Closing Bell - Closing Bell Overtime: Apple & Amazon Earnings; Intel CEO Pat Gelsinger 10/31/24

Episode Date: October 31, 2024

Nearly $5.5T in earnings reported after the bell, including behemoths Apple and Amazon. We have you covered with instant analysis and reaction from every angle. Plus, Pat Gelsinger, Intel CEO, discuss his company’s earnings, the outlook for the business and moving forward after some difficult quarters. iPhone co-creator Tony Fadell weighs in on Apple Intelligence and the company’s larger strategy with AI.

That bell marks the end of regulation. Cineverse ringing the closing bell at the New York Stock Exchange. Gigi's Playhouse Long Island doing the honors at the NASDAQ. And a sea of red tech getting wrecked. That sector in the S&P down more than 3% to close out the month of October ahead of a monster hour of earnings ahead. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today.

Well, tech investors have been waiting for this moment as companies with a combined market cap of nearly $5.5 trillion are about to report results. First, we'll get Amazon and Intel. And a first on CNBC interview with Intel CEO Pat Gelsinger, before the earnings call. And then in 30 minutes, Apple reports its fiscal fourth quarter numbers. Our panel of experts on standby to cover every angle that matters most to your money. Now, as we await Amazon and Apple earnings, let's bring in Henning and Walsh Asset Management President Kevin Maughan. It's great to have you, Kevin. Let's talk about this Amazon report, which is crossing any moment. We're used to capital spending from Amazon, but investors have had to get used to it from the likes of Meta and Microsoft and others. So how does that position Amazon? Yeah, expect more CapEx spending from Amazon.

Specifically, John, as it relates to AWS, as they continue to expand into their own generated AI capabilities. We learned recently of the agreement that they signed with Dominion Energy based in Virginia to actually provide SMRs, small modular reactors, to help fuel their growing AI business. And then we have to think about the upcoming holiday shopping season, forecasted to be good, not great, but good. And if the consumer is more frugal and if they continue to be more value conscious, that generally benefits Amazon because people shop online to find the better deal. So I think the outlook for Amazon is positive, but expect more capex spending from them as it relates to AI. Okay, Amazon results are out. You can see that stock moving.

It is up about 4% initially as we speak. Intel, I'm told, is out as well. Let's see. Let's go to Kate Rooney right now on Amazon. Kate. Hey, John. So it was a beat for the third quarter for Amazon, at least on the top and bottom line. AWS was in line in terms of the growth rate, EPS, $1.43. That was better than expected. We also had

revenue of $158.8 billion, a beat as well. And then that AWS segment sale, this is important, 19% in line with street expectations. You can see stock up more than 5% here. We're looking through the results, John. We'll bring you any highlights, but we'll be right back to you with more details. But those are the big headlines right now. All right. Kate Green on the screen. Let's bring in Mike Santoli, senior markets commentator, with us as well. There was a lot of concern.

Oh, hold on. We got Intel ready as well. SEMA Modi has those numbers. SEMA, that stock's up 10%. Yeah. John, Intel's third quarter revenue of $13.3 billion beat Wall Street's $13 billion estimate and an adjusted loss of 46 cents. It's unclear if that is comparable to the two-cent loss

analysts were expecting. That loss does include a huge $3.1 billion impairment charge that was not previously disclosed. I would point to the fourth quarter guidance, though, upbeat and above Wall Street consensus for both sales and earnings. And just to go back to the third quarter, data center sales of $3.35 billion did come in above street estimates. Intel CFO David Zissner telling CNBC things are starting to move in the right direction and that they're mostly through that $10 billion cost-cutting plan and 15% reduction in its workforce. On the product side, its new AIPC Lunar Lake expects to ship over 100 million units by the end of 2025.

And John, on Foundry, he says it remains on track to ramp in 2025. We're looking at shares up now over 10 percent in overtime. OK, Seema, just to clarify, we do know that that non-GAAP EPS number is not comparable. Now, I mean, that's a that's a big loss number. And some retail investors looking at that might be saying what's going on. You and I just spoke with Dave Zinser, the CFO, a few minutes ago trying to explain some of this. He did tell us, right, that this was a one-time event. Some of these restructuring charges that actually show up in non-GAAP EPS, they're undergoing the significant reset of the business.

