceTime through the pair
of Apple smart glasses.
Speaker 2 (18:28):
Oh yeah, I already talk to myself with my phone
all the time. I can just talk to myself more
in glasses. That's that's totally fine. Certainly You're right, I've
in the form factor for the vision Pro much different
than metas ray Ban Sunglasses. Hey aarn Mark German repeatedly
saying essentially this, and I'll read it right from the
live blog. This is nothing new to our audience because
(18:49):
Mark says it all the time. He writes, as I've
been saying, despite concerns about the performance of Tim Cook
from some analysts, there is no universe in which the
board will replace him with this type of quarter. It's
essentially impossible. Do you agree with Mark's assessment there Ivan
that Tim Cook is there to stay despite the challenges
(19:10):
of the company's experience. When it comes to AI, he.
Speaker 7 (19:13):
Has done a phenomenal job. He's created tremendous shareholder value
in returns since his tenure as the CEO. Companies hit bumps,
Apple has innovated tremendously under his time as CEO. So
he's done a great job. And I don't think any
(19:35):
of the issues that have investors that are concerns right
now are really you know, being could be tied to
some kind of fault of his. So I think it's
highly unlikely that they will replace him, and I think
that Apple will come back strong in AI, and I
think we will see the next generation of some kind
(19:57):
of you ar VR headset moving more toward the glasses
type of form factor of which you look. They have
a billion and a half iPhone users. They have a
over two billion ecosystem of Apple product users that are
eager to adopt Apple products and buy Apple products. The
(20:19):
integration across their products is tremendous and they just enhanced
that further with the recent announcement of the Glass Operating
System that standardizes the interaction of all the devices.
Speaker 3 (20:35):
Hey, just one last question. As we see Apple shares
up about two percent here in the aftermarket, anything that
makes you want to buy Apple shares here?
Speaker 7 (20:45):
I always we have a buy on it. We've got
two twenty price target. We're probably going to reevaluate and
raise it, and I think on any weakness it has
been a buy and I think that they will surprise
the positive for AI and the services revenue also is
a tremendous driver of growth and profitability, and that will
(21:09):
continue as well.
Speaker 3 (21:10):
All right, good stuff, Ivan, Thank you so much. I've
and find Seth He is Research director, chief Investment Officer
of at Tiger's Financial Partners. They've got over five hundred
million in assets under management. Joining us here in New
York City again watching Apple shares hire in the postmarket
after they reported earnings and some strong numbers outperformance there,
(21:31):
stock up two percent.
Speaker 1 (21:33):
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Speaker 3 (21:51):
The Fed, the trade, the markets, tariffs, everything that we
are keeping a watch on on this Thursday, even though
it feels like a Friday, it is still Thursday. In particular,
we want to dig a little bit into what we've
seen in the dollar and the FX trade.
Speaker 6 (22:03):
JT.
Speaker 3 (22:04):
Bardoisee is with us. She's director in FX Strategy for
TV Securities. Back here in our studio. Good to have
you here. A lot coming at investors. We've seen some
strength as of late in the US dollar. Let's go
back to the macro. What's of note, especially in a
week where we've heard from the Fed got a decision,
We have the White House still doing trade deals and
tariff deals, there's some extensions. We're trying to figure it out.
(22:27):
What's the important macro trade right now for the US dollar.
Speaker 8 (22:30):
Thank you so much for having me. Always a pleasure
to join both the field in the studio. I think
what we have learned from this week is that you know,
there is still a lot of uncertainty even with the
trade deals being announced, particularly on the data side. With
the trade deals being announced, you're obviously getting less confusion
on the trade front. With you being the largest trading partner,
you have some certainty on what that tariff trade now
(22:52):
looks like. But unfortunately the Fed that come out yesterday
and told you that there's still a lot of uncertain
uncertainty of on the data front had warrants a lot
of caution, a lot more caution than what markets were
priced for going into the meeting. Markets were more than
fifty percent price for a September cut. They felt comfortable
with the fact that the fact should becoming an easy
interest rates, but Power gave no such indication because there's
(23:15):
still a big risk out there, particularly on the inflation side,
which is severely underpriced by markets right now. Which is
what we've learned that while you are getting a little
bit more clarity on the trade front. Now we're utterly
data dependent because on the macro growth and inflation side,
there's still a lot of uncertainty which is not resolved
with just us knowing those treets.
Speaker 2 (23:33):
Why do you think inflation is being mispriced by the
market right now?
Speaker 8 (23:37):
So this is actually a very interesting question. So we
actually have some in house models, which is where we
actually track trading currencies on the basis of different macro factors.
So our macro factor, our growth factor, our equity factor,
all of those factors are making a lot of money,
but our inflation factor has actually been losing money, which
is an indicator to me that FX markets have actually
(23:58):
not been paying attention to data. They think that with
the tariffs and the uncertainty around the trade deals, focus
has primarily shifted to the growth outlook. But one thing
we are now realizing it that the baseline tariff rate
is no longer ten percent. It's at least fifteen percent,
which is also interesting because we don't know what that
pass through inflation will look like. The last CPI report.
Speaker 3 (24:21):
That side Mitchelle on our FED specially said yesterday like
the range was more like either I can't remember eighteen
to twenty, but it's much higher than the ten percent
that we've all been talking about.
Speaker 8 (24:30):
Yes, and the last CPR report had the market reaction
was very telling. We had a downside surprise, but markets
took it hawkishly because you saw the first signs of
inflation tariff pass through into the goods categories, particularly into toys,
which markets took to be very hawkish, even though the
core CPI was a downside miss.
Speaker 3 (24:47):
And forgive me, I meant Bob Michael. So what's interesting
is all right, so wait, so what does this mean
for the dollar?
Speaker 7 (24:53):
Then?
Speaker 3 (24:53):
Going forward?
Speaker 8 (24:54):
In your view, I would say that you know, we
are bullished at all or in the short term tact
you still have August first, the deadline tomorrow, which is sticking.
