Apple, Amazon Report Results… And Countdown To The Jobs Report 10/31/24

0:01And live from the NASDAQ market site in the heart of New York City's Times Square. This is Fast Money. Today's market action, a fairly scary one for your money. We're going to tell you why in moments, but here's what is ahead on this Halloween hour. Tricks or treats, you got$5.5 trillion. Were the companies rolling out their earnings right now? Apple, Amazon, the beaten up Intel, and more. All out, all the numbers ahead. Overall, your markets, your money down today. We got this, you know, election next week. You might have heard about that. The jobs number tomorrow. Will it all just add to volatility?

0:34Plus, a glow down for Estee Lauder, Uber's not-so-five-star earnings report, and a story that hits home. Could Comcast sell off or spin off its cable businesses, including, guys, this very channel? It is a very big night. I am Brian Sullivan coming to you live from Studio B at the NASDAQ. And on your desk tonight, Tim Seymour, Karen Feinemann, Dan Nathan, and Guy Adami. All right. We did not have to look hard for a lead to tonight's show. It is the if we couldn't figure this one out, folks, we should quit. It is the massive amount of earnings rolling out right now. Apple, Amazon, Intel and more all in focus.

1:18And as always, we've got full team coverage lined up for you. I see Seema Modi looking very nervous in that lower left hand corner. Steve Kovach is dialed. You can smile there, Seema. Steve Kovach dialed in on Apple's call. Seema Modi has the details on Intel. But we will begin tonight with the box to the right, Kate Rooney, who's got all the headlines from Amazon. Hi, Kate. What were the big takeaways on a stock that is moving up 8 % right now? Yeah, Sully. So the beat in the corner for Amazon really proves that CEO Andy Jassy is able to turn a strong profit while still investing in growth. That is the big takeaway.

1:55Margin expansion, really a story here. And cloud growth helping the stock after hours. As you can see, up more than 3 % after hours. Shares were up more than 5%. AWS growth, and that growth rate was the number to watch sales there. They were in line, grew 19%, right in line with expectations. AWS revenue was$27.45 billion. We're going to hear more about AI as the call for Amazon kicks off as we speak. Q4 revenue guidance was also key, and that was in line. They are looking for operating income of between$16 billion and$20 billion. Margins, a big story for this quarter. North American retail margins expanded to 5.9 % after contracting in Q2.

2:35And then Q3 operating margins were 11 % for the quarter, beat expectations, which were around 9%. Advertising also beat. It's becoming a bigger part of the bull case for Amazon. Grew 19 % in the quarter to$14.3 billion in sales. That was stronger than expected. And then operating income grew 129 % year-over-year to$17.4 billion, and really highlighting some of the cost-cutting Amazon has gone through and this focus on efficiency by Andy Jassy. As I mentioned, Brian, the call is going off as we speak. I will flag any headlines, but I'm going to tune in. Back over to you. Yeah, certainly will. All right, guys.

3:09So, Guy Domi, Amazon. Yes, welcome, Brian. Yeah, come on. Come on, Tim. Nice to see you, sir. Happy Halloween, Guy. Thank you. Yeah, thank you. Go Dodgers. Happy. Because that's unnecessary. I'm going to start to show off. Oh, please. Chef's kiss, Guy Adami. Amazon, your take. Market likes it. The guide was not good if you look at it. But you know what the street's looking at? Kate just talked about it. Look at operating margins. We're up 11%. The street was at 9.3%. That's up from 7.8 % a year ago. That's all you need to look at, in my opinion. Obviously, the other things matter. The quarter was fine.

3:42But it's all about margins. So when they sort of turn the knob and make an operating margin number like that, it stands to reason that the market's going to respond in kind. And quite frankly, given the sell-off today, I thought it would be trading better than it is now. We just got back what we lost today. But this quarter, with that margin, should be able to take us through the July high, which is like, what, 198 or something? I think that's it. And I think it's a stock that's underperformed a bit. And at times, it's been easy to kick Amazon around. But you get back to 19 % growth on AWS, that ad business, too.

4:11I mean, double 19s, those are the numbers I think the market wanted to see on top of the margin. So it's all about relative performance to me. And it's all about, you know, this is coming on a day. I think it's appropriate that markets were as weak as they are. We're going to talk about that earlier today because I think it puts it in a framework where Amazon relative to itself is showing they can. Remember, the question was about we always know that they can grow. Can they ever squeeze profitability at it when they could ever do that? It was those are the periods that we rallied the stock. Then it was the opposite.

