Closing Bell - Closing Bell Overtime: Amazon and Apple Report Quarterly Results 10/27/22

Episode Date: October 27, 2022

Amazon shares sinking in Overtime after reporting results. Our all-star panel of Stephanie Link, Alex Kantrowitz and Dan Ives give instant reaction. Plus, Apple’s highly anticipated numbers also hit the tape … CNBC’s Steve Kovach spoke to Apple CEO Tim Cook about the quarter. And, market expert Mike Santoli gives his “Last Word” on big tech’s latest quarter.

All right, Sarah, thank you very much, and welcome, everybody, to Overtime. I'm Scott Walkman. You just heard the bells. We are just getting started here at Post 9 for the New York Stock Exchange, and the stakes could not be higher this hour. That is our talk of the tape. Apple and Amazon and Intel, all set to report earnings with so much on the line. Can they reverse the mega-cap meltdown started by Microsoft and Alphabet, only to be made

worse by Meta? Have the chewed- up chips bottomed? We'll get to the answers to all of those questions in just a matter of minutes. Our team of experts standing by with everything you need to know as well. Let's welcome in CNBC contributors Stephanie Link of Hightower, Big Technologies, Alex Kantrowitz, and also StarTech analyst Dan Ives of Wedbush is here with us on set as we await these earnings. Welcome, everybody. I said thesebush, is here with us on set as we await these earnings. Welcome, everybody. I said these are imminent, especially for Amazon.

Dan Ives, you have called this the moment of truth for tech, maybe more than ever or more than a long time, given the disappointments that we've gotten already. Yeah, and so far it's really been disappointing. I mean, last night, obviously, an epic disaster in meta. And right now, a lot of white knuckles going into the Apple and Amazon. Can they save earnings season for tech in terms of big cap tech? Or ultimately, does the softness continue?

And that's why I view it as really a bifurcation that we're seeing in tech on enterprise and consumer. I still believe Apple is ultimately going to surprise and be much better than expectations. Yep, all right. So Amazon is out, and we will certainly keep our eyes peeled there. You can see the stock is moving and it looks to be just down a bit here, about 10 percent. We are going through that, as you would expect.

Deirdre Bosa is going to pop on momentarily. Stephanie Link, a stock that you used to own. Yeah. You do not anymore. And the stakes could not be higher for now. It's down about 11 percent. So we need to dig into that. Does it return to profitability? Right. Had that first loss in some seven years in the first quarter backed up with another loss in the second. So it trades at 80 times forward estimates. So this is not the kind of market that you want to be owning something

that's 80 times for the uncertainty that you're talking about. AWS, I'm really interested to see where the cloud numbers come in because we know that Microsoft guided lower for their cloud business. And we also know that Alphabet was a little bit behind in terms of their cloud business. So want to hear a little bit about that. But also e-commerce. I mean, you are seeing an economy going from goods to services, right? And so have to see, even though they have very easy comparisons, they have an 11-point easier comp on their North America e-commerce business. So let's see where the numbers shake out.

And, yeah, also profitability will be very important. I'll tell you what. I mean, AK, I look at this, you've got a decline of near 20%. Now, once again, we're going to go through it and get you the exact metrics that are leading to this decline. But if you were looking for something to stem the tide of the mega cap meltdown, this ain't it. At least not yet. No, definitely not.

And I think it's sort of predictable for Amazon. Right now, we're living in a moment of uncertainty. We don't know if the Fed is going to keep on with its push, although it seems like it is. But it might pivot. There are signs that some of the inflation is weakening. So maybe they make a change. In a moment of uncertainty, it's really difficult for a company like Amazon. Amazon's cloud business is entirely predicated on enterprise companies planning for a predictable future and saying, we're going to invest in our infrastructure. We

expect to grow. We don't know that anymore. And it's a consumer business, the same thing. People saying, I have discretionary income and I'm going to buy goods. Without that predictability in the economy, which we do not have, it's really tough sledding for Amazon. And Microsoft, like Stephanie mentioned, showed us the way earlier in the week. And now we're starting to see the results. Let's get to Deirdre Bosa, who has the details of why this stock, Dee, is down some 19 percent after these earnings. Let me point right to it. It is the guidance here. Q4 revenue guidance estimated at between, this is what the company says, guiding between $140 and $148 billion. The street was

expecting $155 billion in Q4. This is the most important holiday quarter, so that is very light operating income. The street was expecting more than $5 billion. The company says to expect between $0 and $4 billion. So coming up short there as well, when all the street is focused on cost, Amazon was supposed to have been working to getting this under control over the year, bringing in that extra capacity. In terms of the top and bottom line numbers, the top line is a slight miss here. $127.1 billion, $127.45 was expected. EPS, $0.28.

I'm not going to compare that to the other number because there's a bit of funny stuff going on because of its Rivian investment. But it was what I can tell you is a $1.1 billion gain in Rivian. I'm going to continue to go through this, Scott, and I'll bring you numbers for advertising, for AWS, for all the rest of it. Yeah. Thank you so much. That's Dee Bosa. She'll be back on with us, as we said. Dan Ives, the revenue guidance is a massive miss.