But there's two scenarios which can play out with most
of the countries. Either you don't get a trade deal,
which brings in a lot more uncertainty and volatility into
your local assets. Or the second part is you do
(25:15):
get a trade deal, but on terms which appear more
favorable to the US than your country, which is now
actually leading into US local equity market out performance over
other countries. Equities. Both of these are actually dollar positive,
so thankfully, in the short term this makes my job
a little bit easier because irrespective of a deal or
no deal, it should feed into a little bit of
(25:35):
a dollar bounce in the short.
Speaker 3 (25:37):
Term stronger dollar. They are possibly problematic for US multinationals
in terms of selling their good So is that something
to think about when we look at profits and profitability
going forward?
Speaker 8 (25:48):
Not yet, because we do think that this taller bounce
will be a bounce. It will not, you know, bring
up that you know, dry is back of the US exceptionalism.
We won't get euro back to one O five or
below that one thing. It's that kind of a move. Okay,
it's more for short term adjustment, which market needed given
what was priced.
Speaker 3 (26:05):
We promise more time later. We love having you on
with us.
Speaker 6 (26:09):
J T.
Speaker 3 (26:10):
Bardoase, she's director in FX Strategy for TD Securities.
Speaker 1 (26:13):
Joining us, you're listening to the Bloomberg Business Week Daily Podcast.
Catch us live weekday afternoons from two to five eas
during Listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (26:28):
Tariffs and Trade Front and Center. The August first deadline
is fast approaching tomorrow. It's not so called Liberation Day
April second. No, it's not July ninth, which was the
other one.
Speaker 4 (26:39):
Other one.
Speaker 2 (26:40):
Yeah, now we're at August first, is the deadline. But
there's an extension with Mexico correct, and we're.
Speaker 3 (26:46):
Still waiting to find out kind of where we are
with US China. Maybe we'll get an update a little
bit later on today.
Speaker 2 (26:50):
But separately with all this, there's the big question the
president's trade war. It's facing a crucial test as federal
appeals court here is a challenge to his use of emergence,
the powers to impose sweeping tariffs on imports. The question
seems basic, but it's pretty complex. Are these tariffs even legal?
Eric Larson is with us. He's Bloomberg News, a legal reporter. Eric,
(27:12):
Are they legal?
Speaker 5 (27:14):
Well?
Speaker 9 (27:14):
I think ultimately the Supreme Court is going to answer
that question. But they did address it today in the
Court of Appeals for the Federal Circuit, which is an
appeals court in Washington. Because it's such an important case.
They had all eleven judges in in that court hear
these arguments today. They were something that that both sides
have been preparing for for months now. One side, all
(27:37):
the Democratic led States filed a lawsuit and a group
of small businesses and they of course one at the
US Trade Court which found these tariffs were illegal, the
ones that were issued under the emergency law. So this
hearing was to determine whether or not the Trade court
decision will be affirmed or overturned.
Speaker 3 (27:55):
What are the arguments on both sides?
Speaker 9 (27:58):
Well, the States in the small business is that sued
say that this emergency law that Trump cided from nineteen
seventy seven doesn't say anything about tariffs and it was
never intended to be used for the president to issue tariffs,
certainly not sweeping global tariffs against all of our trading partners.
They on top of that, they argue that the national
(28:19):
emergencies that Trump declared in order to invoke this law
are bogus, that the trade deficits, as Trump said that
the persistent US trade deficits are a national emergency, a
threat to our national security, and that justifies issuing these tariffs.
Same with fentanol. He said that that crisis in the
US warrants big tariffs against Mexico and Canada and China.
(28:43):
So these emergencies, the States, small businesses, they say they're bogus.
Speaker 2 (28:48):
Section two thirty two is this is what was invoked
in the first Trump administration with China. Correct.
Speaker 9 (28:55):
Well, that's the thing is there are a bunch of
different trade laws that can be us used legally and
arguably to issue big tariffs in a lot of different situations.
That this law in particular has never been used to
issue tariffs before. So there's all these other ways section
two thirty two. And one of the judges today was
(29:16):
asking the Justice Department lawyer about that, saying, we have
all these other trade laws that a president can use
to issue tariffs. What's the point of all those if
a president can just use this one to do whatever
he wants.
Speaker 2 (29:28):
Could that be a backup plan for the president if
the court strikes down at least this methodology of sweeping tariffs,
could the president go back and use another part of
the law.
Speaker 9 (29:42):
I think that a lot of critics of these tariffs
have even said that that is something that is possible,
that there's other ways that Trump could could put these
tariffs in place. Their issue and their issue all along
in these lawsuits has been that Congress has the power
over taxing and tariffs, and that this is a massive
(30:04):
tax on all Americans who are paying the bulk of
these of these tariffs, so that that's something only Congress
can do, and that this law was just never intended
to be a blank check for any president to issue
whatever tariffs who wants, at whatever rate against any country
for any period of time.
Speaker 3 (30:21):
Is this once again about presidential authority?
Speaker 9 (30:23):
Is that the correct so many of the other cases
that have been going on against the Trump administration.
Speaker 3 (30:30):
So this is what I'm wondering. Like here we are, Eric,
as you know at Bloomberg, often the top stories and
most read stories, certainly over the last couple of weeks
and for a long time, have been about trade deals
in tariffs, and we've seen market certainly react on that.
If tell us about if this goes to the Supreme Court,
(30:50):
or if this decision go is a decision that requires
it to go to the Supreme Court, is it possible
that all of these headlines could be made insignificant and
not important and not real.
Speaker 9 (31:04):
Well, that's a huge question.
Speaker 6 (31:06):
Right.
Speaker 9 (31:07):
We already have these terrorifts being baked into the global
economy while they're being debated, because this same appeals court
allowed them to stay in effect. While this appeal proceeds.
Speaker 3 (31:17):
But there's a big question mark.
Speaker 9 (31:18):
There's a big question mark all of them. But as
we're seeing as we're seeing a lot of countries are
going ahead with negotiating and some of them reaching deals.