They are trying to focus investors on the operational results and things, places like data center and their Q4 projections. And it appears, at least initially, that's where investors are focused, right? Yeah, that seems to be what is getting the attention of Wall Street are the fourth quarter numbers, upbeat guide. And I would point out also it's CapEx numbers of 12 to 14 billion for next year. That remains in line with what they told us last quarter. And again, they're truly trying to focus on the future now as they do expect Foundry to ramp in 2025. But for now, people overlooking the bottom line focused on guidance. That seems to be the case, John. Yeah, and a little bit more on that non-GAAP EPS loss. The CFO telling us that Intel bought 10 nanometer tools in the COVID era more than they

needed. They had kept them in a category of assets under construction, never deployed those tools. But now they've been looking for ways to reuse them. But now as they were going through things, going through this restructuring, they're just they couldn't find a use for them. They were pre-EUV. That's the advanced lithography technique that's used to make the most advanced chips right now in the advanced fabs. And so they're now taking this right down. So a lot of this is non-cash but has to show up in that non-gap EPS. And so that's why even though you've got this big non-gap EPS loss, the stock is still headed higher because once you X that out, things look very different. Hear more about that in just a bit when CEO Pat Gelsinger breaks down these numbers with us in an exclusive interview in just a few minutes. Where are we going next?

Remind me. Back to Kate Rooney on Amazon, which is also headed higher. Kate, what do we see? John, so this is a margin story for Amazon, and that's why you can see the stock up more than 5%. I want to point you to North American margins, operating margins, which were better than expected. We did see some expansion here, 5.9%. That was up from 5.6%. That was one of the fear factors heading into the print that margins were compressing here. That looks strong. You've also got operating margins of 11%. That was better than what the street was looking for, which was around 9 percent.

Guidance also looking pretty strong here. Q4 revenue guidance right in the range. And then operating operating income between 16 billion and 20 billion for the quarter. A couple other beats here. North American revenue, 95.5 billion. That was better than expected. But again, John, the margin story looking really strong here for Amazon. Thanks again. Let me get back to Kevin Maughan here. I haven't talked to you for a moment. You've got a little opportunity to digest these Amazon results. I don't know if you have thoughts on Intel. This is a turnaround story. I didn't really know how investors were going to react to that non-GAAP number. Now, the CFO did warn last quarter that there would be some charges that would affect non-GAAP EPS, but it just goes to show what a

different experience a turnaround company is having from some others, yes? Certainly, but for me as a portfolio manager, John, it's hard to overlook that negative bottom line number. Yes, we know that the PC market has slowed and that impacts Intel more than it does others. We also know that they lag their competitors as relates to the server market. So I do believe they need to lean into the data center business. And some of those numbers that they reported did give me reasons for optimism going forward if they dedicate their chips more towards data centers than they do towards that struggling and slowing PC market. But still, coming into the day, Intel was down, what, over 50% year to date. Now it really rose about 10% after these earnings.

But we need to see where they allocate money going forward and if they maintain that focus on data centers as opposed to keeping their focus on the PC market. Indeed, to your point, the expectation for Intel data center revenue was $3.17 billion. They beat at $3.3. Mike Santoli, Amazon's margins, as Kate Rooney was just telling us, probably add to their story here. A little interesting for Amazon to beat on margins at a time when other hyperscalers are spending a lot on CapEx. It is true. Now, obviously, they have many, many levers to pull if they so choose on margins. And so that, I think, reinforces the idea that it's a pretty intact fundamental story. The guidance was more or less bracketing or validating

the current consensus and maybe suggesting a little bit of upset. It will never not be amusing to me that, you know, one third of the way through the fourth quarter, their revenue guidance has like an eight billion dollar span for the for the fourth quarter. But that just shows you the scale of the business and how it could break either way. You know, this stock has been really kind of consolidating sideways. It was one eighty five last April. It was was 185 at the close today or thereabouts. It was 185 at the high in 2021. So there's room here for, I guess, upside surprise as the numbers have increasingly fallen to the bottom line. And AWS, at least right now, at least not knowing exactly what they say on the call, no reason to really find too much fault with those results.