I mean, look, that's a horror show relative to what you're expecting going to a holiday quarter. And I think it just shows the cautious that they're seeing, not just on the e-commerce side, but as Stephanie's talking about AWS, that's really been the rock of Gibraltar for Amazon. And this is really what I believe is a seminal moment for Jazzy and Amazon to sort of get through. Otherwise, the bloom's coming off the roads really quick for big tech. And this is just another massive disappointment. I mean, they did have two prime days, right? I mean, which is a little bit unusual for the company. So they were seeing it

hurt throughout the quarter in terms of demand. I mean, Jass, he's trying to cut costs. Is it fair to say, Steph, you think that he inherited a bloated business? No question about it. And he is the one who is now charged with fixing it at a time where the former and founder, Jeff Bezos, is tweeting things in the last few weeks about batting down the hatches. Stay-at-home beneficiaries, they increased their distribution centers, over-increased their distribution centers, and now they're closing some of them. So they are definitely behind the eight ball here. And again, as I mentioned, this is not a kind of market and an environment where you want to own something that is this expensive. And so I'm a little surprised at the reaction. It's a little aggressive because

the stock's already down 33% year to date. But look, maybe it's going to catch up to meta, unfortunately. Maybe, you know, Alex, not that dramatic of a stock slide, given what we've seen. If you miss and miss badly, or if you guide, let's say this is a guide, a guide down, draw down. This is the punishment that you're going to get in the kind of market that we are in if we haven't witnessed that through the Microsofts and the Alphabets and then the Metas. You haven't been paying attention. Absolutely. And it all comes down to the leadership you have. I mean, we see what's happening with Meta. That's a Mark Zuckerberg issue.

So let's look at Amazon with Andy Jassy. Now, Andy Jassy is fresh off of residence in Amazon Web Services, right, which has much higher margins than a retail business like Amazon Retail. And he's just not used to making the type of cuts that you would if you were in the more cutthroat division like retail. So Jeff Bezos, he grew up there and down the hatches. He knows how to do that. He made the leadership change. Does Andy Jassy know how to do that right now? He's proving that it's really difficult for him. And this is a big question. It's going to be the key question of his leadership. Let's go back to Deirdre Bosa who has some more for us.

Yeah, Stephanie said a lot of the streets looking at AWS is cloud computing growth, and it actually dropped below 30% for the first time in at least six quarters. So it came in at 28% growth, which is still impressive from that enormous base. But that is a steeper than expected decline. And it actually came in about a billion, just less than a billion dollars under expectations. I'll continue to look through this. Scott, you got anything on advertising yet? Are we still going through that? Let me see. Hold on. OK, so that actually did come in a little bit over. So growth here is better than expected. 9.55 versus 9.5 expected. So we'll call that in line. But this was pretty much expected because the model is a lot more sturdy, let's say, than that of a snap and meta. This is intent-driven advertising. So, you know, it is still a good

thing that this came in in line because of what we saw with Alphabet. So some strength there. But again, that AWS business is so much bigger that that's what investors are really going to look at. $21 billion in the quarter for cloud versus less than $10 billion for advertising. Yeah, yeah. Dee, thank you. I expect that we'll hear from you again momentarily. Steph, you were looking for 30% growth in AWS. This is the growth engine.

The reason why some suggest you'd be willing to pay the multiple that those holders of the stock have been willing to pay. Does this make you question that even further if you've got a declining amount of growth, albeit slight 28 versus 30, it's still not at street expectations. It underscores a slowing part

of almost all of these businesses. Right. And I think you have a lot of generalists in this name to begin with. And they were thinking 30 percent. Anything with a two handle would make me very was going to make me very nervous. But I'm also looking, by the way, at North America. The North America sales came in below expectations as well. So you have both sides of the business coming in disappointing and operating income is really quite, quite disappointing. And then, of course, the guide as well. So, I mean, we'll come back to that in a second. We didn't mention at the top, but Pinterest is out as well. Our Julia Borson has that. Jules. Well, Pinterest beating across the board, adjusted earnings of 11 cents

per share versus estimates of six cents. Revenues coming in at $685 million versus estimates of $666 million. And the monthly and daily active user numbers are also stronger than expected. MAUs of $445 million versus $437 million estimated. And average revenue per user, $0.03 better than anticipated at $1.56 per user. So we see that those better than expected results are driving the stock up 14.5%. A key thing here, since we've talked so much about the outlook for the fourth quarter, the company is saying they see fourth quarter revenues up mid single digits and the consensus is for up 4.5%. So slightly better than that. And they're seeing the operating expenses

for the full year of 35 percent. So we're now watching Pinterest shares up. They were up as much as 16 percent, now up about 14 percent, Scott. Yeah, Julia, thank you. Julia Borson with Pinterest there. It proves, Alex, that not all social stocks are complete train wrecks. Forgive us for thinking, you know, after Snap and then Meta, expectations couldn't have been all that great for Pinterest. But maybe they're bucking that trend. I mean, well, that's where all the Facebook revenue is going, apparently. But it is on a much smaller scale than these other companies.