We haven't seen all the details on them yet, of course,
but they're they're certainly trying to reach these deals, and
there is a chance that potentially the Supreme Court ultimately
could decide that they're illegal. Perhaps they don't want future
(31:39):
presidents to have the same kind of blank check, so
they these countries might have to go back to the
drawing board.
Speaker 3 (31:46):
Well, have any other presidents ever done this? In terms
of no, okay, no, I.
Speaker 2 (31:52):
Think, I mean, I think the hard part about this
is that, you know, we heard this from feted Cher
jpwell yesterday. The uncertainty, yeah, is going along with this.
So it's like if you're if you're a company that
is trying to figure out, Okay, we need to get
these things from here, and we need to communicate to
investors how much it's going to cost us now in
this new environment. That's a challenge. Yet we haven't necessarily
(32:14):
seen that reflected in the company earnings, at least to
the extent of at least in this quarter, Carol, Right,
you remember last quarter where we heard all the uncertainty
from the airlines. We heard concerns about ripping up guidance
moving forward. If you're an investor and you're looking for
some sort of resolution here, is there a realistic timeline
for this or is this just going this drum beat
(32:36):
just going to continue as it makes its way to
the Supreme Court.
Speaker 9 (32:40):
I think that the Supreme Court, when it gets there,
is going to probably move expeditiously on this. They can
move quickly in cases that are extremely important. They could
also just they could also just let whatever the lower
court ruling is sort of stand. Right say, if Trump
loses at the Federal Circuit and they don't take it
up right away, you know, could be a hint of
(33:02):
things to come. But until there is a final decision,
no company is going to have any certainty. But as
you mentioned, these other options for Trump issuing tariffs. If
even if he were to lose on this, I think
we know that Trump, based on how he usually does things,
is he would press ahead with some other way to
get these deals done.
Speaker 3 (33:23):
And it sounds like he's got the options out there
right in terms of other mechanisms he could pull.
Speaker 8 (33:28):
Sure there.
Speaker 9 (33:28):
Yeah, I mean these tariffs that we've seen here, they
said in open court that they were basically a pressure tactic,
giving Trump a way to pressure countries to come to
the table.
Speaker 3 (33:40):
We actually talked with Bill George, executive fellow at Harvard
Business School, former chairman and city of Metronic, and remember
he thought CEOs, they're approaching this all wrong. He's basically saying,
by delaying, you know, making either an m and a
deal or strategy, if you're waiting for TERRFF clarity, he says,
at the same time, you've got competitors they're seizing, you know,
(34:02):
the opportunities, while everybody else, maybe American CEOs are kind
of waiting for clarity on the tariff deals. So it's
kind of interesting. What is the timetable here.
Speaker 9 (34:12):
To We don't we don't have one. I mean, we're
of course preparing for a decision to come anytime, but
they could take days, they could take weeks, okay to
come up with the decision and then of course Supreme Court.
Speaker 2 (34:23):
So so don't I hope you have no vacations planned.
Speaker 3 (34:29):
It's just amazing because.
Speaker 2 (34:31):
You're going to be here.
Speaker 3 (34:32):
But this is it, right, This is kind of our
world like, this is an uncertain aspect and we'll have
to see how it plays out. Thank you so much.
Get home safely. We know we're waiting for some big
rain here in New York. Eric Laarson is Bloomberg News
Legal reporter. Check out his work on The Bloomberg and
at Bloomberg dot com.
Speaker 1 (34:47):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(35:08):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy, plus global business finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:32):
Amazon shares down about three percent in the after hours.
The company sees third quarter operating income fifteen and a
half to twenty point five billion dollars. I was in
line with estimates that are at nineteen point four two billion.
I guess maybe on the lower side it's not in line,
and that could be why the stock is moving a
little lower. Sad quarter operating income though blue past estimates
at nineteen point one seven billion dollars.
Speaker 3 (00:53):
Yeah, I do think that third quarter operating income could possibly,
especially the downside or the lower end of the estimate,
be problematic. Let's see what our team has to say.
It is such a massive company, as you know, we
need two Bloomberg Intelligence analysts to really break it down
with us. Is Senior technology analyst Anna rog Rana and
senior analysts. Excuse me for e commerce and at leisure,
(01:13):
Punam Goyle at a RAG out there in our Chicago bureau,
and we've got Punum in our Princeton bureau. Hey, Anag,
I want to start with you because AWS is always
so important when it comes to the top and bottom
line here at Amazon. Walk us through what we got
on that side of the business.
Speaker 4 (01:29):
Yeah, I mean, as you see, you know, they met
expectations on aw's growth of seventeen percent in constant currency.
But you know, this is where we are saying that
this is probably not good enough because Microsoft beat by
a big number, Google beat by a big number, and
the big question is going to be, you know, why
didn't Amazon beat by a big number? And I think
that's going to be probably one of the most important
(01:50):
questions on the call, and we look forward to hearing
what management has to say about it.
Speaker 2 (01:54):
I want to bring in Punham here because one thing
that I noticed when I was reading this in real
time the statement from CEO Andy Jasse also president over
at Amazon Punham how much he talked about the connection
between the shopping experience for Amazon's core customer and artificial intelligence,
because up to now and maybe I'm wrong, but I've
thought about AI and the context of AWS. But what
(02:17):
he's trying to communicate to investors is the effect that
AI is happening is having on how people are buying stuff.
Is it actually doing that?
Speaker 5 (02:26):
Yeah? Absolutely. You know, AI is a big deal in
e commerce and Amazon's been investing a lot to improve
the customer experience. It starts with search. Right when you
go to Amazon and you're searching something, They've just improved it.
And they've also launched Rufus, which is their AI or
your personal assistant, So that's really been helping shoppers and
just you know, figure out what they want to buy.
(02:48):
You want to buy a microwave, but what microwave is better?
The shopping assistant helps you not only bring choices forward,
but also helps you navigate through the descriptions of pricing, etc.
So it really helps improve conversion. And that's where AI
is helping on the shopping side.
