Closing Bell - Closing Bell Overtime: Exclusive Interview with L3Harris CEO; Amazon’s Strong Earnings 4/27/23

Episode Date: April 27, 2023

Averages surged today with the Dow posting its best day since January. BD8 Capital’s Barbara Doran breaks down the action on the busiest day of earnings. L3Harris CEO Chris Kubasik joined in an exclusive interview after the company posted strong earnings. Amazon gained sharply in overtime on strong results; Arjuna Capital’s Natasha Lamb and Raymond James’ Aaron Kessler break down the move while former exec and CommerceIQ CEO Guru Hariharan discussed the e-commerce side of the tech giant. Plus, our Deirdre Bosa spoke with Amazon’s CFO and Morgan dove deep on the company’s space ambitions. Intel also reported; shares were volatile. Susquehanna’s Chris Rolland on why he is becoming more favorable towards the stock. 

A major rally across the board as Meta lifts the mood. It wasn't the only one either. Major averages all finishing higher by 1.5% or more. S&P's best day since January. This is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. It is one of the busiest days of earnings season,

and our team of reporters is standing by to bring you results from Amazon, Intel, Snap, Pinterest, and many, many more. Plus, we're going to bring you an exclusive interview with the CEO of defense contractor L3 Harris after those numbers cross. As we wait for those numbers to cross, let's talk about today's rally, though. Barbara Duran from Bob Capital joins us. BD8 Capital. I was like, this is not right. BD8 Capital joins us now. Barbara, it's great to have you on. S&P finishing the day up 2%. Earnings really leading the charge. Meta, Honeywell, Hasbro, of course, being led by tech, but it's a little bit broader base than that. I think it's the read through we're seeing, whether it's Visa or MasterCard or American Express or the big banks a few weeks ago. When you're looking at the consumer, the consumer is employed. They've got good wages. They've got good savings. And there is no no hint of, you know, serious stress in the in the credit department.

I also think that the Fed is probably close to pausing. The probabilities are they will raise next week maybe 25 pips, and I think they're going to be able to pause for a while. And that's simply because the leading economic indicators down for 12 months in a row, housing, manufacturing weakness. I think there's clear evidence the economy is slowing yeah and so it will begin to impact in consumer spending i just want to note amazon has crossed the tape you're seeing shares trade markedly higher right now up eight percent and after

hours we're combing through the numbers and the report we're going to bring you those in just a few moments uh but in the meantime barbara i mean we did get that weaker than expected uh first quarter GDP number. Tomorrow it's PCE, the Fed's preferred measure of inflation. Just how much hinges on that? Well, at this moment, I think the market is a little bit of animal spirits here. I mean, this is a pretty extraordinary day. And I actually think it's probably time to trim a little bit in these high flyers.

But I think the market knows the inflation peaked last June at nine point one percent. It's coming down. There's a little bit of back and forth. It's not a straight down. And so I think that whatever the number is tomorrow, it won't be dramatically different than expectations. And I think it'll be a non-event. But I don't expect it to be down dramatically. And I don't think the market does either. I think this is a patient thing that we will see throughout the rest of the year as inflation slowly comes down. Barbara, how do you see this mismatch between how goods are performing? Let me stick a pin in that because we are ready with the Amazon earnings numbers. Dear Drabosa, what do they say? Yep, on the surface, they are good.

And that is why the stock is up more than 10 percent. Let me give you the top line. First quarter revenue coming in at $127.4 billion, $124.5 was expected. We're not going to compare the earnings per share, but that came in at $0.31. Remember that last quarter, this was a loss. So this is certainly an improvement in terms of the guidance. That is, of course, essential. The Q2 revenue guide is coming in at $133 billion, and that is significantly better than expected. The street was looking for about $130 billion operating income. This is key, remember,

because investors are looking to this profitability. Amazon says that they're expecting between $2 and $5.5 billion for the current quarter. That's the second quarter. The street was expecting $4.4 billion. So, you know, somewhere in the middle of that, it could be higher. But usually, remember, Amazon does 4.4 billion. So, you know, somewhere in the middle of that on the it could be higher. But usually, remember, Amazon does give this wide range. But really, this quarter, they have to show that they are bringing all of these efficiencies, all the capacity they built up during the pandemic. We're going to look for those cloud numbers, advertising, core e-commerce numbers. We'll bring them to you as we get it, guys. Back to you.

All right, Deidre, thank you. Mike Santoli, looking at the AWS number here, they reported 21.4 billion. That compares to 21.2 billion, I believe, in the quarter before, and operating income for AWS of 5.1 billion. That's sort of in line with the kind of thing Microsoft reported, continuing cloud strength and margins at least holding up, if narrowing maybe slightly.

People were afraid this would be worse. Without a doubt. Afraid it would be worse. Even with a 5% run in the stock today in the regular session, it seemed as if there was a little bit of reluctance to extrapolate off of Microsoft and, to a lesser degree, Alphabet. So a relief trade here. It has been a laggard stock, even though it's got a decent run this year. So I do think you're making some of that up.