4:40We want to see the top line growth. They're getting them both here. I think Amazon is a stock you're staying on. And I like the consumer business, which I realize we don't put any value in. I thought it was a pretty good story. Yeah, I agree with everything both of them said, except, though, the one thing I disagree with Guy about a little bit is the guidance. I don't really care what the guidance is. They're not usually they're not in the business of giving you exact guidance. That hasn't. It seems they don't like it at all. I think I don't even know why they do it for years, forever. Right. I don't even think they I always think no company should give guidance because who the hell knows what's going to happen.

5:12But so I don't put a lot of stock in their guidance, but I think they picked a nice day to put out a very good enough. There was definitely things to like here. And the stock was down during the day. So it did just get that back, basically. But I like it. I'm long. I'm staying long. There's nothing in this release that would make me want to reconsider that. Yeah. Just as far as the guidance is concerned, they used to give guidance that you could drive a truck through. And they've definitely narrowed it a great deal. But they definitely moved the midpoint up a little bit, I think, on the revenue line.

5:39And Tim's point about the 19 and 19 as far as AWS growth and, you know, and obviously advertising, those are like they're high margin businesses. The advertising is growing very fast. I think it's like a$50 billion a year business. Now, you could say on their total that would make it about 10 percent ish or something like that. So to me, I think that's really interesting the way they're growing. Some of the advertising stuff that we've seen over the last week or so from some of their competitors has been pretty good. It's been a decent, bright spot. So to me, I just think it's a margin story as it relates to e-commerce, like these guys said.

6:10But, you know, growth in AWS bottomed out, I want to say a few quarters ago, like 13 percent. No one thought it was going to get that low. So when you get to 19 percent and you get a greater percentage of the total sales, I mean, that's really what I think driving this performance right here. Yeah, and this had basically a round of, you know, if you don't want to come in the office five days a week, then maybe you can go find another job. It's clearly trying to cut costs, maybe drive down those margins up. I mean, this was always Amazon since the dawn of time was a low margin story, a no margin story.

6:41Now I feel like, and I mean this respectfully, you talked about narrowing those guidance. It's like a grown up company now. What do you do? Big boy. Big boy company. It's a big boy company. No, 11 % margins are extraordinary for a company that historically is low single digits. And given the magnitude from year over year growth, I mean, you have to be impressed by that. And again, all right, so I won't make a huge deal out of the fourth quarter guide. I didn't think it was great. But you know what? I understand. This quarter in and of itself is good enough to get the stock, I think, to a new all-time.

7:08Yeah, really quickly about the big boy thing or the grown-up thing. I mean, actually, you could make the argument for 20 years. They've been kind of just reinvesting any profit that they've had to just grow their market share pretty dramatically, right, into other products and other verticals and other geographies, that sort of thing. They were able to kind of build up businesses like AWS doing that. So now, 20 years on, I think they're getting a lot of that benefit. Well, if it's the big boy thing, then maybe we'd see a different. They don't have the tons of cash as much as the other ones do that sort of became big boys like Meta, whoever, maybe a dividend or buyback or something.

7:39But also they do have their own sort of, you know, the Kuiper Project reality labs and just spend, spend, spend. Yeah. That maybe one day will be something. And that's Bezos. Like, you wonder what Andy Jassy may do. And I only bring up the big boy company. I mean that as a compliment because maybe at some point, Karen, you run out of new businesses that just keep pouring your money into. And at some point you become a, dare I say, I mean, a cash flow play, right? A harvester. A harvester. Well, it is certainly something that at times the market has been looking to get from Amazon and other times they have not.

8:12It's also interesting that you're seeing these headlines and the CEO is saying we're going to continue to lower product prices as unit growth continues to grow. I think that's a great thing to communicate not only to the market, but to your consumers right now. I think Amazon, part of this whole platform, has been about being a place where they can dominate. And where they can dominate, certainly in the consumer part, getting that into the advertising business, it will feed that business. And now we can see where those consumer revenues, where essentially those retail revenues, those e-commerce revenues actually lead to profits.