Overtime is full of surprises. Just about every day, something in this hour surprises me. Kevin, thank you. Mike Santoli, going to see you in just a little bit. For more on Amazon, let's bring in Tom Forte of Maxim Group. He has a buy rating, a $251 price target on the stock. Tom, you like what you saw here? Yeah, so it looks like we got two treats from Amazon. John, when you look at the performance in the quarter and you look at the guidance,

so the Forte family is going to be giving out Baby Ruth and Butterfinger today, and it looks like Amazon gave us two treats in the results and the outlook. Well, they didn't. They weren't Butterfingers, I guess, in fumbling the results here. So what about the comparison between AWS and what we heard from Azure and from Google Cloud? Google got some real upside alphabet from the Google Cloud revenue results. How do you feel about the way AWS is comparing to those? Yeah, so I feel really good.

So to the extent that Amazon has seen sustained growth in its cloud computing effort, recall that they had challenges there for about 12 to 18 months as enterprises were managing their spend in cloud computing. think it could both sell the picks and shovels with AWS and get gold to the extent that it can improve its e-commerce sales and also manage the fulfillment centers better with automation from AI. So I think I'm very encouraged by the results. How do you feel about the predictability of Amazon's CapEx versus the other hyperscalers? Yeah. So the challenge for Amazon is that the CapEx spending is both at the fulfillment center level and at the AWS cloud computing level. That's a little different than their peers that are more about servers. But I think that, again, Andy Jassy, his numbers are looking or his comments are looking to hold true that at least from an EBIT standpoint,

they're able to both invest in growth and generate very strong cash flow and profits. And that's wonderfully encouraging for the stock. How do you feel Amazon is positioned versus retailers in general in a holiday season where the consumer is really stretched when it comes to credit but still employed so seems to be spending? I think it's going to be challenging for Amazon and Walmart and Target. So to me, the big tell by Amazon was the fact that they chose to have two mega sales again in one calendar year, Prime Day and the one they just had in October. I was worried that would result in kind of a pull forward in retail sales. I don't think that's evident in the guide, but I do think it's going to be a challenge for not just Amazon, but Target and Walmart this year with the challenging consumer spending environment.

All right. Tom Forte, thank you. As, of course, we await that earnings call. And we await Apple earnings coming up momentarily. But before that, coming up, a next I can't miss interview with Intel CEO Pat Gelsinger before his call with Wall Street at the top of the hour as that stock had skyward more than 12 percent in overtime. As I mentioned, the countdown is on to those Apple earnings coming at 430 Eastern, where investors are going to be looking for any early clues on iPhone 16 demand. Don't go anywhere. Overtime will be right back. Welcome back. Intel stock sharply higher right

now in overtime, up 12 percent after reporting results moments ago. Joining me now in a first on CNBC interview before the conference call is Intel CEO Pat Gelsinger. Pat, welcome. I didn't know how investors were going to digest this one. I'm not used to seeing a non-gap EPS loss here, but this has to do with equipment, bought COVID timeframe, 10 nanometer that you just couldn't use. Is this over with this scale of these types of charges, many of them non-cash? Yeah, thanks, John. I'm always a pleasure to chat with you. You know, and overall, I just say we had underlying strength in the business this quarter, but we had the one-time charges that were consistent with what we indicated on our last earnings call.

The major restructuring that we have done, you know, the people actions against the business, and as you say, these one-time charges for the Intel 7 equipment. You know, and simply put, we had too much equipment, you know, somewhat induced by the COVID era expectations of a much larger PC, you know, business at the time. That equipment isn't useful as we move to the EUV nodes, Intel 3, Intel 18A. So we did take this one time write-off associated with it. In addition to the impairment charges,

which are largely accounting charges that are affected this quarter. But when you look at the underlying business, great progress on products, on foundry, you know, a beat and raise. So obviously the markets are responding positively, but our view is, you know, 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. Give me the give and take between the client business and the data center business. Client computing was just about in line, slightly less than the consensus, though I think after AMD, investors might have been expecting that.

Data center actually did a little bit better than a lot of analysts were expecting out there. What did you see demand-wise? Yeah, overall, our client business, we made significant adjustments with our customers to lower inventory levels. So we go into the rest of the year with a very good inventory position and a very robust product line for our client business overall. Clearly, different segments of the market, like the desktop products, we weren't quite as strong this quarter. You know, clearly different segments of the market, like the desktop products, we weren't quite as strong this quarter, but overall we're on it for the AIPC, our leadership there, very strong launch of Lunar Lake, our core ultra product, you know, that just has really set the world right to their own, just how strong that product is, battery life, AI performance. And on the data