The guidance on overall revenues for the quarter, yes, always a wide range. I always say that there's only two months left in this quarter, and they've still got a $4 billion revenue range. But that's how big the business is. It runs at more than a half-trillion-dollar annual revenue rate. But also, you know, the lower end of the range is really not that far off the consensus. So I think those things together and the fact also that Meta and Microsoft held and built upon their after hours bounces after their reports probably is emboldening this reflex move to the upside and Amazon stock here. OK, Barbara, I want to get your thoughts on this since I know you own this name. I mean, we are seeing it looks like a pretty strong

top line growth in the North America segment with that up looks like maybe 12 percent, 11 percent year on year. And some commentary here from Andy Jassy, the CEO in the release, basically saying our stores business is continuing to improve the cost to serve in our fulfillment network while increasing the speed with which we get products into the hands of customers, talking about robust growth at the advertising business and highlighting machine learning investments in that process as well. Yeah, well, that's that is actually a very good thing, because I think there was a question about e-commerce. You know, are they going to continue to gain share?

And what's happening there in terms of the consumer? Because we know it's post-COVID, people are going to stores, consumers may be pulling in a little bit. You know, and we're seeing that in terms of the trade down. And so that's very interesting that they did so well there. Because obviously, AWS right now is a big driver. Advertising is a driver, even though that's still building up. We also want to see the impact of cost cutting. So because they are doing some lifts that are not significant in the grand scheme of, you know, how many employees they have, but they are trying to

cost at every level. But e-commerce was a question. And I want to see a little bit more about their prime membership. You know, there's some indication that may be stalling out for now, but that may be a function of, you know of their video, that that's part of the video offering. I don't know. But I think the e-commerce number is very encouraging. All right. Barbara, hold on. Intel earnings out as well. Christina Parts Nevelis has the numbers. Christina. So we are seeing a top and bottom line beat. The company posting a loss of only four cents. The street was anticipating 15 cents for adjusted EPS on revenues of $11.7 billion, which is a beat, but that's still down 36% year over year. But what you may

see, you see the stock up 2.6%, but Q2 EPS guidance, that comes in a little light. They're expecting a loss of 4 cents a share. The street was anticipating a penny, so that would be positive versus the negative that we're seeing on Q2 revenue, which pretty much falls in line. One number that I was looking at was data centers, because we are seeing or hoping that there's going to be some strength there. Data centers came in at three point seven billion, which was a little bit higher than what the street anticipated. So it's a good thing. Still down about thirty nine percent year over year. The company saying, though, the CEO in this press release, that we remain cautious on the macroeconomic outlook and that they're going to be prioritizing their foundry business,

which they call IDM 2.0. And the CFO also pointing out too that they are prioritizing investments needed to advance their strategy in the internal foundry model, which we know now they want to open up to other chip makers so they can make chips for others, much like TSMC. So we're getting a top and bottom line, and that's why the share is reacting very positively right now, up 4%. Yes, indeed. Christina, thank you. I'll mention I have an interview with Intel CEO Pat Gelsinger. You can catch it tomorrow on CNBC, most of it on Closing Bell Overtime. I also want to note the client computing group at Intel that represents consumer PCs. That was quite a beat from there.

People were expecting maybe just shy of $5 billion in revenue there. They turned in $5.8. So that's on top of the data center beat. Also, the midpoint of the Q2 revenue guide is $12 billion, Morgan. And the street was looking for $11.75. So the midpoint revenue guide is a beat, but they're spending to try to make that future happen. They're spending. It's going to be very curious to see whether this is going to be the quarter that's an inflection point. And I know we have an analyst on who's going to be talking about that, too.

Mike, want to get your response to this? Intel shares are popping about 4 percent right now and after hours. Yeah, they are. I mean, I think it's basically if you're an investor at Intel, you've tried to pick a low over the last couple of months. Basically, you want progress. Any signal that says they're getting in the direction that they want to be going. I think the stock needs to kind of convincingly get above 30 because it went in this recent decline. It went right back into that sloppy range near the low. And also, it's a good lesson. The time to really get aggressive to buying the stock was when they cut the dividend. And the days after that, that was when the ultimate low was put in. That's often the case once they kind of pull the Band-Aid off. That was rough indeed, Mike Santoli. Thank you. Where are we going next? We're going back to up. Deidre Bosa has more on Amazon. She has been combing through that report. Dee, what do you see? Yeah. So a lot of folks are worried about AWS, that top line growth, not as bad as feared,

but in terms of those margins, this is where folks were really worried. And the operating income came in in line at $5.1 billion. So still narrowing there and declining there, but in line, let's call it online stores. Remember, this is the core e-commerce business. There were some worries as well that this would continue to decline. But that's a beat. Fifty one point one billion versus fifty point one. We'll call it in line. A little bit of a beat there. Subscription services. This is the prime ecosystem. This coming in better than expected at nine point seven billion dollars versus nine point five expected. And finally, guys, advertising. This was has in better than expected at $9.7 billion versus $9.5 expected.