8:44All right. Now we're going to turn to Apple. Now, Apple, unlike Amazon, is actually a little bit lower right now, despite the fact that the numbers, at least on the surface, didn't seem so bad. Steve Kobach out west with more on the key numbers that we need to know from Apple. Steve. Yeah, Brian, it was a beat on the top and bottom lines. Like you said, the stock is down about a percent on this. Let me go over the most important numbers here. EPS was a beat at$1.64 adjusted. Street was looking for$1.60. There is a one time charge in there for a EU tax charge. That is why we're going comparing to an adjusted number, not the gap number.

9:22As for revenue, it was a decent beat here. Ninety four point nine three billion dollars, just above ninety four and a half billion. The street was looking for iPhone revenue, a record September quarter for iPhones. Forty six point two two billion beating the streets estimates by at forty five point four seven billion. Again, a September record quarter for the iPhone. Services, though, this is the downside of this report. A miss,$24.97 billion. Street wanted$25.28 billion. Now, I caught up with CEO Tim Cook on these results and talked to him a little bit about Apple intelligence and the momentum there.

9:57He told me about the software update that was iOS 18.1 that hit on Monday. he told me, quote, a really early stat, which is only three days worth of data, but users are adopting iOS 18.1 at twice the rate that they adopted 17.1 in the year ago quarter. Now, of course, I asked him if they're also tracking how many of those people who updated if they turned on Apple intelligence. He told me they are tracking those figures, but not disclosing. I will note, though, he did sound quite optimistic about getting those momentum numbers out there. And then on that record September quarter for iPhones, I asked Cook about how much of that came from increased 16 sales versus more people buying a 15 model so late in the cycle.

10:42He actually said both lines outperformed their predecessors from the year ago quarter, telling me, quote, it's a combination that 15 was stronger than 14 in the year and 16 was stronger than 15. Plus, keep in mind that the 15 Pro and Pro Max also run Apple Intelligence. Now, guys, the call is just getting started. I expect any minute now we'll get some December quarter guidance that could impact how the stock is moving here after hours. Brian, I'll send it back for you. All right, Steve, we'll look forward to some of those numbers as well. There's a lot of guidance, a lot of numbers there. There's a lot of 15 max, 14 pro, 16, 18.1, 72.

11:18But here's the thing. I want to focus on one number, and that is the services number. Bang on. Here's what's going to blow you. I know it came in a little bit weak. It's going to blow your mind. Please. All right. Apples. Apples. Why? Apple, sir, he's just so, you know, Apple services business at$98 billion a year. Their secondary business to the phone is bigger than Dell. Bigger than Dell's entire business. Truth. And it gets no respect. No, I disagree with that. I think it gets a lot of respect. I think the valuation that Apple gets is based on exactly what you just said. The reason it's trading at 31 times next year's numbers is because of that services number being 26.5%, 27 % of overall revenue, which is a good thing.

12:07The bad thing is it came in a little bit of light of consensus. So I think the market is trying to basically synthesize and digest this a little bit. I'll tell you, by most company standards, this is an A quarter. By Apple standards, maybe it's a C plus B on the back of that alone. Year-over-year revenue growth of about 6%. I mean, does that really justify the valuation? I'm not so sure. And I think the market's trying to figure it out. It's all relative because the school guy was getting A's and the C plus B was fine for me. So, I mean, I think it's a case where if you think about the services revenue relative to the cycle that we may or may not be going on to, I don't care whether we've begun the refresh and the AI cycle for Apple intelligence and Apple hardware.

12:44I do think that that's going to lead to a higher services business. So if we're whether this was a slightly weaker quarter in terms of services, 11.9 percent is the high end of that services growth. That is exactly why this is I think it's more like 28 times, you know, 26 numbers. So maybe that's the same as the number you did in 25 or 30.8 times forward in 25. I actually think Apple is done fine here. In fact, I think this quarter is fine. I think this company, again, based upon the tape we had today and some of the concerns the market has, you haven't priced any of this into Apple. Apple, I know the headline multiple is more expensive than seemingly it was five years ago, but it's no more expensive than it was five months ago or even 15 months ago.