center side, yeah, a little bit better than was forecast in that business. And clearly our Xeon 6 product line that is now in the market is starting to gain momentum there. And our overall position for the Xeon as the AI data center CPU of choice has definitely been a positive for that area of the business as well. Overall, very solid product execution. Quickly, I want to go back to something that you just said, because last quarter you said that you expected Q3 to be tough on inventory, but then that would set you up well for a bounce or uplift in Q4. Has that worked out as well, less well than you expected so far? I think overall the PC market may be slightly smaller, right,

as people are looking at the finish of the year. That said, I think everybody is expecting growth in the overall PC market for next year based on a major Windows refresh, AI PC, a bit more global strength, China economy recovery. So overall, we believe we're very well set up for Q4 and for next year in the level of inventory and our product portfolio with our customers. Okay, now I'm always asking about it.

Tell me about Gaudi 3. I believe that was launching in Q3. You've touted that it delivers 2x performance per dollar on inference and training versus H100. That said, you are selling it for less, of course, and NVIDIA does have Blackwell out. How does the reception look for that product now, long awaited as you're launching it? Yeah, Gaudi 3, strong product. And the efforts in having a strong set of use cases, you've seen that we announced with IBM, their Gaudi 3 in the IBM AI cloud, we're getting good reception from that. And early market uptake is very strong for Gaudi 3. And we're really focusing it on what I'll call the enterprise TCO inferencing-centric use cases, where Xeon plus Gaudi really deliver a compelling offering for enterprises who really are now saying, oh, that high-end AI cloud training is great. How do I use it or how do I inference with it? And that's

where we're seeing our strength on both Xeon and Gaudi 3. Now, let me shift back to client for a moment because AI PC caused some turbulence in your numbers last quarter, the costs associated with shifting some production on that. How does that look to you now based on the PC market being a little bit weaker overall than some expected? Yeah, overall, you know, we feel the guidance that we've set, the inventory levels, the strength of the product line, exactly as we would have, you know, forecast. This is a good business for us. We're the clear market share leaders in it and we're set up well with our product line for next year. Obviously, the margins aren't as strong, you know, for that, and there's

some unique things with Lunar Lake, but those all get corrected when we move to our fourth product in the AIPC category, Panther Lake, where we bring wafers home and we run that on Intel 18A, and we've already been, you know been hitting key milestones in its development. And as we launch that late next year and then volume deliveries of that in 26, we feel very good about our overall AIPC category and the multi-year view of its ability to both have great market share and great margins. Your CFO just telling me a few minutes ago that X out the restructuring charges, the foundry business's performance in the quarter you're reporting here, actually a bit better than last quarter.

But taking a step back on foundry and the whole fab construction project, we've been talking about Chips Act and whatnot. You know, the Republican candidate for president, Donald Trump, former president, was talking to Joe Rogan a few days ago and was not very complimentary of the CHIPS Act, calling it a waste of money that tariffs would get the job done better of shifting incentive to produce chips in the United States. Will tariffs help produce more chips in the United States? Well, overall, I'd say, you know, first, the CHIPS Act was a bipartisan act. And, you know, both Republicans and Democrats had strong

support for it. We continue to see strong support from both sides of the aisle. I'd also say it included both grants, which we're frustrated that hasn't moved faster and they've been too bureaucratic on that process. We're anxious to see those finished. But the other side of the CHIPS Act was the tax incentives, which we do expect, you know, have a meaningful impact. In fact, about two to three times larger than the grant side of CHIPS Act. In addition to that, you know, as the candidates are talking about their future policy initiatives, hard to say, you know, how those would affect the overall market. But I think the emphasis of the semiconductor industry, the critical role that it plays and Intel plays in bringing that back and reshoring that onto U.S. soils. We're anxious for whoever wins the election to be reinforcing the importance of that.

We did a lot to get Chipsack done. We want to see that finished, and we're looking forward to what additional policy opportunities may be there. Do you have an update for me on Foundry customers? Yes. In fact, it was quite a good quarter in that respect. We announced the Amazon relationship several weeks ago, but in addition to Amazon, we added two more 18A customers this quarter, compute centric customers. So three additionally this quarter and several more packaging,

advanced packaging wins as well. So overall a very good quarter for us on the Foundry customers, but even better than that is we have a robust pipeline of activities, many other designs and flight RFPs and activities with others in the industry that are looking to also take advantage of 18A advanced packaging and the Intel resilient supply chain for their business. Analyst Stacey Rasgun was on last hour. I know, you know, you guys love him over at Intel.