And Pinterest has been so down in the dumps for so long. Good for them for having a nice moment here. But, man, overall, we're seeing such a decline everywhere on social media. So Pinterest is your bright spot. You're in some real deep trouble. We got Intel out, too. Christina Partsenevelos has that for us. Christina, what do we see here? So we're seeing an earnings beat at the 59 cents a share. That's a 27 beat, a 27 cent beat, I should say. Revenue came in at 15.3 billion, also a little bit higher, but it's the outlook that has been revised lower for Q4 and the full year. So we're seeing Q4 APS guidance at $0.20

a share. The street was anticipating $0.66 a share. That's just for the next quarter. Revenue guidance coming in between a range of $14 to $15 billion, also lighter. And then for the full year, the company said that they did have to reduce their full year revenue guidance between $63 and $64 billion to reflect continued macroeconomic headwinds. And remember, we heard about these looming layoffs. We still don't know details just yet. But in this report, too, that Intel sent me, they said that they are going to be focusing on driving $3 billion in cost reductions in 2023. So that's $3 billion in cost reductions. 2023, keep in mind that under Gelsinger, ever since he took over as CEO, headcount has increased about

16%. So maybe that's going to come down. Yeah. Christina, thank you. We'll continue to watch it. Shares are up despite a guide on both top and bottom that is well light of expectations. Jenny Harrington's on the phone with us now as well. She owns the stock. You guys may recall that. So, Jenny, you're getting a bit of a boost here despite this guide, which is disappointing. What's your initial read for a stock that's already down 50% year to date? Well, I don't see it as disappointing because because as we were talking about on the show today, you know, it's just like you need it just not to be completely terrible and how much pain

is already priced in. And what we're seeing, Scott, is we're seeing the pain this earnings season, frankly, this year being delivered very asymmetrically. So Intel, they have had pain for the past, what, three, five years. And so now they reduced their guidance, but from $64 billion to $63 billion. That's just not that big a deal. This stock has been being treated as if it's going bankrupt, as if it's not going to cease to exist, as if they'll continue to donate market share to AMD for the rest of their lives. And that's not happening. And I think what we're reminded of today is that you cannot dismiss a company that produces $64 billion in revenues. Like, that's really significant.

And they have an important role in our society. The other thing I think is an interesting juxtaposition between Facebook, who refused to cut costs and got hammered for it, and Intel, who's like, whoa, you know, we're doing everything we can to be profitable, to be meaningful, and to improve our business. This is a professional management team that's operating and executing as well as they possibly can. Yeah, maybe they kitchen-synced it or the market believes that it has, along with the refrigerator, the dishwasher, and just about everything else. Jenny, thank you.

Don't miss, by the way, Intel CEO Pat Gelsinger himself, 11 a.m. on Tech Check, so you get to hear directly from Mr. Gelsinger about the most recent quarter, and even more importantly, of course, is the outlook. Anything as a value investor, Steph, gets you interested? Because you, let's be honest, you have been interested in turnaround stories. You are. You're in many. What about this one? Yeah, no. I mean, and it, well, it is very cheap at 12.3 times, and it yields 5%, so that's attractive in itself. It is also down 47%.

I just don't like the PC business. I don't want to be anywhere near the PC business, and that's probably why they're lowering the numbers as aggressively as they are. I do like the data center business. If I want data center, I'll go to Broadcom, which is just as cheap as Intel with a much better track record in terms of management. I want to go back to the Amazon story for a second, just because the decline in shares is so significant, down 19 percent. You just don't see it all that often. Alex, I thought something really interesting in your notes today was when you said that business, Amazon, relies on certainty.

I want to know, what do you mean by that? Because we are in the most uncertain environment that we've been in in some time. Exactly. It's a terrible moment for Amazon. If you're a business thinking about your infrastructure costs, thinking about your rate of growth even next year, we talk every day on this network about is there going to be a recession or not? Are we in a recession? What sectors are in a recession? And those conversations are happening inside the boardrooms of companies that are deciding what their plan is for 2023. They don't know. And so when you have an uncertain moment, they're not going to outlay the big money

they have been in past quarters on web services spending because they simply cannot bake in that amount of growth. Now you're a consumer. You're deciding, you know, how much money am I going to have next year? Is my money going to be worth what it is next year? And you're deciding, do I make that big purchase or not? And you're uncertain, so you're not buying and that's really terrible for amazon so we're less than 15 minutes away now dan from apple's results i wanted to talk to you guys about twitter but frankly it feels a little out of place given what's going on with the stock slide here and dan what it makes you think about what apple might have in on tap in as i said about 14 minutes time.