And finally, guys, advertising. This has been better than feared from some of the other mega cap players like Meta and Google. Also, that is the case here at Amazon coming in at $9.5 billion. Significant beat about 9.1 was expected. And finally, guys, headcount goes back to this efficiency. We know that Amazon has been reducing its workforce, both corporate and in the factories through attrition. The headcount now 1.47 million.

That's a decline of about 10% year over year, which kind of puts it in perspective. Back over to you. All right. Great stuff. Dee, thank you. Shares of Amazon are up 11%. We've got Pinterest earnings out as well. Julia Borson has those numbers.

Hi, Julia. Hi, Morgan. That's right. Pinterest earnings beating estimates on the top and bottom line. The company reporting adjusted earnings of $0.08 per share versus the $0.02 estimated. Revenue is also coming in at $603 million versus the $593 million estimated. You see Pinterest shares dropping by over 8% right now, and that seems to be coming down to the revenue growth expectations for the second quarter. Those are disappointing where analysts had been hoping they would land. The company also saying it expects operating expenses to grow in the low teen percentages. So that is weighing on the stock now trading down more than 8%.

Snaps earnings are also out. We're going to be going through those results shortly. But just one quick note on Pinterest, we are going to be speaking to Pinterest CEO Bill Reddy. That's going to be coming up in Fast Money. Back over to you. All right. We're looking forward to that and to seeing you again shortly with those snap results with that stock also sinking dramatically right now. L3 Harris numbers are also out. I want to point to the defense contractor here because we had a beat on both the top and bottom lines. In terms of EPS for the quarter, adjusted $2.86 per share. That was one penny better than estimates. Revenue is also coming in better than expected, $4.47 billion versus the $4.25 billion that had been expected by analysts. it looks like full year revenue guidance may be slightly

below expectations company sees 17.4 to 17.8 billion dollars in sales versus 17.7 billion also adjusted eps that is essentially in line with expectations uh just want to note a 25 billion dollar total backlog that's up 16 the company did generate $5.8 billion worth of orders. That was a quarterly record. Space, a big outperformer, which is something we've seen throughout this earnings season. Again, $1.5 billion in new prime space awards. And also, just in terms of that top line, beat 9% increase in revenue, 7% when factored in as organic growth. But we are going to have the CEO and chair of L3Harris, Chris Cubasic, here to break down those results in an exclusive interview in just a few moments. Okay. And meanwhile, we got to get back to Julia Boorstin on Snap earnings. Julia,

why is Snap down 17 plus percent after hours losing all of its gains for the year? Yeah, Snap shares really plummeting in after hours on these results. Now, the company did beat on earnings and user growth, but it missed expectations in terms of revenue growth and also average revenue per user, which is, of course, a key metric of the health of the company. Now, the company did report an earnings gain of one cent per share rather than the one cent per share loss that was anticipated. But revenue declined by 7 percent to nine hundred and eighty eight point six million. That is short of the one point oh one billion estimated. And it is notable that this is the first quarter that Snap has reported a year over year revenue decline, I believe, ever in its history since it went public. Now, daily active user growth was in line with expectations, but just want to give a note on guidance.

Snap does not give formal guidance, but they do say in the prepared remarks that the internal forecast for the second quarter assumes between 394 and 395 million users. That would show accelerating quarter to quarter user growth. But they say that the internal revenue range is of 1.04 billion in the second quarter. That is implying a year over year decline of 6%, which is below the analyst consensus. Also warning that their internal forecast is for negative seventy five million dollars in EBITDA in the second quarter, which is also worse than anticipated. So it really looks like that guidance and the fact that revenue growth is declining. I'm sorry. Revenue is declining from the year ago. Period. Really weighing on on the stock right now. Now down 19 and a half percent. Yeah. Falling by the moment now down. Yeah.

Twenty percent. Julia Borson. Thank you. I mean, it's been it's been there before, but it's been a while. Barbara Duran, want to go back to you because I'm seeing perhaps a trend running between a snap and Pinterest falling revenue or stagnant revenue after a strong quarter that we got from Meta. People have been saying, oh, maybe Meta's business model is dead. It looks like maybe the smaller social networks are having the trouble there. Yeah, John, I think you're spot on. I think it's a question of the smaller platforms. They don't have the money to invest in AI like, you know, Meta has or Google has or Microsoft has.