Speaker 2 (03:03):
Are you what metrics do you look at Punham to
make sure that the investments that they're making are actually
leading me to spend more money on Amazon?
Speaker 5 (03:11):
So Amazon doesn't share all the metrics that we'd like
to see, but we know that they've talked about conversion
and how that's improving. So I think that's the number
one metric to any extent when we get color around that,
I think that is what's most important. If you think back,
online conversion just broadly speaking, is in the load to
miitsigledgit range. So only about five percent of shoppers that
(03:32):
go online to shop actually transact. It's very very low
compared to a brick and mortar store, and every little
that Amazon does on AI or anything else is going
to help boost that conversion. It's higher on Amazon.
Speaker 3 (03:44):
Of course, Let's remind everybody that in the aftermarket following earnings,
Amazon down about two point six percent. Here it's only
up about seven percent year to date. Ada rog you know,
you talked about, you know, the blow out numbers that
we've gotten from the likes of Alphabet and others. When
it comes to cloud aws, as we said, the growth
was in line with what the street was expecting. What
(04:05):
might why might they not have outperformed what we got
from some of the other hyperscalers.
Speaker 4 (04:12):
You know, the first thing is they are much larger
than all the others. Their run rate is over one
hundred billion dollars, so you know, that's one factor, and
you know, to be very honest, growing seventeen eighteen percent
at one hundred billion is not a bad deal. But
the second part is when you look at somebody like
a Microsoft, they are getting a bit the benefit of
you know, chat GPT transactions being run on their cloud.
(04:33):
So you know, that's that's a huge benefit for them.
Amazon doesn't have that option, frankly, because they don't have
a chat gipt like you know.
Speaker 6 (04:41):
Application that's running.
Speaker 4 (04:43):
A lot of what they're doing is on the enterprise side,
and those applications are currently in the build phase, which
means over the next several years we should see the
trickle down effect of those usage you know, driving up awis.
So I think there is a timing mismatch. I don't
see you know, them as being inferior in any way
to some of.
Speaker 6 (05:02):
The other cloud providers.
Speaker 4 (05:03):
In fact, as I said, they are the largest with
probably the most services out there right.
Speaker 2 (05:07):
Now, do they stay the largest? I mean, they certainly
were early into this. I think you could say that
they helped invent this. I mean Andy Jasse certainly, that's
why he's CEO. After heading up the eight Amazon Web
services and then being picked by Bezos to take this job.
Would you say that they're comfortably in first or is
(05:27):
Azure at Microsoft on Iraq? And also is Google Cloud
doing a good job of catching up?
Speaker 4 (05:35):
They're both doing a very good job of catching up.
And as I said, you know, Microsoft has an inherent
advantage there.
Speaker 6 (05:40):
So maybe down the road, you know, several.
Speaker 4 (05:42):
Years from now, let's say three to four years, they
would be neck to neck. But you know, one of
the things is this is a market where we think
the entire market is growing much bigger. You know, we
don't see five years from now ew as being a
smaller business than where it is right now.
Speaker 6 (05:55):
The rate of growth depends.
Speaker 4 (05:57):
On the propensity of enterprises to spend on technology, but
we think all three of them will benefit with cloud
becoming much bigger over the next three to five years.
Speaker 3 (06:06):
We should point out some more of the statistics on
Amazon online stores net sales sixty one point five billion,
up eleven percent year over year, physical stores net sales
about five point six billion, up seven and a half
percent year over year. Third party seller services net sales
forty point three five billion, that's up eleven percent year
over year. Put them, you know, they also say in
(06:30):
some of the commentary or conviction that AI will change
every customer experience is starting to play out. So we
talked about it a little bit earlier. I mean, what
they are doing in terms of getting people to spend
more time on the platform, spend more time on the platform,
it's all happening.
Speaker 5 (06:45):
Yeah, it's happening. I mean all the numbers that you
just cited, they have performed expectations. So whatever they're doing,
and they're doing a lot, they're doing it right. We
think that Amazon is making the right moves to expand
their retail footprint online. Once again, you know, it comes
back to what a customers want. They want everything and
Amazon's a marketplace that really sells a lot of different
(07:05):
types of goods and they want the speed and speed
is key here because you can get things same day
or next day from Amazon without paying a fee being
a Prime member. So that's really key here. And the
numbers in the second quarter were actually quite impressive on
the retail side. They did do really well. Prime Day
sounds like it was a great success. We'll hear more
(07:26):
on the call, but the numbers outperformed on the retail side.
Speaker 3 (07:29):
Is there a read a follow through, if you will.
When it comes to what this tells you about kind
of consumers and the US economy.
Speaker 5 (07:37):
Yeah, I think consumers are focused on value, and I
think Amazon does give you value. They are trying to
keep prices low, and this may be a function of
that where you know, as consumers shop around and they're
seeing price hikes due to tariffs, either they've already started
or they're coming up, they're finding deals on Amazon. So
they're going there and that's a nice place for Amazon
(07:58):
to be as we move forward into the second half.
Speaker 3 (08:00):
I want to ask both of you, and let me
start with you put them. I mean, what are you
thinking about that you want to listen for on the
call that the company does with analyst and investors top
of mine or what you would be asking?
Speaker 5 (08:13):
Yeah, for me on the retail side, it's really the
terror of question and the diminimus question. You know, we
know we're losing the dominamous exemption, so how should we
think about that in terms of their third party, especially
where they do rely on some of those drop shipping,
especially Hall. And then the second thing I'm looking for
is just how they're going to be pricing the goods
as we move into the second half, because for now
(08:33):
we have been somewhat insulated with a ten percent pause
on most goods outside of China, but that we know
is changing in the back half.
Speaker 2 (08:42):
A honorock, come on back in here, because one thing
that we're I'm looking at the write ups right now,
and it does seem like, you know, what we said
at the beginning that this operating profit estimate for the
current quarter really underwhelmed. Why is it that Amazon doesn't
get rewarded for being less profitable the same way that
(09:04):
other companies are rewarded for this or maybe the better
way to ask it would be, you know, the measure
of capex and why you know, investors are so okay
with meta platforms spending so much money, but Amazon's operating
profit not coming in as high as they thought it would.