Yeah, I mean, Scott, I think it's the biggest report, not just in tech, but across all of earnings, because as Alex has hit on, it's really about what the demand picture looks like in China. The iPhone Pro Mix, is that ultimately coming through? And this has really been, what I view, is sort of Cook's been able to navigate any type of market.

You look at services, could be a bit weak there. I still believe Apple. We sit here a half hour from now. I believe they've been able to navigate this storm better than any other tech player. That's why, in my opinion, of the FANG names, this is the one to continue to own. Even though you would suggest, as you've lightened up your position in Apple itself, that it's just not cheap in the kind of environment that we're in. And oh, what a difference it makes because we used to say that exclusively about Apple. Oh, it's just not cheap in the kind of environment that we're in. And oh, what a difference it makes, because we used to say that exclusively about Apple.

Oh, it's so cheap. X the cash. Look how cheap it is. Not anymore. I know. And it's held up remarkably well relative of the fangs, right? Only down 17%. But yeah, 24 times.

It's just not compelling. It's not super expensive. It's just not super cheap, especially compared to other parts of technology. So I think iPhone is going to be fine. Fifty two million units up eight percent year over year. They have an extra week in the quarter. Right. Supply chains get easier. So that's good. Services is going to be weak. The whisper number is eight percent.

Consensus is at about 10 percent. So let's just see. It's not a disaster. I don't expect a disaster. But is it going to live up to the expectations given that it's held up relatively well? Still expecting record revenues. And we're going to get a good idea of where the iPhone is with consumers as well. A good read on China. Let's do this. Let's sneak a break in because we are just minutes away from those results from Apple. Our panel of experts is standing by as well to break down those numbers, everything you need to know about that.

Do not go anywhere. The countdown clock is on. A little more than 12 minutes to go. We're right back. All right, welcome back to Overtime. I'll show you another check on Amazon. Those shares are plunging by 19%. It's the guidance, specifically on the revenue guide for the fourth quarter of the year that was a well light of street expectations.

Stock is, as you see, getting hit rather dramatically. And we are, you know, what, 11 minutes or so away from Apple. And it's report. Let's bring in Liz Young, head of investment strategy at SoFi as we continue the countdown. So, all right, Microsoft, Alphabet, Meta, Amazon, melt, melt, melt, melt. What are you feeling in the market now? You know, honestly, Scott, I'm feeling like we're finally ticking the boxes of earnings falling apart. And we've been waiting for this to happen.

I keep saying this over and over again. There's usually a sequence of events. First the market goes, then earnings go, then the economy goes. So I think this is finally that part where we're seeing earnings get hit. And I don't think it's any mistake that it's tech that's getting hit the most. Tech is what has been under pressure in this market since the beginning. And it was the first thing to be under pressure. If we remember way back to that first time when the Fed retired the word transitory, tech fell out of bed and continued to go. So they're the first earnings that are really getting hammered.

I think that this is just another check on the list of things that we need to get through before we can really be done with this part of the cycle. So you truly think this is a dramatic moment that we are going to mark in time. We'll timestamp this as a shift for these companies as the tried and true investments that they have been for the last many, many years. Well, I don't know that I would say they're companies that we're going to run away from as investments, but I would say also I'd echo, I think, something that Steph said earlier in the show. Valuations matter a lot right now. They matter almost more than a lot of other fundamental metrics in this environment, especially in an environment where we have a Fed meeting coming next week, another one in December.

So looking at how much people are willing to pay for, number one, that future growth and the future growth isn't looking great. A number of these companies have missed on revenue in a time when inflation has been sort of buoying revenue. So future growth isn't looking great. They're not controlling costs to a point that is satisfying investors. And now the earnings and margins are going to get hit. So I think we'll mark this moment in time as this is the beginning of when the market realized earnings were actually going to be pressured and when we realized that 2023 earnings might end up a contraction year over year versus 2022. Do we collectively stay and we by I mean investors did we stay too long?

Did we stay at the party too long with these stocks? With tech stocks? You mean the mega cap tech? Yeah. I mean, I think some people did, but look, all of us probably did. And by no fault of our own, we're also still invested in many of these if you're a broad index investor. So if you have any ETFs in your portfolio that invest in a broad index, we're still in it. So did we stay too long in the sense of should we have run for the hills sooner? I think a decent amount of people did. And I think starting at the end of last year, people really did. So that was an important move to make. Now, did we hope that they would be the ones that would still stand up in the face of pressure like they did the last time? Yes, I think that's maybe where investors have gone wrong.

We're really comfortable with these big cap tech names. We use them in our daily lives. We've been invested in them for a long time, and they haven't really led us astray. So I think there's probably a little bit of overconfidence on behalf of the investing public at large. But these aren't names that I think are going to disappear in this cycle. I think that they'll come back eventually. It's just that for this next three to six months, it's going to be really a tough slog for them. Yeah. I appreciate it, Liz. Thank you so much. That's Liz Young of SoFi joining us.