And if you saw Meta, you know, what they had, their ad sales were up for monetization on Instagram by 30%, on Facebook, 40%. And that's not something that Snap or Pin Interest has access to. They just don't have that. And I think that's what's happening. I know for Snap, I mean, they've got, you know, a very good user base, but they are losing out to TikTok and to Reels in terms of their stories. They're seeing less time on that. They're trying to switch from branded ads to direct response, and they just don't seem to have the tools or the capability to do that. And I think that's the problem with pin interest, too. Pin interest maybe, you know, may take a little

longer because they've got a new CEO, they had some activist support, but I think they've got the same problem. They're not a big enough platform in terms of the money that they generate to invest in these kinds of tools. Yeah. And of course, Pinterest is down almost 8 percent right now. Snap is down 22 percent. And actually, Intel has turned negative as well here in the last couple of moments. Mike Santoli, I want to get your thoughts on that, because it does seem to be a bifurcated market, at least in terms of the earnings results we've gotten, where online advertising is concerned. Well, yes. Today, as well as for the entire earnings season, actually,

even the companies that were beating were actually not in aggregate having their shares rewarded. People, there's some skepticism about guidance out there. When it comes to something like Snap and Pinterest, I do think it kind of fouls that instinct to buy them all after the market because, you know, based on what Amazon had to say, snap. I mean, if this is not a revenue growth company and it's not at the moment, it's not expected to be for the whole year. What are we doing here? It's 300 million in stock based compensation for the quarter for a company that didn't make it to a billion dollars in revenue. And so that's kind of the trap that the company is in in terms terms of just its, you know, the whole business model, how they pay people and what they're

earning off of that base. So it's a tough spot. Stock seems like it's going to go back down toward its lows. Nobody's quite sure if there's strategic value there, I guess, at this level. And similar with Pinterest, though less extreme in the sense that it's never really been all that profitable. It's been about this nice franchise, this pool of users, this very friendly e-commerce and advertising-based type of content. So in a different situation, but still a company that's never consistently shown that it was earning great returns off its user base. Okay.

Barbara Duran of BD8 Capital Partners, thanks for kicking off the hour with us. And Mike, we'll see you in a little bit. Now, let's spend a little more time with Amazon. Joining us now is Arjuna Capital Managing Partner Natasha Lam and Raymond James Senior Internet Analyst Aaron Kessler. Amazon is one of Arjuna Capital's top holdings. But, Aaron, I want to go to you first on these AWS numbers after what we've already seen from Microsoft and from Google and what that says, both in profitability and just raw growth that we're getting from these hyperscalers? Yeah, we think the Amazon AWS growth was better than fear, definitely. And we were modeling 14%

growth for AWS. They came in at 16%. I think there was some concern around the buy side. That'll be more in the low double digit range. I think it will be important on the call what they guide to or kind of what they end of the quarter at. But I think expectations for investors are still fairly low for AWS this year in kind of low double-digit growth. So if they can kind of maintain this mid-teens growth, we think that's better than expected. And then profitability came relatively in line. Amazon also continued to see nice growth on the advertising side, 23% growth. Online stores are relatively in line in terms of growth. But advertising was better than expected. And then AWS growth was probably better than feared as well. So, Natasha, how are you feeling about

your investment going forward, given Amazon just killed Halo, the health wearables today? They announced that they're laying off people, but it seems like some of these difficult growth trends might have bottomed out for them. Yeah, I mean, I think so. You know, this is a year that's going to be focused on efficiency. And, you know, we're expecting this year for free cash flow to go from negative to positive, for earnings to double after dropping 60% last year. And, you know, for them really to focus on the core of the business, on the e-commerce, on the cloud, adding in more artificial intelligence functionality to those services,

expanding ads, and, you know, continuing to be an innovator and disruptor. And obviously, where they see things aren't working, they're letting them go for now. Yeah. Natasha, I just want to get back to the valuation of Amazon, too, because, yes, it was beaten down pretty, pretty badly, at least compared to its Fang brethren last year. But, you know, it's still based on some metrics. It's still trading at a much richer multiple than some of those other companies. We did see a rally to start the year. When you get results like this, and I realize we're still waiting on commentary, is it still a compelling story? Is it still a compelling investment at these levels?

You know, I mean, it's great to see it up 11 percent after hours and have this beat today. There was a lot of concern going into the quarter after last quarter. They gave lighter guidance on revenue. And, you know, even before today, the stock's been really strong out of the gate. It's now up, oh my gosh, you know, before after hours, it was up about 31%. But you have to remember, that's after a 50% drop last year. And that's really what's so tricky for Amazon. They're not as profitable as their peers. And so last year, you saw their multiple get above 50 times. It's the highest multiple of their peers, which is why it sold off so much. It's still

trading at a premium before this after hours move. However, it's been at a two year low. So it was 30, 38 times versus 24 for the tech sector. And I would have said, you know, a little bit ago, well, this isn't a bad time to invest. And it's and it's still maybe again, this is going to be a turnaround year. And, you know, we're just happy to see that cloud came in a little bit stronger. That was the big concern. And, you know, we saw some strength with Microsoft this week, some strength with Google, even though, you know, maybe Microsoft didn't quite, you know, slow a little bit.

Okay. We'll leave it there. Natasha, Aaron, thank you. Thank you. Up next, we'll take a closer look at Intel's results and the read-through for PC makers and other chip stocks. Overtime, we'll be right back. Welcome back. Intel earnings out moments ago.