Is it because metas just printing money and has a
higher margin business.
Speaker 4 (09:26):
I mean, you have to remember, you know, Amazon has
a lot of retail footprint also, so you can't really
equate them to a tech company as is.
Speaker 6 (09:32):
I mean, it's only the aw as part of it.
Speaker 4 (09:34):
But frankly speaking, if you go back to the history
of Amazon for probably ten fifteen years, you know, they
did were extremely unprofitable, and people you know, still rewarded
for them. You know, in our view, profitability story has
been amazing over the last three to four years. Look
at where AWSS gone from low twenties to the thirties.
Now today, it was a bit lower than what consensus
were anticipating, but you know, it ebbs and flows because
(09:57):
of the capex that they are investing in throughout their ecosystem.
Speaker 6 (10:01):
Imagine a business.
Speaker 4 (10:02):
I mean last quarter their AWS profit or our operating
margins were thirty nine point five percent. I mean, that's
a forty percent margin business. That's that's pretty impressive across
any you know, tech platform. So again it is lumpy,
but that's because of investments, that's because of how they hire.
You know, we think longer term, that is still a
forty percent margin business.
Speaker 3 (10:22):
So I want to put the same question I asked
a punam Anag what you are thinking that you want
to know a little bit more about when the company
gets on the calls with analysts and investors.
Speaker 4 (10:32):
Yeah, the two things that we want to know is
what's happening to your capex. Now, my gut feel is
they will want to take the capex up because all
the other cloud providers have done it, so they can't
really be left behind. But then the second question is, well,
can you give me an idea for all the capecks
that's going in? What kind of AI workloads are you seeing?
And if you are seeing some AI workloads, you know,
why not disclose that number and you know, talk about
(10:53):
it openly as Microsoft has done in the past, you know,
one and a half to two years.
Speaker 2 (10:58):
Hey, Punam Guile, I want to bring you back in
here because you cover e commerce and ath leisure. Carol
asked you a really good question about if we can
get any insight into the consumer and the health of
the consumer by reading into these numbers, would you say
that Amazon is well positioned if you indeed believe that
we could be entering a downturn. We did see this
question asked yesterday at the Federal Reserve by one of
(11:20):
our own reporters, and referencing that vantage score report that
high income consumers are actually missing on their bills right
now when it comes to autos and credit cards? Is
Amazon well positioned to be a player if we do
see a downturn.
Speaker 5 (11:36):
I think if we see a downturn Amazon's not going
to escape the ramifications of that. But that said, compared
to everyone else in retail, I do think Amazon will
fare better than the rest, and I do think that
they will continue to attract the value customer who's just
looking for deals and looking for value. Because at the
end of the day, when you think about how retailers buy,
(11:58):
those with scale have buying power, and Amazon has over
seven hundred billion dollars in GMB based on our estimates,
I can't think of a retailer bigger than that in
the US that has buying power.
Speaker 3 (12:09):
All right, put them, We're going to let you go.
Put them go. Our senior analyst for e commerce and
at leisure, we're going to be watching out for her
research and commentary. Also following the company call, she is
of course with our Bloomberg Intelligence an rug before you go,
at least for this moment, Apple should be crossing in
less than ten minutes time. What will you be looking
out for here?
Speaker 4 (12:29):
We really want to know what commentary they have around
AI initiatives and what is the policy at this point
in terms of adding you know, other third party models
onto the ecosystem. When we look at the results, we
think we're going to get a push or a pull
forward of demand from you know, the loss for the
last quarter, but next quarter guidance is extremely important, which
we don't think is going to be that great.
Speaker 3 (12:51):
I feel like we keep saying we want to know
more about AI. What do you do? And what do
you do? And Ana rug Rana, thank you so much,
senior tech analyst at Bloomberg Intelligence. They're in our Chicago.
Speaker 1 (13:01):
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.
Speaker 2 (13:15):
I want to bring in Ivan fine Seth, research director
and chief investment officer at Tiger's Financial Partners. The firm
is more than five hundred million dollars in assets under management.
They've got both Apple and Amazon stock for clients. He
joins us from New York City. What do you make
of this? It was a pretty massive beat on the
top line, really a massive beat across every category. Slight
(13:36):
beat when it came to China, iPad revenue slightly below expectations.
What are your first impressions?
Speaker 7 (13:42):
Well, I think there was a lot of caution going
into the quarter, and they were strong on revenue, definitely
strong on iPhones and strong on iPhone sales in China.
Those are the key concerns. I think that even Tim
Cook just commented that pull forward sales based on tear
on tariffs were only a small part from what they
(14:02):
were seeing.
Speaker 2 (14:03):
So then why do you think the iPhone beat was
so big?
Speaker 7 (14:07):
It just could be where we are in the upgrade cycle.
Speaker 2 (14:11):
But we're in a time where people hold onto their
phones for longer and wait to buy it because that
new one comes out traditionally in September late September.
Speaker 7 (14:19):
There's still a lot of you know, twelves out there,
so people may you know, can't maybe hold off or
the promotion. We're still seeing a lot of promotions from
the carrier providers like AT and T, T Mobile and Verizon,
so the promotions drive sales. Maybe it is, like Sarah said,
(14:40):
concerns over higher tariff driven prices and people are upgrading now.
So either way, there was a lot of concern that
it could have been a weaker than expected quarter, and
it was a much stronger than expected quarter, especially in
three key areas overall revenue, iPhone sales and China iPhone sales.
Speaker 3 (15:01):
All Right, so you've got Tim Cook saying today Apple
is project Reporter Jude quarter revenue record with double digit
growth and iPhone Mac and services and growth around the
world and every geographic segment. So highlighting that, you know,
the big question that we had ivan they're going into it.
And one of the things that was top of mind
is AI. Right in a week, in a couple of
(15:22):
weeks where we've been looking at the hyperscalers, the big spend,
the return on investment as a result of that, what
about on AI? How big a deal is that for you?