I'll talk to you again soon. I'm sure of that. Steph, I wanted to get your comment before we move to a different segment. I mean, this notion of staying too long, you saw the writing on the wall because you had removed or significantly reduced your exposure to tech over the last many months. What'd you see? 35% of the S&P 500 waiting in terms of comm services and technology overall. That's very, very high. And when I compare it to some of the more value parts of the market, like energy, for example, at just being at 5%, I just think tech was so overcrowded. And some of the value

parts of the market, which I want to own when rates are going higher, are actually so much smaller. And so it was really just where did I think I could make more money and where was more opportunity? Where was I buying low and where was I selling high? And really, I was much more worried, much more worried about double and triple ordering in the space overall. And you've seen it. Dan, I have someone on emails me suggesting this is 2000 to 2002 all over again. You want to push back on that or? I mean, I covered stocks. I covered stocks during those periods. And I view those as totally massively different periods because of the actual spending that's happening right now. I mean, we're going to have about a trillion dollars of cloud spend over the next four or five years. These are companies that have cash

to profitability. And I think this is ultimately a stark contrast to those years. But we are seeing, I mean, a significant, we've already seen the meltdown in the highest of high valuation ones. And now it's starting to trickle through the tried and true, what some would say defensive. We'll see what happens with Apple. We're less than five minutes away. Our all-star panel standing by with the instant reaction you need to those results. Don't go anywhere. There's the countdown. We're back right after this. All right, we're less than two minutes away from Apple's results. The countdown is on. Our all-star panel is here.

CNBC contributors Stephanie Link of Hightower, Big Technologies' Alex Kantrowitz, star Wedbush analyst of tech is Dan Ives, and he is still with us too. Dan, the most important thing you were looking for in about 90 seconds is what? It's iPhone units. Is there upside there? thing you were looking for in about 90 seconds is what? It's iPhone units. It's really, is there

upside there? That would indicate an ASP lift, more pro models, and ultimately the demise of Apple, you know, would really be false in terms of what the narrative was this quarter. It's about that services. You're expecting a slight miss, but it ultimately needs to be in that sort of 19.3, 19.5 area. Services, the big area for you, Alex? Absolutely. I mean, you've seen these moves that seem desperate from Apple, raising the rates for Apple Music, squeezing Facebook on the boost post inside apps. So what does that signal? To me, that signals that services are growing slowly.

See, instead of looking at me, I feel like you should be looking at Ives with less than a minute to go, right? Because he's the Uber bull, and you're questioning part of the bullish thesis. How do you respond to what he said? And I think what Alex is talking about is really right now the big bull bear debate in Apple because service is a big part of the valuation. And if you start to see cracks and you don't see a reacceleration back to double digit growth, that would definitely poke holes in the bull thesis. But I do believe, I respect Apple, you know, in terms of everything they're doing on services,

respect your opinion, but I just believe that Cook, again, will be tough on like as we come through. We're looking at 8% growth for the services business. Again, these are behemoth businesses. One of the reasons why you're willing to pay what Stephanie Link says is a premium valuation is because of all of that

yes iphone still accounts for half of revenues but it's very much a services story too let's go to steve kovac now who has those results apple earnings are out hey there scott they are indeed so we got a beat here on the top and bottom lines but some misses within individual segments let me break it down for you revenue coming in at 90.15 billion versus the $88.9 billion expected. That's a slight miss. EPS, I'm sorry, that's beat rather. EPS also a beat, $1.29 versus $1.27 expected. Now for those misses within the individual segments. iPhone revenue coming in light, $42.63 billion versus the $43.21 billion expected. Still up 10% year on year. Services missed, by the way. It's another miss, by the way. $19.19 billion versus $20.1 billion expected. Scott, I'll have more for you in a bit,

but that's the numbers to chew on for right now. Looks like shares are down 4%. Yeah, we'll chew on it, too. Thank you, Steve. You come back on in just a moment. Ives, initial reaction, iPhone number light, services number light. But better than feared. I mean, if you look at what the worries were is that you were going to have potentially a $1-$2 billion

iPhone miss, services, as Alex was talking about, that you're going to see a lot of softness. If you look at these numbers, just given what happened on the plus, it shows that the pro mix is probably about 80%. And I think as the street digests this, I think it's ultimately going to be a positive data point in a dark market. You talk about the pro being significant.

It's a higher ASP for the pro, right? And that matters, the average selling price, correct? That ultimately was the hero this quarter because you're seeing more of that ASP come through, especially in China, despite what we saw with the plus and some sort of choppiness in Europe. And I think that's ultimately what really stabilized the iPhone revenues this quarter. But see, at some point, we can't look at a stock decline of some 5%, a miss on the critical iPhone, which again is half the revenue, a miss on services,

say, oh, it's just better than feared and not address the fact that it still is a miss. And maybe the company is not just not going to be able to grow to the degree it was because of the uncertain environment that we find ourselves in. And then it comes down to what's baked. It's a great point. What's baked into the stock here and what's the install base look like? I mean, you have right now you have about 25, 30 percent of the install base has not upgraded their phone in roughly four years. They have that unique install base going into the holiday season. You have the China thesis. So I just believe relative to others in big tech, they will be a more formidable model that that could ultimately penetrate that install base.

