Amazon Shares Soar on Cloud Growth

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech coming up. Tech earnings bonanza. Apple, Amazon, also Reddit and Twilio will break them all down with experts and their C-suite. Plus, NVIDIA CEO Jensen Wang still hopes to sell its Blackwell chips to customers in China. We'll discuss that and a flurry of Korean deals. And we sit down with CoreWeave CEO Michael Intreja to talk AI infrastructure after a failed takeover bid for Core Scientific. But first, we check in on these markets, which are not quite at a record high.

1:48But we're back up and to the right when it comes on the day. We're looking at the AI bubble back in focus, but AI boom, really, what's driving these stocks higher over the course of the week. We shrug off government shutdown. We're putting to one side geopolitical risks. We're up 2.6 % on the Nasdaq 100 for this week alone. Let's move into what's happened on an individual basis. And the key story of the day is Amazon. Look, we are at a new record high. We're up almost 11 % for this particular company. And this is as they show that AWS cloud growth is back on top. It's a bitter pill for many to swallow who have lost their roles at this particular company.

2:23Remember, we started the week talking about 14 ,000 jobs to go. So let's dig into all of that at the moment because I'm pleased to say Brad Erickson is here with us. RBC Capital Markets is, of course, a key Internet analyst there. And you've still got an outperform rating on the stock. You think the price could go higher from where we are currently 10.8 percent. You see it hitting 300. Brad, just talk us through what you liked in the numbers. Yeah, I think obviously the reacceleration to 20 % on AWS and Q3 was like the headline critical metric they had to do. They did it. And so that really got the stock going.

3:00And then I think as you think about going forward, they're getting this capacity deployed faster than we would have thought maybe a quarter ago. and they gave some nice detail around some of the power, the gigawatts that they've been able to deploy and some forward commentary there. And it just comes down to kind of simple math. They're not saying they're going to accelerate necessarily on AWS, but if you do the math, it implies that they probably will. And that means there's probably a lot of upside to street numbers. And so that was the point we were making in our note. I mean, 3.8 gigawatts is massive when you think about each gigawatt, potentially up to a million homes.

3:38That's how much they put on in the last 12 months. What are you making of the vertical integration here as well? The fact that they're saying that their Tranium chips are already a multi-billion dollar company. How much does that build to future revenues? Yeah, you know, Tranium, to go with your second part first, Tranium 2 is largely being used for Anthropic, which is kind of the major enterprise player in the generative AI space. They're going to continue to grow a lot. They're going to double the number of chips at the Rainier site by the end of the year. So it's, you know, that is going to continue to scale up and drive a ton of revenue growth.

4:17And it is material to next year. And this is$130 billion business. So it gives you a sense. In terms of just, you know, taking vertically integrating, it's massively important, right? The power grid is not set up for these data centers. And they have massive needs, massive cooling needs, massive water needs. And so it has and will always likely continue to make sense for these guys to make sure they can do that on their own or at least become less tied to third parties. So I think it's the right thing to do. Andy Jassy's time and time again been like supply is the issue here, not demand, Brad.

4:54What's interesting is that generative AI gets rippled through the entire business. We're looking at Rufus, of course, which is helping us decide what we're going to be buying on Amazon if we needed any more help on that. That's saying they can add another$10 billion. It's interesting to then dovetail that with what came at the beginning of the week. Look, corporate jobs are going at Amazon. And in many ways, Andy Jassy steered us to that four months ago. Is that inevitable when they're looking to bring generative AI as a way to catalyze the business? Yeah, I mean, kind of two parts of that, right?

5:27Rufus is really intended to sort of, you know, add a, we'll call it a tailwind to your shopping experience and your conversions. So literally get you to buy more stuff. So that's that part of it. The headcount thing is tricky because you're right. Like initially, you kind of follow the fact pattern. And then what we know of some other companies and the efficiencies they're getting. Clearly, generative AI is it is very likely that it is contributing to job losses right now. And some companies are overtly saying it. Last night, Andy Jassy, the CEO, said that largely it was kind of a function of overhiring, middle management, trying to sort of flatten the organization a little bit more.

6:12So not related to generative AI. But I think by all intent and purposes, you have to think that trend is going to continue. And, yeah, it's a little concerning from a deflationary standpoint, I would say. But that's what we know so far. Brad Erickson of RBC Capital Markets, really appreciate your analysis this morning. Thank you very much indeed. Happy Halloween. Meanwhile, let's talk about Apple, which is looking a little uglier than it did earlier in terms of stock price. But earnings came out yesterday and the iPhone maker said that sales rose nearly 8 % in its fiscal fourth quarter. It predicted a jump in holiday sales.