The stock is down about 1.5%. After, at first, going higher, they did beat on the top and bottom lines, ago. The stock is down about one and a half percent after at first going higher. They did beat on the top and bottom lines, guided to a range where the midpoint was higher than analysts expected, but they are spending. And this investor is not used to seeing losses from Intel. All of this could have read throughs for other stocks, including on the chipmaker side, AMD and Nvidia got to listen on the call for what Intel says about overall industry demand and the implications for whether they're losing share or not, because if they are on CPUs, GPUs,

they're losing it to these guys. Also read-throughs to PC and server makers. The data center results also outperformed a bit, though not as much as client computing. Given the fact that they're still spending with these hyperscalers, including Amazon with AWS, how does that read through to Intel's expectations? Well, that could have implications for, on the data center side, HP and Dell, and even there could be some implications for Apple in what Intel says. Remember, Apple has completely transitioned off of Intel chips, now making its own. So if Intel is suffering, perhaps it's share loss to Apple at the premium end. Let's bring in an analyst on this, Susquehanna Financial Group Senior Analyst

Chris Rowland. Chris, the fact that they were outperforming on the client side, that read-through from Microsoft actually panned out. What does that mean for Intel, given the disappointment, perhaps, with the amount of spending they're doing on the future? Yeah, I don't know if there are great read-throughs from that or not. On the data center side, we have recently picked up some weakness. That said, this guide, the overall top line was pretty decent. We think a big part of that is ultimately client, which is bouncing off the bottom here, or PC. So if you believe that Intel has a shot at a turnaround here, and I've called this the turnaround attempt of a decade. Who knows whether they can do it or not? Again, I'm going to talk to Pat Gelsinger this afternoon, bring it to

our viewers tomorrow. If you believe there's a chance, is there any chance built in to Intel at this level that they succeed in coming back to manufacturing prowess and pulling off this foundry thing? Or if they do it at all, does the stock go higher from here? Yeah, that is the question. And this was an important quarter for them in which they did pull in some roadmaps, particularly around the data center side. And this was probably the first positive roadmap pull-in that I remember in at least five to maybe even 10 years. So if they were to have a shot, they would need to continue pulling things in and catching up with competitors like AMD

who produce on TSM. So Chris, I know that we still have an earnings call to get through with Intel and there's more information that's gonna come from that, but you do have a neutral rating, a $33 price target on this stock. What would change your mind? Well, firstly, we upgraded from a sell this quarter. We're now at neutral. The reason we upgraded was a pull-in of these roadmaps, things starting to look better on the process technology side. And what would get us to a buy would be indeed

another pull in around these products, around this process technology, and allowing them to get at least on par with TSM's process technology. So that would be a huge, huge bonus for us. Well, you know, Chris, I'm going to ask him about that. If you don't ask him first on the call, Chris, thank you. Speaking of, mention it again, don't miss tomorrow right here on Overtime, Intel CEO Pat Gelsinger on the quarter. All right. We're looking forward to that. Up next, we'll talk exclusively with the CEO of L3 Harris, which also just reported results, rounding out a big week for defense stocks. We're going to talk earnings, potential impact of the debt ceiling drama, much more right after the break.

Let's get you caught off on some of the after hours action. Amazon leading the group, beating on revenues up seven and a half percent. Red across the board. Other than that, Intel turning lower after initially being higher. Pinterest and Snap sharply lower. Check out T-Mobile, the stock moving into the red on a revenue miss, although bottom line results did beat estimates. Churn numbers were pretty low as well, Morgan. All right, well, let's talk aerospace and defense.

It's been a busy week for earnings with commercial aerospace continuing to show signs of recovery and defense portfolios being buoyed by growing demand, especially for capabilities tied to space. Case in point, Northrop Grumman, which gained 2% today on an earnings beat with sales jumping 6%. CFO Dave Kepfer telling me earlier today the contractor space segment seeing strength across the board, be it nuclear triad modernization. They have a couple of big contracts there, missile defense or even missile tracking. Modest improvement in supply chain, but in general, a degree of disruption that's just becoming the new normal, according to him. Labor continuing to ease and a moderation

in inflation rates, even though costs are still climbing. But that was this morning. This afternoon, we have more results from another big defense contractor, L3 Harris, with earnings and revenue beating estimates. And you can see shares trading up almost 3% right now in after hours. Joining me here on set exclusively and ahead of the upcoming conference call, L3 Harris CEO and Chair Chris Kabasic. Chris, great to have you here. Always good to be here, Morgan. Thank you. All right. Let's start with a quarter because you did have a beat on the top and bottom lines. You did have a quarterly record in terms of the amount of orders generated, double-digit increase in the total backlog, and actually book-to-bill, which we don't always talk about very much, really solid as well.