And that's the key. And we got to hear what Cook says about the December quarter. That's going to be the key. In fact, let's do it now, because Steve Kovac had a conversation with Apple CEO Tim Cook. He joins us once again, Steve. Yeah, I did. And in fact, I talked to Tim Cook about those demand issues Dan was just talking about between the 14 Pro and the regular 14. So here's what he told me about iPhone demand specifically among the Pros. He said, quote, we're constrained right now on the 14 Pro and Pro Max and have been from day we launched. And so obviously we're chasing supply there and trying to get as much supply as we can to solve the demand. So as we've been hearing, Scott, for a while now, iPhone 14 Pro, they are just constrained on that while the regular 14 is just fine. And to Dan's point earlier, that does help with the ASPs. Keep

in mind though, guys, this quarter is only eight days of iPhone 14 sales. So we got a lot more coming through the holiday quarter. I also want to talk a little bit about how Apple is still able to beat on the top and bottom lines here, despite some of those misses within the segments. I asked Tim Cook about that as well and how he's cutting costs. Here's what he told me, quote, we are hiring deliberately. And so we've slowed the pace of hiring and we're going after cuts and our savings into commodities. So slowing hiring, Scott, and savings into commodities, that means things like memory chips are getting cheaper for Apple as demand for smartphones and PCs goes down across the board. All right, Steve, thank you.

We'll get back to you in a moment as well. Hiring deliberately, those are the kind of words you want to hear, Dan Ives? I think that's exactly what you want to hear. And that's why, as opposed to last night with Zuckerberg, Cook, that's the pilot you want on the plane to navigate you through this storm. And I think it shows they're going to ultimately hire in strategic areas, any sort of weakness, they'll ultimately really be able to spot out. And this is what you want to see. You want to see margins that continue to really be resilient, as well as more and more that comes out of China. That's going to be key to the thesis. But I just want to say, what he said about the supply

constraint, that's important around pro. They'll talk about it in the conference call. That also is going to be something that the street's going to view as more demand over supply, rather than supply over demand. Yeah. And I mean, look, Kovac makes the appropriate point, too, that rather than demand, it's supply. So the products still remain tremendously popular. Steph, you know, constrained on supply is something we're going to just continue to hear about because supply chain issues. There's the China issue, which sort of is the overhang that's not really going away anytime soon. I thought it would be better, to be honest with you, the supply chains. Right. Because we know they're easing and we're hearing that throughout earnings season from every company,

that it's getting a little bit better. So clearly this is still an issue. So here's the problem. Services have over doubled the margin than products and they just missed on services. And so you have to, I hope that they're going to do a good job at explaining why it was so weak, probably app store down 2% is kind of what we were remodeling. But can it go from 8%, 9% growth back to double digits, back to Dan's point? Because that is really where you're going to get the juice and the operating leverage from the margin side.

You know, Steve Kovach, I remember, you know, since Steph just brought up the App Store and we're talking about the services miss, I remember when Katie Huberty, I think it was, of Morgan Stanley, you know, raised that issue. Now, I don't even think she's covering that stock anymore. She's moved to a different job there. But nonetheless, there have been concerns about App Store for quite some time now, haven't there? Yeah, there have. In fact, there's just been tons of data that App Store's sales are going down. In fact, there's just been tons of data that app stores sales are going down. In fact, when I talked to Tim Cook and Luca Mastri just earlier, they were telling me it's gaming is falling. And this is all part of a recessionary headwinds that everyone's facing. Also, Scott,

foreign exchange is a big headwind for them, too. They were telling me in this when I was talking to them earlier, just how on a constant currency basis, they're really happy with what they're seeing on a demand basis. On a constant currency basis, these growth levels they were telling me would be in the double digit percentages, but it's really that foreign exchange, the dollar was actually stronger than they anticipated. And that is what really put pressure on them. Now I also asked them about, hey, you guys are recently raising prices. We saw you raise prices on Apple Music and Apple TV Plus. Is that kind of a way to offset some of the growth, the damage to their growth that they're seeing?

And they said not necessarily because music costs have gone up and they really see this as a way to pay the artists and the record labels that need to get paid as those license fees go up. And on the Apple TV Plus front, again, not necessarily about keeping App Store growth high, but more about they have more stuff to watch now, including Emmy winning and Oscar winning stuff. So they think they have the pricing power there to raise prices more in line with some of the other streamers. So it's kind of a mixed bag, Scott. Yep. Steve, thank you. Steve Kovach, once again, outside Apple headquarters, it looks like for us. If 24 times is too expensive for you, again, you still hold the stock,

but you're underweight. It's small. I got it. I got it. What is an appropriate multiple? That's a good question, right? I mean, if you're growing iPhone sales at 10% growth, and you're growing services at 8%, why am I paying 24 times for 10 and 8% as a mix? Ask Dan Ives. I view it as relative. In this tech world, when you look at Apple, I also believe that that's a re-accelerating growth story on services, what they could penetrate. And you're going into what's going to be just a matte, forget even the next three months, but the next six, nine, 12 months, they have 30% of the install base that still has to upgrade an iPhone.