6:46Shares actually did do very well after market, but they've come back down this morning. Let's discuss the results and what the share reaction is currently doing. Carolina Melanesi, President and Principal Analyst over at Creative Strategies. You're really the person we turn to when you think about how they're innovating, where they're pushing forward. Were you surprised by the overall sales growth when many thought that iPhone 17 wasn't going to be the catalyst that we'd hoped for? I wasn't. And the reason is because, as I talked to you in the past, hardware refresh, when the actual hardware looks different, always drive upgrades.

7:25People still want to rely on the device that is in their pocket 24-7, but make it look different. And this year we got that with the Air, which is not the main seller for Apple, but it doesn't matter. is getting people back in the stores to see the rest of the portfolio. It was really interesting yesterday that Cook mentioned that supply issues on the 16 model, not just on the 17. And that is a good reminder that a new model every September brings people back in stores and upgrade to previous models as well. It's not just the latest. is the portfolio with maybe some price adjustment and some carrier promotions that drive that upgrade.

8:15Fewer upgrades going on in China, though. What did you make of the pullback, the surprising pullback in that particular region? I think part of it is the economic situation in China. We have seen kind of hot and cold from a consumer perspective. The timing was later in the quarter. So it takes a little bit longer from a supply chain perspective. We also need to remember the supply chain has moved away from China. So there is some adjustment to make as well because of the U.S. and production shifting to India. India. But the most important thing is what Tim Cook said, which is signals towards the end of the quarter was positive.

9:01People were going back into the stores. But the big quarter for China is always Q1. That is Chinese New Year. By then, there's hope that the supply constraint that Apple has had, especially in the higher models, which is usually where China gravitates towards, will be resolved. And that's where the big quarter should come in. And if it doesn't, that's when I'm going to start worrying. But for now, I'm not worried. And I digest the eSIM situation as well. I spy a Cowboy Carter memorabilia behind you. I love that tour too. Let's just talk about the services side. The music side is part of that. But services really is what drove the strength at the moment.

9:40Can that be reliable going forward when we think about the regulatory pressure on the App Store, for example? I think it can because more and more Israeli content and is also advertising. We've seen Apple close the deal with F1. So they'll start streaming F1, which is becoming more and more popular in the U.S. and across the globe. With a demographic that Apple is really, really keen in keeping and growing, which is Gen Zers and younger millennials. So I think that that is real, the opportunity for Apple is on the content side, is the engagement side. And that also over time will come into play with Apple Vision Pro.

10:24I mean, very briefly, what about the AI side? Well, we have been promised an improved Siri coming in 2026. And as we discussed before, Apple has some time to figure this out. I think that most of us have figured out what AI can do for us in a productivity setting, but not yet on a personal way. And I think that's where Siri is going to play the most. Carolina Milanesi, always great catching up with you. President, Principal Analyst at Creative Strategies. Happy weekend. Meanwhile, coming up, the parade of earnings that continues. We're going to be talking to Twilio's CEO about their results next.

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12:07Shares of Twilio, as you can see, spiking today up 17%, let's call it, after the company reported strong third quarter results. Gave a bright outlook as well. Let's discuss it all. Kazama Ship Chandler is with us. Twilio CEO, analysts, investors very excited about the voice AI applications in particular for their customer engagement. Is that what drives us? Well, we had a great quarter. And I would say across the board, Voice AI was certainly a contributor, but every single one of our products contributed this time. I'd say messaging and voice in particular were particularly strong. In addition to that, across channels, across geos, across customer segments, it was just a really good quarter for us.

12:46And fortunately, we were able to beat on revenue, profit, cash flow, as well as race for the year. So we're pretty excited about the results. You go into the detail of how the 10 largest voice AI startup customers are increasing by 10x. Where particularly are they finding the rewards? Because many have questioned really the sort of pilots, whether they're working or not. Where have yours been working? I think you've got two ends of the spectrum. So on the one hand, you've got voice AI startups. And these are companies that want to get going super quickly, right? So we're an extremely well-known brand.