Absolutely. Well, it was a great quarter. So first I want to thank the 46,000 men and women of L3 Harris getting us off to a great start to 2023. As you said, 9% revenue growth. All three segments grew. This is the third consecutive quarter we've experienced top-line growth. The orders is really what fuels the growth. And as you mentioned, record backlog, record orders. Booked a bill at 1.3, meaning for every dollar of revenue we book, we get $1.30 of new business. business this really uh for me says that the strategy is resonating with our customer and they're recognizing it by giving us more business

a beat on eps by a penny and positive cash flows so off to a good start gives me confidence we're going to grow in q2 and the full year okay so where are you seeing the most demand come from we just touched on space but also there's the defense budget trajectory here in the U.S. and we see a big increase in what's already been appropriated for this year, but also so much more international demand, too. Globally, we're seeing new records released just earlier this week in terms of the defense spending that's being done. Yeah, we're seeing defense. We're seeing growth across the across the board. We're about 22 percent of our revenues from international customers. We're seeing in the Far East. We're seeing in the Mideast, obviously, Ukraine. We've delivered

15000 radios to Ukraine since the conflict started. And here in the U.S. space is space is a hot market. We grew double digit. But we're also seeing it in our airborne assets, our autonomy, and of course, with the cyber market as well. So pretty well balanced portfolio. Are you seeing supply chain normalization and labor dynamics easing too? We have. I believe the worst is behind us in both of those cases. It's still a challenge. You talk about supply chain. You know, we put our engineers to work and we have redesigned our products and are now using 1300 different parts than two years ago that were not originally designed in. So instead of sitting back and waiting for the supply suppliers to catch up, which we hope they do, we're redesigning our products and taking advantage of what's available.

Chris, how durable is that communication systems revenue growth that's been so strong? Is that those radios that you talked about delivering to Ukraine, how much of it is public safety and how much of that sticks around? Yeah, it's really all military. It's all really, really military. And I think one thing we've learned from the Ukraine conflict is that resilient comms is critical to, you know, the next warfare. So you have to be able to communicate past data without having it intercepted. The US, the Army, the Marines, they're all in the middle of a modernization.

So we believe we have good visibility. It's kind of like our personal phones, right? Everybody's got to get the next thing in the Army. The Marines, all doing the same thing. You're attempting to buy a rocket die indyne, $4.7 billion. FTC last month made a second request. We've seen the regulatory environment look no further than Microsoft Activision this week. And of course, the scuttle deal that happened with the last suitor that tried to take over Aerojet.

Are you confident you can get this deal done? I am confident we're going to get the deal done. But I want to kind of take a step back and say, in my belief, there's a lot of confusion in D.C. over terms that mean three different things. So I'm going to talk a second about consolidation, mergers, and acquisitions. They should not be used interchangeably. A consolidation is when two companies come together with similar capabilities. I reflect on 1997, McDonnell, Douglas, and Boeing. They consolidated. There was one less commercial and military aircraft provider in the US and

in the world. Emerger is what we did. L3 and Harris came together. Complementary capabilities. We're now in air, space, land, sea and cyber domains. We saved six hundred and sixty million dollars, shared that with the DoD and our shareholders and have positioned us to be a stronger competitor in the industry. What we're talking about here is an acquisition, all cash, 10% of our enterprise value. And we're not a competitor with Aerojet, and we're not a customer. So when you look at that from an antitrust perspective, we remain confident the deal will close by year end. Okay. Quick question for you. Speaking of D.C., debt ceiling drama, how closely you're watching it and what does it mean in terms of the impact of future budget?

Yeah, we watch that every day, as you would expect. First, you know, we're looking at the defense budget, $842 billion, a 3% increase. I think that's a good start. We have to get this debt ceiling increased. We got to approve the appropriation bills and we got to get to work and protect the country and run the government. So hopefully Congress works through this over the next several weeks or months. Well, we are all watching. Chris Kabasik of L3 Harris, thanks for joining us here on set, Post Earnings. All right, thank you. Breaking news from the Fed, Steve Leisman.

John, thanks very much. The Fed's balance sheet out, and it did decline for the fifth straight week down by about $31 billion to $8.5 trillion, $8.53 to be precise, since last week. However, the thing that we watch this for, which is borrowing by banks is a potential sign of distress. It actually did rise. Borrowing at the Fed's discount window rose by $3.9 billion to $73.9 billion. Barring at the Fed's new bank lending facility was up $7.3 billion to $81.3 billion. Put them both together and banks borrowed from both facilities an additional $11.2 billion. I say banks. I don't know if it's banks. It could be that what we're seeing here is distress of a single bank. It could just be borrowing by First Republic. We don't know

the number of banks who borrow. We just know the amount that they borrow from the banks. We also know that the loans to the bridge banks, these were the banks set up by the FDIC, they were down by $2.2 billion, but remain high at $170.4 billion. The balance sheet remains above where it was before the Silicon Valley bank and signature failures. It is coming down as the Fed continues to sell assets through quantitative tightening. But there's still a measure of stress in the banking system, as exemplified by the borrowing being done at the Fed's discount window and the bank lending facility. Though we don't know if it's just a single bank. John? All right. A good overview of what we know and what we don't know if it's just a single bank. John? All right.