But didn't they benefit from stay-at-home? And so that pent-up demand across the board, across all of their products, and including services and apps and that sort of thing. So how do you reconcile that? How do you feel good about that? It's a great point. I view it as that's going to be a $100 billion annual revenue stream that I believe on a valuation basis is worth $1.3 to $1.5 trillion. Now, you could argue that, and that's ultimately been the debate in terms of Apple and services. But I view it in tech, where when you're looking at a lot of these sell-offs, if I'm going to own a name, it's Apple. And I think this is

just a good example. Look at this week, what's been a nightmare on Elm Street for tech. Apple's the one that ultimately, relative, comes out more smelling like roses because you got Cook and you got that golden install base that I think you have to pay for. Alex, do you agree with Ives' assessment? Yeah, I think Dan is right that Apple's coming out stronger relative to the rest of tech. It's not very hard to do big tech this week. You have Facebook, you know, flying off the face of the earth and you have Amazon with that 20 percent plunge.

I do. I do remain concerned about services. I think that Steve used really interesting word there. Pre recessionary. Right. So this is before we go into the recession as well. People have their jobs. What happens when that goes away? You know, this idea that Dan is talking about how it'll be easy to reaccelerate growth. I don't see that as such an easy task, especially if we're going to go into a moment where we have a much weaker economic environment. And you run out of places to squeeze that money from. They're working. You know, OK, I understand maybe maybe artists are being paid more, but they're raising prices across the board. They're working to get more in that payment revenue. Eventually you stop finding those places. And that could be a long term issue for Apple. See, I want you to respond to that because I feel like, you know, things are we throw things at you,

whether it's myself or Steph or Alex with some of the concerns. And, you know, maybe, you know, investors have significant concerns as well. But you seem to say, OK, good point. Good question. But good point. But what gets you more concerned about where this story is going from here? And part of it, too, is like with Apple, just even going back to 07, going through 08, 09, you know, going through many of those periods with Apple, I've seen that install base and I've seen Cook's ability

to ultimately navigate an install base that's unparalleled. What would get me more worried is ultimately if services did not accelerate, if it didn't go back to double digits. As Stephanie was talking about, you all of a sudden have the penetration story and the upgrade cycle for iPhone 14. It starts to wane and you see significant cuts. That's what I'd worry about. Kevin Simpson, by the way, from Capital Wealth Planning, who's a frequent guest on this program, has gone into Apple a number of times. He agrees with you.

He thinks it's not a bad report at all. And I should also note the degree at which the stock has come down or come back. It could go positive. There it goes. It's right. Hugging the flat line. As both Tim Cook has spoken to some reporters, including our own Steve Kovac and the CFO, Luca Mastri, as well, are talking about strong demand for the products. And that's why I think the stock has been able to react the way it has in these moments after the report came out. And I'd also say it's the Nadellas, it's the Cooks. You feel if they're powered on the plane, you're comfortable them navigating through the storm. You listen to last night with Zuckerberg, you're like, where's the parachute to jump out of the plane?

So that's why it's a big difference in terms of what you're seeing in these large tech, how they navigate the storms. All right. We're going to leave it there. Thank you so much. Enjoyed having you all with me here on set. It's Dan Ives, Alex Kantrowitz, of course, Stephanie Link. We'll see all you soon. Coming up, we're tracking some other big stock movers in overtime today, too. Christina Partsineva is standing by, as always, with that. Christina. Well, we have one retailer that had a stellar quarter, but guidance hasn't increased and shares are dropping. Plus, shares of T-Mobile jumping on higher phone subscriptions. I'll have the details right after this short break. All right, welcome back to Overtime.

Let's touch on these stocks that are moving as their numbers have come out here in Overtime. We'll do Amazon first for obvious reasons, a stock that's down near 19%. It's AWS. Growth was a little light of the street. Their Q4 revenue guidance significantly lighter than street expectations, which is why that stock is down some 19 percent. Apple's been right around the flat line for the last many moments there. They did beat on the top and the bottom. iPhone numbers a little bit light services, a little bit of a miss. But I think it's fair to say it's some degree of optimism from Tim Cook and Luca Mestri.

He's the CFO in the comments that they've both made to our own Steve Kovac there. And maybe that's stemming the tide there in that stock. We'll see what happens on the call, of course. Christina Partsenevelos is here with the other things that are moving in overtime. Christina. And one of those things is Capital One falling over 4% right now in the OT on weak earnings, an 84 cent per share miss. But revenues came in slightly higher.