When you look at Apple, it is a big deal.
Speaker 7 (15:38):
And they still really have not like wowed on ai yet,
and you know, they're talking about partnering working with other
AI providers. I mean, Siri still needs a lot of improvement.
A lot of the functionality that is out there is
pretty good as far as pictures and text and email
(16:00):
messages to integrate AI, to help facilitate the you know,
editing of pictures and sending texts and emails. But I
think they still have a long, you know, a long
way to go. Because Apple has always had a tremendous
wow factor, and you know, AI has really not been
at the level that everybody is expecting from Apple, So yeah,
(16:22):
that is an opportunity. But services revenue did increase nicely,
which is another key point. So those I think are
really that's the fourth of the total four key points
that everybody was focusing on are.
Speaker 3 (16:34):
Ian King sharing with the team on the live blog service.
Revenue up thirteen percent, Wearables provided sales that actually showed
a contraction of about eight point six percent. Max sales
an increase of fifteen percent. I've had revenue a decline
of eight percent, and iPhone had revenue an increase of
thirteen percent. AI. Why is it so tricky for Apple?
(16:56):
They're continuing to lose some top talent. Why is it
so tricky for them ivan that they can't seem to
get it together.
Speaker 7 (17:03):
Maybe the conundrum because Apple is viewed as an incredibly
innovative company, and while they're never the first mover. They
didn't invent the smartphone, but they took it to the
next level. They didn't invent the iPod, took it to
the next level. So each thing that they address, they
take it. They're not the first mover but they do
(17:25):
take it to the next level. So everybody has high
expectations as far as Apple and intelligence or AI, so
I think that is part of it, and they really
haven't come out and wowed everybody. The other area that
I think is important, well, I think the Vision Pro
as a concept was really great, but I didn't think
they were going to sell that many of those headsets
(17:46):
at thirty four hundred dollars, and I expected at some
point they would come out with a more streamlined version,
a much more cost competitive version. And I also am
a big believer at the in the smart glass concept
that Meta is doing very well with, and I think
we will see some type of smart glass concept from
(18:07):
Apple that integrates across all of its devices as far
as the phone and the watch, where you could you
keep the phone in your pocket and do a lot
of things as far as communication, make and receive calls
and you know, video and pictures in real time and
communicate just like you would on FaceTime through the pair
of Apple smart glasses.
Speaker 2 (18:28):
Oh yeah, I already talk to myself with my phone
all the time. I can just talk to myself more
in glasses. That's that's totally fine. Certainly You're right, I've
in the form factor for the vision Pro much different
than metas ray Ban Sunglasses. Hey aarn Mark German repeatedly
saying essentially this, and I'll read it right from the
live blog. This is nothing new to our audience because
(18:49):
Mark says it all the time. He writes, as I've
been saying, despite concerns about the performance of Tim Cook
from some analysts, there is no universe in which the
board will replace him with this type of quarter. It's
essentially impossible. Do you agree with Mark's assessment there Ivan
that Tim Cook is there to stay despite the challenges
(19:10):
of the company's experience. When it comes to AI, he.
Speaker 7 (19:13):
Has done a phenomenal job. He's created tremendous shareholder value
in returns since his tenure as the CEO. Companies hit bumps,
Apple has innovated tremendously under his time as CEO. So
he's done a great job. And I don't think any
(19:35):
of the issues that have investors that are concerns right
now are really you know, being could be tied to
some kind of fault of his. So I think it's
highly unlikely that they will replace him, and I think
that Apple will come back strong in AI, and I
think we will see the next generation of some kind
(19:57):
of you ar VR headset moving more toward the glasses
type of form factor of which you look. They have
a billion and a half iPhone users. They have a
over two billion ecosystem of Apple product users that are
eager to adopt Apple products and buy Apple products. The
(20:19):
integration across their products is tremendous and they just enhanced
that further with the recent announcement of the Glass Operating
System that standardizes the interaction of all the devices.
Speaker 3 (20:35):
Hey, just one last question. As we see Apple shares
up about two percent here in the aftermarket, anything that
makes you want to buy Apple shares here?
Speaker 7 (20:45):
I always we have a buy on it. We've got
two twenty price target. We're probably going to reevaluate and
raise it, and I think on any weakness it has
been a buy and I think that they will surprise
the positive for AI and the services revenue also is
a tremendous driver of growth and profitability, and that will
(21:09):
continue as well.
Speaker 3 (21:10):
All right, good stuff, Ivan, Thank you so much. I've
and find Seth He is Research director, chief Investment Officer
of at Tiger's Financial Partners. They've got over five hundred
million in assets under management. Joining us here in New
York City again watching Apple shares hire in the postmarket
after they reported earnings and some strong numbers outperformance there,
(21:31):
stock up two percent.
Speaker 1 (21:33):
This is the Bloomberg Business Weekdaily Podcast. Listen live each
weekday starting at two pm Eastern on Applecarflay, and Android
Auto with the Bloomberg Business App. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa, Play Bloomberg eleven thirty.
Speaker 3 (21:51):
The Fed, the trade, the markets, tariffs, everything that we
are keeping a watch on on this Thursday, even though
it feels like a Friday, it is still Thursday. In particular,
we want to dig a little bit into what we've
seen in the dollar and the FX trade.
Speaker 6 (22:03):
JT.
Speaker 3 (22:04):
Bardoisee is with us. She's director in FX Strategy for
TV Securities. Back here in our studio. Good to have
you here. A lot coming at investors. We've seen some
strength as of late in the US dollar. Let's go
back to the macro. What's of note, especially in a
week where we've heard from the Fed got a decision,
We have the White House still doing trade deals and
tariff deals, there's some extensions. We're trying to figure it out.
(22:27):
What's the important macro trade right now for the US dollar.