But he was talking about expectations and where they were set when you came in. He's arguing that they were set too high, that you set expectations too high for what could get done. But do you feel they're set at the right place now based on these restructuring actions that you take in this quarter and based on where you say you are with Gaudi 3, 18A, et cetera? Yeah, I feel like, you know, we've gone through a very challenging period as we've restructured the company. I mean, the people actions, the restructuring actions, you know, this is hard, John. But then to overachieve on our operational results this quarter, raise guidance for Q4, you know, that says a lot to the team that we have here at Intel and our ability to perform

in light of that. We feel like we're set up well, you know, for the future. That's why we've taken these hard restructuring steps. You know, we're also taking, you know, the steps to make sure we have the balance sheet and the capital capacity, the capital efficiency to complete the journey, right? Both getting Intel back to product leadership,

process leadership, launch us as a foundry, and really establish this role that Intel uniquely plays in the technology industry in the U.S. and in the global supply chains of the world. That's what we're out to do, and we're well on our way to accomplish exactly that. Well, Pat, as always, I appreciate you joining me first on CNBC here, this time before the call. I think this worked out pretty well. It doesn't hurt that the stock is up 13%. Pat, I'll let you get on and prepare for the call. Appreciate it.

Thank you, John, as always. Well, the final countdown is on. After the break, the earnings report that could set the tone for tomorrow's market and beyond. Apple's earnings numbers coming up next. Welcome back to Overtime. Apple earnings are just moments away, seconds practically. Let's bring in Sandhill Global Advisor, CIO and CNBC contributor, Brenda Vangelo, CFRA Research Senior Equity Analyst, Angelo Zeno, and CNBC Senior Markets Commentator, Mike Santoli. Teddy, did that make make in the rundown? Let's see.

Brenda, to start, are we going to learn today enough to judge how strong this iPhone 16 launch or week, how this has been? I think it's debatable, John. And honestly, I think in our view, when we think about the 2016 or the impact of the 16, it really is a 2025 story. And I think by that time, we'll have more of the Apple intelligence functionality rolled out. Consumers will really understand just how differentiated the product is. And I think that will likely be the impetus for a larger replacement cycle. But I don't think we're going to hear a whole lot about that this quarter. This quarter, though, I think we'll hear a little bit about how China is going. There's a lot of speculation there

about a potential recovery playing out. And then also the services side of the equation, which has been really strong. We've seen some nice mid-teens earnings growth there. It's very profitable business, really shows that consumers are highly engaged with the company. So I think that's another important. Got to cut you off. Apple earnings are out. Steve Kovac has the number, Steve. Hey there, John. Yeah. And it's beats on the top and bottom lines here for Apple EPS coming in at a dollar sixty four on an adjusted basis versus estimates of a dollar sixty. There's a one time charge happening here for an EU tax bill that accounts for that adjusted number that we're using for comparisons here. Revenue was also a beat, $94.93 billion. Street was looking for $94.5 billion. And iPhone revenue was also a beat,

$46.22 billion versus the $45.47 billion expected. And by the way, that is a record September quarter for iPhone revenue. And one miss in here, though, services was a miss on expectations, $24.97 billion versus $25.28 billion expected. We see shares pretty much flat here, John. Okay. Brenda, sorry I had to cut you off there, but you understand. Angela, let me get to you on this. The stock is fractionally moving around right now. We'll see where it settles out. Of course, there's more to learn on the call, but this is a record iPhone quarter at a time when people were curious how this would go.

Yeah, no, you're absolutely right. And you kind of look at the iPhone here over the last two cycles, essentially it's been kind of no growth for the iPhone 15 and iPhone 14 cycle, like no growth to low single digit growth. So you kind of look ahead here going into the December quarter. Clearly, what's most important is going to be kind of what the guidance is looking for. But kind of, you know, first of all, the first 10 days, at least from this quarter, it looks like you're looking at mid single digit growth for the the iphone here in this in the uh the september quarter and again it'll be interesting to kind of see what tim cook says about about iphones in the december quarter he's not going to give an exact number right but it'll be interesting to kind of see whether he