13:26I like Apple here. I think the balance sheet makes it very defensive in an environment where if suddenly people are questioning this rally in the NASDAQ, I want to own Apple. Yeah, the only problem here is there's no there there as far as Apple intelligence is concerned, right? So when the stock took off after WWDC on June 10th or so, it was really predicated on this service was going to basically cause an upgrade super cycle. Now, they did say the September sales, but they keep growing their install base, which is great for them. But you guys are talking about the hardware. They are actually really a services company.

13:55The future of this company is really those fatter margins. But if you have this Apple intelligence, you need developers to build on top of that. That's where they get the service revenue. So if there's not this layer of Apple intelligence that basically developers think is interesting, it's just going to take longer. And I know Gene's going to say something different, and he's much smarter. He's forgotten more about this than I'll ever know. But you won't have the upper age cycle until it comes at some point, probably mid-25, which actually pushes you out into September, October. We're all pretty tech savvy around this table.

14:29Maybe not guys, but we're all pretty tech savvy. There's a guy wearing rubber duckies. Has anybody What's your fault? Has anybody here got Apple intelligence? I do. It's a joke. There's nothing there. What I'm saying is you did. Do you? I wouldn't even know. Not me. Carry the one. 20 % of us, one in five, actually bother to deal with it. I buy everything. I have meta AI glasses on right now. Which you probably shouldn't admit to. I do. I love them. I try everything. So we are just not the norm. You know, when you think about the Silicon Valley types, the Wall Street types. We're all early adopters.

15:07I have a vision pro in my closet. Sorry about that. I know. Guy's got an 8-track tape. I'm actually sort of agreeing with what you're saying, which is that we're not, none of us are saying, boy, it's a really compelling reason. We're not lining up outside the Fifth Avenue Apple Store. Because it's a chicken and egg thing, right? Or chicken with the leg on. Lunch, but right, the chicken and the egg, well, you know, waiting for the apps to get the phone that uses the app. So I actually think for this quarter, guidance will matter for him to, you know, we'll see what Tim Cook has to say, because I don't think anyone's expecting huge sales up until now.

15:40But it's about, you know, the promise of it. So one little thing I thought was interesting, it doesn't really move the needle, but the AirPods was a big beat. I think that AirPods. Really? Well, people view them now as. Well, that's true. But they could be hearing aids. For real. Yeah. What? So I do think that. That's fantastic. Yeah, think about that. Tinnitus, too. By the way, all Apple does is. Can you sell tinnitus, guy? If you use Apple One, which is Apple News, Apple Plus, Apple Music, whatever, they just keep raising prices. Not a lot. Just like streaming. And it's becoming this annuity business.

16:13And you're not going to stop using it. Buy Apple, then. There you go. Well, I'm going to need a new MacBook because I can't get this Dell to work. And I'm going to throw it across the frame. He's probably watching right now. And he's a fan. Michael Dell. So you just basically blanked on his product. I love Dell. Hi, Michael. I don't care. All right. Coming up, more after hours action. Intel actually surging. Yeah, I said those words in the same sentence. We're going to talk about a stock down 60 % this year coming up. Plus, Super Micros, Super Slide continues. What do we make of this collapse in a once red hot trader favorite name?

16:51What exactly broke here? We're back.

17:02All right, welcome back to Fast Money. We have got another earnings alert for you. This one is on Intel, an Intel stock doing fine. It's up not as much as it was, but it's up 9.5 % right now, about$2.2359, kind of erasing many of the losses for at least this month, but certainly not for the year. Now, CEO Pat Gelsinger was on CNBC in the last hour ahead of the conference call. Seema Modi has more on that. Also, she spoke with the CFO, I believe. So it was a full Intel day on Intel. Seema. Well, a lot's happening at the company, Brian. CEO Pat Gelsinger says, well, Intel has gone through a challenging period.

17:43It has overachieved on its operational performance this quarter and added that on the earnings call that it needs to fight for every inch and execute better than ever before. Now, one of the highlights of Intel's third quarter results was that data center revenue of$3.3 billion, a 9 % increase year over year, beating Wall Street consensus. Intel did raise its forecast. It expects revenue in the fourth quarter to come in between$13.3 to$14.3 billion and a profit of$0.12 versus the$0.06 analyst estimate. Still well below what Intel historically used to bring in, but Gelsinger says its story is improving.