Speaker 8 (22:30):
Thank you so much for having me. Always a pleasure
to join both the field in the studio. I think
what we have learned from this week is that you know,
there is still a lot of uncertainty even with the
trade deals being announced, particularly on the data side. With
the trade deals being announced, you're obviously getting less confusion
on the trade front. With you being the largest trading partner,
you have some certainty on what that tariff trade now
(22:52):
looks like. But unfortunately the Fed that come out yesterday
and told you that there's still a lot of uncertain
uncertainty of on the data front had warrants a lot
of caution, a lot more caution than what markets were
priced for going into the meeting. Markets were more than
fifty percent price for a September cut. They felt comfortable
with the fact that the fact should becoming an easy
interest rates, but Power gave no such indication because there's
(23:15):
still a big risk out there, particularly on the inflation side,
which is severely underpriced by markets right now. Which is
what we've learned that while you are getting a little
bit more clarity on the trade front. Now we're utterly
data dependent because on the macro growth and inflation side,
there's still a lot of uncertainty which is not resolved
with just us knowing those treets.
Speaker 2 (23:33):
Why do you think inflation is being mispriced by the
market right now?
Speaker 8 (23:37):
So this is actually a very interesting question. So we
actually have some in house models, which is where we
actually track trading currencies on the basis of different macro factors.
So our macro factor, our growth factor, our equity factor,
all of those factors are making a lot of money,
but our inflation factor has actually been losing money, which
is an indicator to me that FX markets have actually
(23:58):
not been paying attention to data. They think that with
the tariffs and the uncertainty around the trade deals, focus
has primarily shifted to the growth outlook. But one thing
we are now realizing it that the baseline tariff rate
is no longer ten percent. It's at least fifteen percent,
which is also interesting because we don't know what that
pass through inflation will look like. The last CPI report.
Speaker 3 (24:21):
That side Mitchelle on our FED specially said yesterday like
the range was more like either I can't remember eighteen
to twenty, but it's much higher than the ten percent
that we've all been talking about.
Speaker 8 (24:30):
Yes, and the last CPR report had the market reaction
was very telling. We had a downside surprise, but markets
took it hawkishly because you saw the first signs of
inflation tariff pass through into the goods categories, particularly into toys,
which markets took to be very hawkish, even though the
core CPI was a downside miss.
Speaker 3 (24:47):
And forgive me, I meant Bob Michael. So what's interesting
is all right, so wait, so what does this mean
for the dollar?
Speaker 7 (24:53):
Then?
Speaker 3 (24:53):
Going forward?
Speaker 8 (24:54):
In your view, I would say that you know, we
are bullished at all or in the short term tact
you still have August first, the deadline tomorrow, which is sticking.
But there's two scenarios which can play out with most
of the countries. Either you don't get a trade deal,
which brings in a lot more uncertainty and volatility into
your local assets. Or the second part is you do
(25:15):
get a trade deal, but on terms which appear more
favorable to the US than your country, which is now
actually leading into US local equity market out performance over
other countries. Equities. Both of these are actually dollar positive,
so thankfully, in the short term this makes my job
a little bit easier because irrespective of a deal or
no deal, it should feed into a little bit of
(25:35):
a dollar bounce in the short.
Speaker 3 (25:37):
Term stronger dollar. They are possibly problematic for US multinationals
in terms of selling their good So is that something
to think about when we look at profits and profitability
going forward?
Speaker 8 (25:48):
Not yet, because we do think that this taller bounce
will be a bounce. It will not, you know, bring
up that you know, dry is back of the US exceptionalism.
We won't get euro back to one O five or
below that one thing. It's that kind of a move. Okay,
it's more for short term adjustment, which market needed given
what was priced.
Speaker 3 (26:05):
We promise more time later. We love having you on
with us.
Speaker 6 (26:09):
J T.
Speaker 3 (26:10):
Bardoase, she's director in FX Strategy for TD Securities.
Speaker 1 (26:13):
Joining us, you're listening to the Bloomberg Business Week Daily Podcast.
Catch us live weekday afternoons from two to five eas
during Listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (26:28):
Tariffs and Trade Front and Center. The August first deadline
is fast approaching tomorrow. It's not so called Liberation Day
April second. No, it's not July ninth, which was the
other one.
Speaker 4 (26:39):
Other one.
Speaker 2 (26:40):
Yeah, now we're at August first, is the deadline. But
there's an extension with Mexico correct, and we're.
Speaker 3 (26:46):
Still waiting to find out kind of where we are
with US China. Maybe we'll get an update a little
bit later on today.
Speaker 2 (26:50):
But separately with all this, there's the big question the
president's trade war. It's facing a crucial test as federal
appeals court here is a challenge to his use of emergence,
the powers to impose sweeping tariffs on imports. The question
seems basic, but it's pretty complex. Are these tariffs even legal?
Eric Larson is with us. He's Bloomberg News, a legal reporter. Eric,
(27:12):
Are they legal?
Speaker 5 (27:14):
Well?
Speaker 9 (27:14):
I think ultimately the Supreme Court is going to answer
that question. But they did address it today in the
Court of Appeals for the Federal Circuit, which is an
appeals court in Washington. Because it's such an important case.
They had all eleven judges in in that court hear
these arguments today. They were something that that both sides
have been preparing for for months now. One side, all
(27:37):
the Democratic led States filed a lawsuit and a group
of small businesses and they of course one at the
US Trade Court which found these tariffs were illegal, the
ones that were issued under the emergency law. So this
hearing was to determine whether or not the Trade court
decision will be affirmed or overturned.
Speaker 3 (27:55):
What are the arguments on both sides?
Speaker 9 (27:58):
Well, the States in the small business is that sued
say that this emergency law that Trump cided from nineteen
seventy seven doesn't say anything about tariffs and it was
never intended to be used for the president to issue tariffs,
certainly not sweeping global tariffs against all of our trading partners.
They on top of that, they argue that the national
(28:19):
emergencies that Trump declared in order to invoke this law
are bogus, that the trade deficits, as Trump said that
the persistent US trade deficits are a national emergency, a
threat to our national security, and that justifies issuing these tariffs.