talks about kind of consistent growth levels some sort of acceleration but if he can kind of you know point to at least kind of a mid single digit growth rate here something consistent to what we just saw in the september quarter i think that should be good enough to kind of point to at least kind of a mid-single-digit growth rate here, something consistent to what we just saw in the September quarter, I think that should be good enough to kind of hold the recent gains that we've seen here over the last six months for Apple. Mike Santoli, how has Apple held up compared to the other hyper, well, I shouldn't say hyperscalers, mega caps up to this point? And what are we learning about that from these earnings? Yeah, the sort of mega platforms. It actually, on a year-to-date basis, it's held up reasonably well. It had this burst higher in June, the WWDC, the unveiling of the AI capabilities. It goes from like 195 to 225, and it more or less has been there for six months or thereabouts, or four months, let's say. And so

it's hung in there. And it's interesting because it seems as if at least, you know, directionally expectations had been beaten down for iPhone for the upgrade cycle in the last several weeks. So it feels like there's a little bit of a sigh of relief, at least on that product line. But it also is the case. It's a 30 times P.E. It used to be a 15 times P.E. five years ago. The reason you pay up more, in my view, is it should be a less hit driven business, a little more consistent. Services has mostly proven that out. But I do think it's a relatively demanding standard here in terms of where the valuation has gotten to. All right. Stocks still bumping around down fractionally. This is the moment I've been waiting for. Let's get back to Steve Kovach for more on Apple's results. Steve, do we know how it looks inventory-wise on iPhone 16 and mix-wise here?

Not quite, John, but I did get some color from CEO Tim Cook. I caught up with him just moments ago to talk about these results. First, let me talk about some Apple intelligence momentum so far. Tim Cook was talking about upgrades to that new software update that hit back on Monday. Here's what 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. So now clearly he thinks that is an indication of what Apple intelligence demand actually looks like. So I asked him if he's also tracking how many of those people who upgraded actually turned on

Apple intelligence. You have to go in the settings and do it. He told me that they are tracking those figures, but they are not disclosing. But I will add, he did kind of sound optimistic about that upgrade rate. And then I was talking about that mix of 15 and 16. Keep in mind, this was a record quarter for iPhone sales. So I asked him how much of that is the 15 versus 16. He told me, quote, it's a combination that 15 was stronger than 14 in the year and 16 was stronger than 15. And later told me, plus keep in mind that the 15 Pro and Pro Max also run Apple Intelligence. So a little bit of explanation there why usually, you know, this is the quarter where we see slowdown of the prior generation in anticipation of the next.

But that may not have happened in this case there, John, because of Apple Intelligence. To clarify, Steve, was he saying that the mix in this quarter of 16s versus 15s was stronger than the mix of 15s versus 14s in the quarter a year ago? Correct. Okay. That's correct. Steve Kovach, thank you. Brenda, back to you on this one then. We know that people are downloading iOS 18.1 at twice the rate of 17, but we don't know if they like it yet.

But at the same time, the 16 mix being stronger than the 15 mix with these initial few days, how significant is that? I think early indications are certainly good. I mean, it's not surprising that those who have the phones that are capable of running Apple intelligence want to download the latest version of iOS so they can check it out and understand how it works. But I do think over time, in our view, this is a reason to replace older iPhones, for sure, a lot more newness than we've seen from Apple. But I do think that it's likely just going to take more time before everybody has a chance to really understand that functionality and have it be fully rolled out. Okay, Angelo, we know that this is a record iPhone

quarter on revenue. Units are a different question, I suppose. But we also know from what Steve Kovach just told us that the mix of the newer phones versus the previous generation is stronger than a year ago. Does that give us an interesting or important data point besides all of these questions about what Apple is doing production-wise? Yeah, listen, I think as far as kind of the September quarter is concerned, you've only got a couple of days in there. So, you know, they're also kind of filling the channel to some extent in there. So it is kind of more, to an extent, somewhat more supply-driven than demand-driven in the early days there. I think what I'd be a little bit more interested in knowing about as we kind of go into the december quarter and

it'll be interesting to kind of see whether or not um he gets asked about it or whether or not you know tim cook comments about it but given that this is kind of a software kind of upgrade cycle to an extent i'm wondering if there are consumers out there that are potentially sacrificing maybe instead of upgrading to the pro devices are they they willing to kind of buy more of the standard devices out there, your kind of iPhone 16 and 16 plus? You know, personally, I did buy an iPhone 16 plus kind of personally because I couldn't get my hands on a pro at that point in time, but I was more than satisfied with the plus. So it'll be interesting to kind of see what the mix kind of looks like in this upcoming cycle as well versus kind of the pros and the standards. We will watch Apple stock now down about a percent and a half. Angelo, Brenda, Mike, thanks for joining me. Well,