Good overview of what we know and what we don't know. Steve Leisman, thank you. And up next, Mike Santoli breaks down what the uneven performance between the indices and the average stock could mean for the market when we come back. Welcome back to Overtime. Mike Santoli joins us again from the New York Stock Exchange. What's on your radar, Mike? Yeah, John, we continue to hit on this theme of a very split market

that has sort of diverged among some of the handful of winners and then the majority of stocks that have been lagging. This is a way of illustrating it. The top 50 stocks, top largest 50 stocks in the market on a year-to-date basis, way outperforming microcaps. The biggest versus the smallest. And everyone was getting along just fine until right here. Again, that was SVB collapsing in early March.

That really seemed to just change the entire complexion of the market in terms of perceptions of liquidity and exactly how strong the economy was going to be to be able to support the majority of stocks. On a longer-term basis, not as stark, but still been a large cap led market. Now, even within the Nasdaq, some folks are saying, oh, tech is just taking the mantle. It's not really just tech. It's really the very largest Nasdaq stocks. So a Nasdaq 100, the QQQ is the ETF on that relative to the equal weighted one. Now, they're both up a little bit, but there's been no progress on the equal weighted one since the beginning of February, where you have seen the very largest NASDAQ 100 stocks take the overall market cap weighted index higher. So I don't think there's ever one single

way the market has to behave while going up or going down. But usually these divergences can't last for long. It can't just be this. On a one-year basis, these are both about neck and neck. So it's not that pronounced on a longer-term stretch, but something that everyone's talking about and is worth monitoring. Tough question for you here, Mike. What's with this theme that I see running across so many different types of stocks? Big winning versus small. Social, look at Meta versus Snap and Pinterest. Banks, look at the too big to fails versus the regionals retail you know again look at amazon or walmart etc versus these smaller direct-to-consumer brands which some of them had you know exciting ipos warby parker etc

that have fallen apart what does that say about this economy especially for investors i think what it really means is there's just less growth to go around. So if you're worried that the overall economy is not going to be growing as quickly, that is the overhang on psychology right now, on a lot of the numbers right now. You realize it's more of a zero-sum game world. It's not as if everybody gets their share. You could feed on that fast growth. So you pay a premium for the companies.

It seems like either they can defend market share or gain it in a tougher economy. That would be the way I would view it. Some would say, well, this is what happens when money's not free and liquidity kind of rushes out of the out of the market. I'm not sure that's really measurable, but that is one of those perceptions out there that you also have running alongside it. Yeah. I mean, the Russell finished today up 1.2 percent, but that was still an underperformer versus all of the major averages. And it is down since the start of the year, albeit barely. But we've seen a lot of selling pressure there. I

mean, is this expectation, given the conversation we're having right now and, of course, how we're now seeing it play out in real time and earnings, that this is underperformance that could continue? It absolutely could continue. But you also have seen it kind of ebb and flow, this relationship, over time. So one of the ways you can view it as being maybe not so bad is the market sort of allows the big stocks to do the work for a while while the other ones set back and rest and reset expectations and recognize the fact that earnings aren't going to be as strong. And then when the mega caps get stretched, the other ones can maybe either just hang in there or make up some of that ground. So there are two ways that these divergences can reconcile themselves. All right. Mike Santoli, thank you. Earnings calls from Amazon, Intel and Snap are getting set to kick off. Here's a check

on those stocks right now. Amazon is the only one in the green of 7.5%. Snap down 18%. Pinterest 9%. And Intel down about 1%. 18%. Well, hold my beer. Check out one more earnings mover in the red as we head to break. Cloudflare falling hard. Revenue a slight miss. Revenue guidance for Q2 and the full year coming in very light as well. The company saying increasing sales cycles to blame and expect that to continue. Much more overtime straight ahead. Welcome back to overtime. It has been another wild hour of after earning after hours earnings, including Amazon, which is up about 7.5% after reporting results earlier in the hour. Let's get back to Deirdre Bosa for more on those results. Hi, Dee. Morgan, I just spoke to Amazon CFO Brian Olsowski, and I asked him how he saw cloud growth,

if it had bottomed out, if he's starting to see some stabilization. He didn't really say that. He said that he's not sure how the next few months would play out. However, he did say that they're winning new business. And he thinks the deceleration of growth is due to this macro backdrop, not more competitive pressures as we do see Microsoft Azure and Google Cloud continue to increase their growth, even though that's decelerating. In terms of costs, he says that the company really spent the last six to nine months evaluating every business, making some decisions on where to move resources, eliminate some businesses if need be. In terms of where the growth was spurred this quarter and how that top line came in better than expected, he said that there was a lot of strength in international where economic conditions had improved in the first quarter.