Same with fentanol. He said that that crisis in the
US warrants big tariffs against Mexico and Canada and China.
(28:43):
So these emergencies, the States, small businesses, they say they're bogus.
Speaker 2 (28:48):
Section two thirty two is this is what was invoked
in the first Trump administration with China. Correct.
Speaker 9 (28:55):
Well, that's the thing is there are a bunch of
different trade laws that can be us used legally and
arguably to issue big tariffs in a lot of different situations.
That this law in particular has never been used to
issue tariffs before. So there's all these other ways section
two thirty two. And one of the judges today was
(29:16):
asking the Justice Department lawyer about that, saying, we have
all these other trade laws that a president can use
to issue tariffs. What's the point of all those if
a president can just use this one to do whatever
he wants.
Speaker 2 (29:28):
Could that be a backup plan for the president if
the court strikes down at least this methodology of sweeping tariffs,
could the president go back and use another part of
the law.
Speaker 9 (29:42):
I think that a lot of critics of these tariffs
have even said that that is something that is possible,
that there's other ways that Trump could could put these
tariffs in place. Their issue and their issue all along
in these lawsuits has been that Congress has the power
over taxing and tariffs, and that this is a massive
(30:04):
tax on all Americans who are paying the bulk of
these of these tariffs, so that that's something only Congress
can do, and that this law was just never intended
to be a blank check for any president to issue
whatever tariffs who wants, at whatever rate against any country
for any period of time.
Speaker 3 (30:21):
Is this once again about presidential authority?
Speaker 9 (30:23):
Is that the correct so many of the other cases
that have been going on against the Trump administration.
Speaker 3 (30:30):
So this is what I'm wondering. Like here we are, Eric,
as you know at Bloomberg, often the top stories and
most read stories, certainly over the last couple of weeks
and for a long time, have been about trade deals
in tariffs, and we've seen market certainly react on that.
If tell us about if this goes to the Supreme Court,
(30:50):
or if this decision go is a decision that requires
it to go to the Supreme Court, is it possible
that all of these headlines could be made insignificant and
not important and not real.
Speaker 9 (31:04):
Well, that's a huge question.
Speaker 6 (31:06):
Right.
Speaker 9 (31:07):
We already have these terrorifts being baked into the global
economy while they're being debated, because this same appeals court
allowed them to stay in effect. While this appeal proceeds.
Speaker 3 (31:17):
But there's a big question mark.
Speaker 9 (31:18):
There's a big question mark all of them. But as
we're seeing as we're seeing a lot of countries are
going ahead with negotiating and some of them reaching deals.
We haven't seen all the details on them yet, of course,
but they're they're certainly trying to reach these deals, and
there is a chance that potentially the Supreme Court ultimately
could decide that they're illegal. Perhaps they don't want future
(31:39):
presidents to have the same kind of blank check, so
they these countries might have to go back to the
drawing board.
Speaker 3 (31:46):
Well, have any other presidents ever done this? In terms
of no, okay, no, I.
Speaker 2 (31:52):
Think, I mean, I think the hard part about this
is that, you know, we heard this from feted Cher
jpwell yesterday. The uncertainty, yeah, is going along with this.
So it's like if you're if you're a company that
is trying to figure out, Okay, we need to get
these things from here, and we need to communicate to
investors how much it's going to cost us now in
this new environment. That's a challenge. Yet we haven't necessarily
(32:14):
seen that reflected in the company earnings, at least to
the extent of at least in this quarter, Carol, Right,
you remember last quarter where we heard all the uncertainty
from the airlines. We heard concerns about ripping up guidance
moving forward. If you're an investor and you're looking for
some sort of resolution here, is there a realistic timeline
for this or is this just going this drum beat
(32:36):
just going to continue as it makes its way to
the Supreme Court.
Speaker 9 (32:40):
I think that the Supreme Court, when it gets there,
is going to probably move expeditiously on this. They can
move quickly in cases that are extremely important. They could
also just they could also just let whatever the lower
court ruling is sort of stand. Right say, if Trump
loses at the Federal Circuit and they don't take it
up right away, you know, could be a hint of
(33:02):
things to come. But until there is a final decision,
no company is going to have any certainty. But as
you mentioned, these other options for Trump issuing tariffs. If
even if he were to lose on this, I think
we know that Trump, based on how he usually does things,
is he would press ahead with some other way to
get these deals done.
Speaker 3 (33:23):
And it sounds like he's got the options out there
right in terms of other mechanisms he could pull.
Speaker 8 (33:28):
Sure there.
Speaker 9 (33:28):
Yeah, I mean these tariffs that we've seen here, they
said in open court that they were basically a pressure tactic,
giving Trump a way to pressure countries to come to
the table.
Speaker 3 (33:40):
We actually talked with Bill George, executive fellow at Harvard
Business School, former chairman and city of Metronic, and remember
he thought CEOs, they're approaching this all wrong. He's basically saying,
by delaying, you know, making either an m and a
deal or strategy, if you're waiting for TERRFF clarity, he says,
at the same time, you've got competitors they're seizing, you know,
(34:02):
the opportunities, while everybody else, maybe American CEOs are kind
of waiting for clarity on the tariff deals. So it's
kind of interesting. What is the timetable here.
Speaker 9 (34:12):
To We don't we don't have one. I mean, we're
of course preparing for a decision to come anytime, but
they could take days, they could take weeks, okay to
come up with the decision and then of course Supreme Court.
Speaker 2 (34:23):
So so don't I hope you have no vacations planned.
Speaker 3 (34:29):
It's just amazing because.
Speaker 2 (34:31):
You're going to be here.
Speaker 3 (34:32):
But this is it, right, This is kind of our
world like, this is an uncertain aspect and we'll have
to see how it plays out. Thank you so much.
Get home safely. We know we're waiting for some big
rain here in New York. Eric Laarson is Bloomberg News
Legal reporter. Check out his work on The Bloomberg and
at Bloomberg dot com.
Speaker 1 (34:47):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(35:08):
and always on the Bloomberg terminal
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Carol Massar
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