Like other financial institutions, rising rates helped net interest income here increasing to $7 billion. T-Mobile shares moving higher in the OT, the company beating estimates on earnings. But there was a slight revenue miss, and look at that, now unchanged. The carrier saying its cost and customer trends have improved heading into the end of the year while logging its strongest jump in core phone subscriptions since its merger with Sprint. And then shares of Decker under pressure despite a top and bottom line beat while reaffirming its full year guidance. So the thing to keep in mind is that they had a big beat and yet they still reaffirmed that same outlook, which is probably contributing to why the stock is down over 6% right now. The company says they are able to maintain their full year guidance because it's the UGG brand's peak

season and Hoka sneakers continue to sell well. I don't know if you have a pair, but I'm assuming you do. I don't. I don't, but I appreciate you asking. Seemingly, a lot of other people do, too. Christina, thank you. Christina Partsenevelos. Up next, we're counting down to conference calls for Amazon and Apple and Intel all kicking off within the next hour. We'll talk about the key themes investors need to be listening for just ahead. We're back in overtime right after this. All right. Another check on Amazon shares falling significantly after reporting a revenue miss and giving weak guidance as well. Our Deirdre Bosa fresh off the call with the company's CFO. We're going to bring you those headlines. Don't miss them next. All right. We're back in overtime. Let's get back now to Deirdre Bosa, fresh off Amazon's media call. Dee? That's right.

Just spoke with CFO Brian Olsowski, who gave some more colors, more explanation on why that Q4 revenue guide was light. He said that they saw moderating sales growth across, quote, many of our businesses in the third quarter. He expects that to persist in the fourth quarter. He says that they're taking actions to tighten their belt, including pausing hiring in some areas. He said that the quarter actually started off quite strong and then moderated as it progressed. In AWS, customers are working to cut their bills. Now, of course, this is a consumption-based model, so they can do so. And he said they're actually working with them to do so. There's levers that they can pull. He also said that the ad side is feeling the slowdown. And then I asked him directly about the consumer. And he said, particularly in Europe,

the consumer demand is soft. He said that the U.S. consumer demand has started to moderate as well in the quarter, but still stronger relative to Europe. He was asked directly if he agreed with Bezos' batten down the hatches comment. He wouldn't directly answer, but he said that they're seeing signs all around them that people's budgets are becoming tight, companies' budgets are becoming tight, and inflation is still high. He also called out energy costs as an additional layer. Scott? All right. Deirdre, thank you. That's Deirdre Bosa with the latest there on Amazon. We watched that stock come off the worst levels of overtime. Nonetheless, it's a 16 percent decliner.

Up next, Santoli's last word on all of this. Back in two minutes. All right, we're back. Santoli's last word. What is it today? The latest sequel to The Purge is underway. It's kind of a fascinating thing because today in meta, you saw what looked like real just kind of give up, right?

It was people who had gotten in early and complacent, gotten in late, thought it was value. And you saw the surrender to some degree, right? 300 million shares traded. Amazon is a big one. And I think we could be getting ourselves close to a point where it's not as if these stocks are going to pick themselves up and turn higher and carry the market with them. But is it getting too late to begin to hate them? In other words,

the process is probably underway for a while now and the revaluation. And I think you kind of banished a lot of the complacent money. But the problem is what you have to wait for is the sell side to actually throw in the towel. 90 percent buy ratings on Amazon coming into the report. Ninety two on Alphabet after the report. Meta is down to 60. Apple, 78. That's kind of par for the course. So I do still think you have waves of these companies aren't what we thought they were. And I don't think they're going to lead the next bull market whenever that arrives. But do they do they need to? I was going to sort of segue to you and ask whether the action in the market over the last couple of days suggests that we don't need them to carry us like we once did.

Look, it's been the case all year. And I've been focused on that fact that if you look at the below the surface, the equal weighted S&P, the equal weighted S&P has outperformed mega cap growth by 17 percentage points year to date. Now, on a three year basis, mega cap growth is still 14 percent ahead of the average stock. So maybe there's more to ring out. But all year, the overall market has been able to kind of find its footing here and there. Of course, it's still down 15 percent. It's not like it's immune. But I do think you're in a situation much like the early 2000s when other sectors kind of came in and led. But it wasn't the same way. It wasn't five stocks doing it. It was just

other economic themes that took hold. What about this idea that Liz Young put forth that, you know, this is the beginning of the real comeuppance for earnings, and it's going to be more front and center now than it's been? It's certainly plausible that other companies in general, more cyclical ones, are not going to be able to escape. Obviously, if we're decelerating hard in GDP, that's not going to be something companies can necessarily navigate around. Yeah, I think 2023 numbers are going to come down. The problem is estimates come down almost every single year in the history of the market. It's not as if it's a new thing to have analysts have to revise lower. I just don't know how severe that's going to be. The breadth of earnings declines have been heavy.

All right. I'll see you tomorrow. All of you as well. Fast Money's now.