up next, much more reaction to these results from Apple. We're joined by former Apple executive and godfather of the iPod, Tony Fadell. And Amazon getting a healthy pop on its results. You can see it there, up 4%. We'll take a closer look at the quarter and why the company's valuation has seen a major reset in recent months when overtime comes right back. Welcome back. Apple shares lower by about a percent right now in overtime as we await the call, despite reporting a beat on the top and bottom lines just moments ago. Joining me now, former Apple executive, Nest Labs co-founder Tony Fidel. He's part of the team that created the iPod and co-creator of the iPhone as well. Tony, great to have you back. So there've been lots of questions about Apple staying power here,

but it seems to me like they delivered a record iPhone quarter in the services business, even though that line was a little weaker than expected. That seems to sort of follow phone sales more than anything. Absolutely. You know, look at the numbers. They just had a consistent, you know, growth, not high growth, but consistent growth. And it's just continuing on the services numbers. As you say, it you say, the services numbers are delayed by a few months after people use their new devices and then sign up. So nothing much to see here except another great quarter for Apple. What's your expectation for how something like Apple intelligence ramps and how the whole AI strategy ramps. Right now, it seems to me like this is just the infancy of it because so often what Apple tries to do is use its vertically integrated

strategy to make it a platform of choice for developers to be able to do things that they can't do on other platforms. Right now, we're talking about what Apple is doing in its own apps with AI more than we're talking about the impact on the ecosystem, right? You're absolutely right. This is all about a platform play. They have a very modest initial offering that came out this week with iOS 18.1. It's just the Apple apps, but the APIs have now been distributed to all the developers. So now what we're going to see is what's going to happen over time, over the next six, nine months, as the developers swarm in and start using these APIs and the next generation ones that are coming just in the winter and the spring. So this is very

unlike Samsung and all the other competitors in the Android world, because they don't have the same API slash AI hardware across the phone. So developers can't take advantage of AI at the edge or on the device itself because they just don't have that kind of infrastructure, Android and the hardware that doesn't support it. So Apple has a very big leg up on AI at the edge versus anyone else out there. So help investors dream here, right? Because they got to really think forward to summer 2025, WWDC, what kinds of developer tools and capabilities and features might get rolled out to have an idea of what Apple might be able to do here that's different. But games are such an important part of the iOS platform. With AI tools, what can you build that's different than what you could have

built before? Well, I think you can see much more rich experiences. With AI, you can actually have these non-playable, what's called NPC, non-playable characters, where you could have very rich experiences with these non-playable characters that are literally AI-driven. They're like mini-humans or mini-agents. We're seeing that with companies like Character AI and some of the stuff in ChatGPT, where you think you're actually talking to a person. So you can bring these new things to light in games and other entertainment, as well as educational experiences. So comparing what Apple tends to do, even on the client side,

with the capabilities that so many of the hyperscalers are building out in the cloud, you know, Alphabets, Google, we're just talking about Amazon, AWS, which just reported that stock was higher. Microsoft as well. What's the difference between how investors should think about AI capabilities in the cloud versus what happens when they're on the device? So first of all, you're going to have a much richer set of applications and things you can do with these huge models in the cloud. But those huge modules in the cloud are not profitable. OK, nobody's making any money. Everyone's still building out data centers and everything. Whereas Apple, when it's on device, and only on the devices that

are AI aware, of course, and now they've also introduced all the things on the math side just this week that's going to take advantage of that, you're going to see all of those things being run maybe to a lesser capability as the ones in the cloud, but on device, and you're going to get there, and they're going to be cheap and fast and private. So it's going to be a very, very different model than what's in the cloud and what we're seeing today. But it's going to be powerful because it's going to be across the entire Apple ecosystem, as well as all the apps that can take advantage of them. So you can still use ChatGPT and these things in the cloud, but you're going to get on-device access through Apple's APIs

and third-party apps. So quickly, what are you excited about building with this? What am I excited? I think about the next generation smart home. So we've been talking about smart home, smart home, like, oh, you can make security like a real security agent in the cloud or on your device that can watch all your cameras. Let's say an Apple TV that watches all your cameras and can tell you this person came home, left this time, the dog's doing this. You know, something's going on in the kitchen. These things can all be done right inside the home. And I can watch it like a security guard. All right.