18:21But when you look at the underlying business, great progress on products, on Foundry, a beat and raise. So obviously the markets are responding positively. But our view is we have a lot of work to do and we had a lot that we got done this quarter. So a really solid quarter of execution. Gelsinger added that in addition to Amazon Web Services, Intel's Foundry added two more customers. and the CFO telling us that producing chips in the U.S. in its foundry division is on track to ramp in 2025. Now, when Gelsinger was asked about former President Trump's recent criticism of the U.S. Chips Act, in which Intel is on tap to receive over$8 billion, he said he was frustrated the money had not been dispersed faster, but also said he was, quote, anxious for whoever wins the election to reinforce the importance of that chips money.

19:10We're watching shares of Intel up about 9 % in after hours, but, yes, still down over 50 % this year. The call did start. Brian, I'll get you the details, more details as they come in. Seema Modi, thank you very much. I mean, I'm not going to make light of this, Tim. I mean, this is a stock. This is a company that is a quintessential American company, right? Everybody knows their little jingle and logo. Intel's inside. It was one of the most valuable companies in the world for a long time. Yeah. It powers this computer, I think, that I finally got working. and investors have just been wiped out.

19:42I mean, I don't say wiped out. No, you could say wiped out. They've lost half their money this year. I don't, what, is Intel a value, is there any value in Intel? Is it a value trap? No, it's neither. It's a restructuring store, apparently. Here, I'm hearing about$3 billion in restructuring. We're going to look at every unit and decide whether it's going. By the way, all this chip money is funny money. What's extraordinary to me is how much money is being thrown at the chip sector, how much money Intel has essentially gotten access to in terms of grants and been able to sell JV in Ireland to Apollo for$15 billion.

20:12And yet we hear about them burning money over and over again. You talk about it's been devastating for investors. Wouldn't you guys argue that coming into 2024, Intel was an awful story for investors? Well, it's down 58 % this year. So we're talking about a stock that's eviscerated so much capital and a company that basically could have a business that it had to not do anything and they were going to dominate, certainly in data center and most of CPU. And now they don't even have that. So, look, I'm frustrated. I've owned this stock for periods where I've been destroyed in it. And I think that ultimately there's nothing I've heard here other than that data center is having some bounce here.

20:55That tells me that the days of this not losing money are over. Yeah. The good news, as you said, coming in here is a value trap or something. I mean, their performance on their financial markets has been so bad. Like in 2021, when they were at peak earnings, it was$5.47,$79 billion in sales, 57 % gross margin. This year, they're going to do$0.24. They're going to do$52 billion in sales with a 40 % gross margin. So the good news is I think it could probably only go higher. You get that cash infusion. You sell a bunch of stuff off. They've been cutting jobs, that sort of thing. And maybe they can remake this company for, you know, they were fabulous forever.

21:31They could start kind of turning some manufacturing on. Maybe that's it. The other thing is, I'll just say this. I think Qualcomm probably buys them at some point. So, guys, we've got to go. We've got to very quickly. We've got to move on. Stocks back to 1998 prices. The reason I talk about this value trap idea, as you know, is a lot of people out there listening and watching that are thinking, oh, it's Intel. It's got to come back. Right? It's a name recognition fact. Nothing has to ever come back in the stock market. So did Xerox. Nobody's owed anything. But to Dan's point, there does seem to be this little bit of a Qualcomm or other put.

22:02Should be. Almost a federal government. And now we've got to go. But real quick, I mean, this is the golden age of semiconductors. At least that's what I've read and heard on networks. I mean, they laid off 19 ,000 people a month ago, and they're laying off another 17 ,000 people now, to Tim's point. I mean, a lot of restructuring going on in an environment where they should be growing. So that's number one. And Tim mentioned Data Center. He's right to bring it up, up 9 % year over year. That's great. But then look at client compute was down almost 7 percent year over year, and that's 65 percent of their revenue line.

22:32So, yeah, the stock can go to 25 and have 26. Nothing's changed. But to your point, it's a value trap. We're going to stick with semiconductors and another company that is getting a lot of attention for all the wrong reasons. That is Super Micro. SMCI yesterday lost a third of its value. Today, there was no bounce back. In fact, it lost another 12 percent of its value. It all came out because its accounting firm, Ernst & Young EY, left the company saying it's, quote, unwilling to be associated with the financial statements prepared by management. After a red hot start to the year, shares of SMCI are now down 20-24.