13:20They come to us first in most cases. And so we're really lucky to be able to count on their business just to get their workloads out in the world. On the other hand, though, you've also got enterprises. Enterprises, they definitely see an opportunity to take out costs, but as well as enhance their revenue experience. And so I think more durably, you're seeing enterprise customers begin to adopt these tools. It's probably happening at a slower rate than it is with the voice AI startups. But all the same, it's really exciting. I just think about some of your key customers, Lyft, Reddit, Dell, Resi, Uber, Shopify, some of the biggest brands out there.

13:54Key bank analysts in particular signaling that this is just a wave that they think is just beginning to build. How much larger do you think this has become? How much am I just going to be talking in a customer relations perspective via voice? I think it's going to become pretty commonplace. I mean, you're already starting to see it. I'm sure you've experienced it a handful of times in your interactions. I think what's key about being able to deliver a good experience is being able to have contextual data underneath it all. If you have contextual data, which is a big part of our story in communications plus contextual data plus AI, but that data is what really allows the customer's problem to get solved, right?

14:33You don't want just cool tech. You want problems to get solved. You want to be able to create richer and richer experiences that actually create customer engagement. And I think that's where the real unlock is. The real unlock being about AI agents for many. And I know you've actually been making some acquisitions in that space. You think about Stitch, the identity platform within AI agents. Is M &A going to be a real use case here for you to bolt on to get the talent that you need, to get the tech that you need? I think we have optionality. I mean, we're generating so much cash that we've been buying back a lot of our own stock.

15:05We also just dipped our toe, as you pointed out, into M &A. Stitch was a great acquisition from our perspective. A small tech and talent tuck-in, less than$100 million in purchase price. And I think it's exactly the right kind of asset that allows us to accelerate our roadmap. With that one in particular, they're very developer focused, which is very much in our DNA. And they also allow us to faster realize our platform ambitions in terms of delivering purely agent experiences that require identity to be a part of it for us to be able to trust who we're interacting with. Twilio shares just showing how much people are loving this revenue and the numbers.

15:49Gross margin is still an area that some called out as being pressured. quickly? Is that something you're focused on? I mean, of course, we're focused on it, right? The commitment that we made last quarter to investors was that we would stabilize gross margins. And I think in Q3, that's exactly what we did. We'll continue to work to stabilize gross margins. I think it kind of overshadows the story in some respects. I mean, the reality is, is that we maintain an incredible amount of price discipline. A lot of that gross margin pressure, frankly, comes from two areas. One is the success that we're having in our messaging business, which is growing super fast.

16:24I don't really think we should have to apologize for that. And frankly, I think that allows us to grow into other customer opportunities over time. And then the other area is just fees that get passed down by carriers. I think that is purely an optical element of the story. It doesn't impact our ability to generate gross profit and importantly, has not impeded our ability to drive operating leverage and free cash flow. That's not impeding the stock today either, because Amo Ship Chandler, great to have some time with you, Twilio CEO. Now, also delivering a better than expected forecast was Reddit.

16:55Social media platform has benefited from data licensing deals, of course, with OpenAI and Google, but it's really about growing advertising business that drives it this time. We spoke with the Reddit COO, Jen Wong. I think a lot of the things that we're doing are working. You saw our active advertiser account grow 75 % year over year in Q3. And I think that's the result of our go-to-market and acquisition investments, as well as making our platform more automated and simple to use, as well as really delivering more performance, particularly at the mid and lower funnel, where a lot of mid-market and SMB businesses like to transact.

17:36We also grew nine out of 15 verticals over 50 percent year over year. And I think that shows the diversification of our business, how robust it is across every vertical and every objective. So every advertiser can find success on our platform. So those investments that we've made are really paying off. And the investments in translation really paying off when you think about diversification internationally. How is that still working? How much low-hanging fruit is there to grow outside the United States? Well, I think there's enormous headroom outside of the U.S. Our traffic today is about 55 % outside of the U.S.

18:15and 45 % in the U.S. And the rest of the world has been growing. And every country that is a non-English country is just an opportunity to build another Reddit. and the process of doing that starts with machine translation, using AI to translate universal conversations so that somebody in France or Germany who operates in a non-English language can have access to great content and communities on Reddit and then the process of building local communities so that if you're in France, you have a local bread community, in Germany, your local football communities so that it feels local, your city communities.

18:56All of that is opportunity for us and opportunities to build another Reddit for every language and culture. It's really interesting that AI is really the tailwind here, whether it's ability to serve your companies, those that are advertising with you, that much more sophisticated applications, the way in which they're able to advertise with you, whether or not it's the AI that's helping you do translation. But also we know that a big part of the business has started to become how you're used by AI, LLM producers. How is that a stage of priority? Can you just weigh it up for us? The prioritization of advertising versus the prioritization of making these deals with big LLMs that you already have done with Google and OpenAI?