He said he was encouraged by inflation coming down and consumer confidence going back up. He also said North America had been solid. And he also pointed out here once again, AWS, he says it continues to hold up in an environment that is slowing. He didn't mention advertising, but I imagine he sees that as well because that came in better than expected, John. All right, Deidre, thank you. We look forward to the call.

Meanwhile, up next, a former Amazon executive breaks down the company's e-commerce results and the read through, if any, for the rest of retail. And two mega cap biopharma names that are pulling back on results. Amgen missing on revenue, but beating on EPS. Gilead missing on EPS, but beating on revenue. You can see both companies have shares trading down more than 2%. We're right back. Welcome back to Overtime, the stock of the hour, Amazon, adding some $90 billion in market cap right now in the overtime after strong numbers really across the board. Joining us now is Guru Hariharan, Commerce IQ CEO. Guru, great to have you on. We've talked a lot about cloud and AWS. We've even touched on advertising. What we haven't really dug down deep into is the retail unit, which when you look at

the top line and the sales beat, it was the outperformance in retail that really drove a lot of that. Yeah, it looks like this time it was, we've always talked about cloud quite a bit, but this time there were two heroes that emerged. One is the re-emergence of retail business. They clearly over-delivered on some of the expectations and advertising continues to be a growth machine for them. Advertising is super interesting, right? If you look at it, now this is a pretty large opportunity for retailers. Every retailer, including Amazon or Walmart or Walgreens, CVS, everybody's becoming a media company.

Why? Because they have shopper eyeballs and the shoppers are there to make a purchase. It's a moment of truth and it's a perfect opportunity for them to provide and provide the brands an ability to advertise their products when consumers are just about to make a purchase. So a lot of the media dollars that were in the top of funnel media per se, which is Facebook, Google, or even like TV ads, like Super Bowl ads and things like that, are now starting to move into more what we call accountable media,

which is retail media. And that's been really impactful and helping a lot of companies. And of course, Amazon seeing a huge tailwind from that entire movement from top of funnel media to bottom of funnel media. Okay, Guru, what is the message to smaller retailers who in the past might've tried to go DTC?

They've increasingly these days been trying to do business with Shopify and gain more control of their destiny. Do they still need Amazon? Is this kind of bigger company succeeding, playing out in that way for the smaller players? If you look at it, John, the VC money has completely drained off. A lot of sins used to be just covered up by VC money in direct-to-consumer. And that's now, that air cover is gone. The market valuations are down. So even if it's, whether it's venture capital money, whether it's public markets,

the money or the dry powder is dried up from the direct-to-consumer business. And you're starting to see impact of two cost drivers. The first cost driver is cost of customer acquisition. Cost of customer acquisition is through the roof, especially after the changes that have pushed through to the latest Apple changes and things like that. That has gone through the rules. Second thing that has happened is supply chain costs, especially coming out of the pandemic. And as we look at the entire P&L, supply chain is a huge cost. Now, when there is a company that is trying to acquire customers

by paying through the nose, they don't have advantages like 60 million shoppers being prime members to supply chain, which again, they don't have the scale of Amazon or Walmart. It starts to become extremely challenging to drive a P&L like a direct-to-consumer. So many of these smaller brands are actually moving to Amazon, moving to marketplaces so that they can make a dime and move revenue. Guru, thanks for joining us. Something we don't discuss often when it comes to Amazon,

it's space ambitions. The $10 billion Project Kuiper, a planned constellation of thousands of satellites to, as soon as next year, offer broadband service to consumers and businesses. Amazon's been cost-cutting. This has not been an area where it's been doing it. Space-based Internet is an increasingly competitive market, be it SpaceX's Starlink, OneWeb, AST SpaceMobile, or the more established players like Viasat. This is something I discussed with Viasat's chairman, CEO, and co-founder, Mark Dankberg, as the the first of three next gen Viasat 3 satellites is poised to be launched to space tonight.

That's one of the things that Starlink has been doing and we can see others are now really, really interested in is how much bandwidth can you deliver for a given price or cost for a customer, all things considered. That's exactly been the strategy that we've been on. We think Viasat 3 is going to be very, very competitive in those markets. And we've been quite successful in the markets that we've been in. The big thing that Viasat 3 will do for us is give us a lot more bandwidth. We think of that as inventory. All right. And more inventory means more growth. Viasat 3 will launch via SpaceX's expendable Falcon Heavy rocket as soon as tonight from Florida. Wall Street's watching the deployment

of this new constellation closely. A reminder that Viasat is publicly traded. But for more on my conversation with Dankberg, check out my podcast, Manifest Space. You can follow and listen wherever you get your podcasts. You want to mention as well, tomorrow, Pat Gelsinger, Intel CEO, hear from him here on Overtime about the path forward, this uncertainty about what to do with this stock. Do you believe he can turn it around or not? What does the rest of the year hold? We're going to talk about all that, Morgan. Yeah. And of course, key conference call kicking off there. Such a busy day for earnings. That's going to do it for overtime. Fast Money starts now.