Tony Fidel, always great to have you, especially on a day like this with Apple earnings. Thanks so much, John. Up next, much more on today's overtime earnings action, including Mike Santoli's look at how Amazon's valuation compares against its biggest rivals. Be right back. Welcome back. Let's check back in on Amazon stock recovering the day's losses, plus a little more after beating estimates. Mike Santoli is back with a look at how the stock and the company's valuation stack up to the competition. Mike. Yeah, John. So here's Amazon shares over the last year relative

to what you can call sort of a composite peer group. That would be Walmart and Microsoft. That would reflect the two major parts of Amazon's business, the everything store and then the kind of enterprise cloud services business. You see it fits right neatly in the middle on the on this one year basis. Also interesting that in July here, when all of them were at a similar spot, all these these three stocks, you see Walmart way outperform Microsoft, suggesting that investors have been more warming to the defensive big play on U.S. consumer spending relative to what's going on in cloud. So obviously positive reaction to Amazon after the market, much more so than Microsoft yesterday.

Here's the valuation. They've all converged. We remember when Amazon wasn't really trying to make a lot of money. They weren't harvesting their huge sales for bottom line profits. That has changed. They obviously are now more consistently profitable. And all the valuations here have converged between like, you know, 31 and 33 on a forward PE basis. Probably not that much of a of a coincidence. They're high quality plays on long term secular trends. None of them cheap, but obviously all sort of reflecting pretty positive expectations on a multi-year basis for profitability. John, A shock to me there is that Walmart has climbed up with the other two.

Big premium built up there. Yeah, I'll see you again in just a bit. Well, up next, all the overmovers that must be on your radar and the data drop that could move the market tomorrow morning. Be right back. Welcome back. If you're just joining me, some big moves from some big names here in overtime. Intel, a standout winner. Believe it or not, it's off the highs, but up almost 8%. It was up as much as 15 as I was talking to CEO Pat Gelsinger just a bit ago. The company did lose an adjusted 46 cents per share because of some restructuring and impairment

charges, but it beat overall in data center and some other areas as well. Apple, a little bit lower by about a percent, despite beating on the top and bottom lines. Missed estimates on Mac, iPad, and services revenues, but a record iPhone quarter. And Amazon turning in a big earnings beat, $1.43 versus estimates of $1.14. That earnings call kicks off at 5 p.m. Eastern. As you see, it's up about 3% so far. Well, up next, what tomorrow's key October jobs report could mean for the market, the Fed, and for your money. And we are just days away from the presidential election.

CNBC will have live coverage throughout the night of some of the biggest names in business. It all starts next Tuesday, 7 p.m. Eastern from the New York Stock Exchange. Be right back. Welcome back to Overtime. Investors anxiously, eagerly awaiting tomorrow's October nonfarm payrolls report. Economists forecasting 100,000 jobs were added last month, with the unemployment rate holding steady at 4.1 percent. Average hourly wages expected to increase by four percent year over year we'll see what the jobs report holds mike santoli but uh the cook report that we just got from apple ceo has uh iphone overall sales at a record which doesn't answer all the questions but you know the stock is doing a lot better than it was before last quarter's report.

Yes, it is. I mean, well, interesting to see if there is going to be any maybe positive follow through to Apple's numbers. There was a pretty decidedly downbeat response in general to some of the other big ones there. So see if the if the call can change. And then, yeah, going up against, you know, this monthly jobs report. Yeah, the consensus is around 100,000 net new jobs. But the range of estimates is very wide from 180,000 all the way down to a loss of 10,000 jobs. That would suggest some low conviction, maybe some big bond market moves. The 10-year Treasury yield since four weeks ago when we got the prior very strong jobs report is up from 380 to 430. It would seem like you have the makings for a little bit of a, you know, buy bonds on the news if it's not too strong, but we'll have to see.

Yeah, and Amazon just pretty much recovering what it lost during the day's regular session so far here in overtime. It is. So, you know, it's going to be kind of a net neutral going into tomorrow. We'll see what the first day of a new month has for us. Yeah, well, that's going to do it for overtime,

but there is a lot going on with conference calls starting off in just a couple moments.