19:35Yeah, our core business is advertising. It's a business model that has a lot of TAM and is a big addressable market. I think we have a lot of headroom there. Our ad platform is growing. Our marketplace is growing, as I said, 60 % plus year over year. And we really like our roadmap there. There are thousands more advertisers that can be on our platform in addition to more verticals and more geographies to come onto our ad platform. So we see a lot of opportunity there across the funnel, in automation, in ad formats, and even in delivering more performance for our advertisers. So that's our core business, and that's where we're focused.

20:17What about the AI chatbots and them actually helping you in terms of driving traffic? When does that really start to bring to bear? You know, that's a space that is just under incredible heavy construction because it's also new and it's changing. The UI is changing. The products are changing. You know, how we think about, you know, the use of AI even on our platform, on Reddit is changing. So, you know, it's hard to say, I think. But I think, you know, I would say the relationships that we have with the LLMs are not partnerships. The relationships are really healthy. And we continue to learn a lot through these partnerships.

20:57I think, you know, we certainly learned that our data is highly appreciated. It's highly used and cited. I think we're the topmost source domain in Q3. So I think, you know, we're watching that area very, very closely as it evolves. Jen Wong, Reddit COO there, talking of relationships with LLMs. NVIDIA CEO Jensen Wang says he's still hopeful that the company would be able to supply Blackwell-type chips, at least, to China, quote, someday. This is the company caps off a huge week, hitting a$5 trillion market cap. Blue magazine, King, who covers its semiconductor space, has been on this relentlessly.

21:34What a week, Ian. And look, this is pushing back at some of the anxiety that blew yesterday that China just wasn't on the table when it came to a discussion between Trump and Xi. Yeah, I mean, there's been so many twists and turns in this one just in the space of this week. Jensen's been obviously making his case in Washington. Now he's making his case in person in Asia where the president is. President Trump mentioned this Blackwell chip, said raise the possibility, raise everybody's hopes, and then kind of took it away a little bit. So we don't really know where we are now other than hoping that, you know, because it's being discussed, that there is more possibility of NVIDIA doing more business in China.

22:13Certainly more business in South Korea. I just want to bring what our own Sherry Ann was able to say and catch up with the CEO of Jensen Huang while in a news scrum in South Korea. Just take a listen, Ian. What's the potential of sovereign programs that you mentioned, especially across Asia? Well, here in Korea, Korea has a chance to be one of the world's major AI hubs. and today's announcement, along with President Li's passion and enthusiasm and drive and all of my CEO friends here who are dedicated to create this journey for Korea, this is a perfect example of sovereign AI. CEO friends being Samsung, Hyundai, SK Group, there was a lot going on, but some sovereign AI too for them in Korea.

23:02yeah no he uh he's trying to make career into yet another example of this push that he sees of let's deploy ai everywhere let's let's get it in government organizations let's get it in in corporate situations and you know career obviously has a vibrant tech economy companies like samsung so he's seeing this as a as another perhaps exemplary kind of position and country for this push that he's making around the world. 260 ,000 accelerator chips to go to Korea. Bloomberg's Ian King, we thank you. And look, there was more than just chips over in South Korea. Shares of fried chicken stocks have got the Nvidia effect.

23:46Restaurant Kocheon F &B briefly surged as much as 20 % on Friday, while Korean poultry processor Cherry Bro also soared by the daily limit of 30 % trading volume about 200 times on average. And also makers of chicken frying robots jumped. Why? Because Jensen Wang ate fried chicken in South Korea alongside the Samsung CEO and others. Wow. He manages to drive up share prices across the board.

24:19welcome back to Bloomberg Tech boy we got a busy markets day for you so many earnings let's digest because we're currently seeing the Nasdaq once again trading higher up a percentage point not yet at a record high not shaking off yesterday's sell-off but we're still trading to the upside as Amazon leads the pack points perspective we're up 11 new record high for Amazon AWS growth more than 20%. Meanwhile, Apple actually fades into the red. We were trading higher before the bell. We then took off maybe a bit of profit-taking going on as they deliver what was better than expected revenue for their fiscal fourth quarter and point towards, what, at least 10%, 12 % sales growth for their all-important holiday quarter.