Closing Bell - Closing Bell Overtime: Mega-Cap Tech’s Big Day 7/28/22

Episode Date: July 28, 2022

Amazon, Apple and Intel all reported results in the Overtime session. Our all-star panel including Wedbush’s Dan Ives, Requisite Capital Management’s Bryn Talkington and Jason Snipe of Odyssey Capital all break down the results with instant, expert analysis. Plus, Amazon and Apple shareholder Mark Lehmann explains what he is listening for on tonight’s conference calls – and what it could all mean for investors.

Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started right here at Post 9 at the New York Stock Exchange. And we have a very big and busy Thursday on tap for you. Apple earnings breaking at the bottom of the hour. Amazon's numbers are imminent. Intel and Roku also hitting any moment now. And as usual, we will guide you through those results and, of course, the stock moves that follow. We begin with, as always, our talk of the tape. The last of the mega cap tech earnings to deliver their results, but will they deliver for you, the investor? That is the key question. Let's ask Bryn Talkington of Requisite Capital Management and Jason Snipe of Odyssey Capital, both members of the Halftime Investment Committee. Dan Ives, he's the star analyst of Wedbush. He's here with me on set as well. He is bullish. His firm is on both Apple and Amazon. Jason Snipe, I turn to you first because you own Amazon and I said this is imminent. What are your thoughts going in? Yeah, it's going to be interesting, Scott. I mean, I think expectations are a lot

lower than they've been. Obviously, they came off a net loss last quarter. I'm really interested to see how labor costs and transportation costs have played into what they've done from an e-commerce perspective. We've heard from Target. We've heard from Walmart. And really, the read-through on the consumer. And I think the other big play for me is how has AWS done? AWS is a little bit more slanted to the consumer than they are to the enterprise. We've seen what's happened with Azure.

We've seen what's happened with Google Cloud. Slight misses, but still real strong growth. So I want to see if that's decelerated some. But that's what I'm looking for in the quarter here. Yeah, and you can see the earnings are obviously out, and the stock is already moving in overtime. We're going through it. Our ace reporters are certainly on the case, and they'll be joining us in just a moment.

You, Bryn, sold this stock not that long ago. Yeah, I sold it a couple months ago. And I just think that when we have so many stocks are down 30% to 40%, you have Jeff Bezos leaving. Andy Jassy obviously has been there since 1998. I just wanted to pivot more money into other names that I feel like I have more clarity around. And once again, the last two quarters have been absolutely brutal for Amazon, down 10 percent after earnings last quarter. I think the same the quarter before. So I'm glad to see it's up, but we'll see what happens after the call. I mean, maybe this is a better than

feared reaction as we see this initially. Mr. Ives, I know you haven't had a chance to look through the numbers. I see, and I told you we're going through it. We'll have the reporter pop on in just a minute. I see a loss here from an earnings standpoint of 20 cents per share, which, you know, would be, they reported their first quarterly loss in seven years last quarter. So it would be a miss there and it would be another quarterly loss. Deirdre Bosa is following this. Is that what you see as well? That is what I see, a loss

of 20 cents. However, Scott, and this is really important, we're not comparing this to the Wall Street consensus because, remember, Amazon's big stake in Rivian, that has been wreaking havoc on these numbers. And remember that these shares were down nearly 50 percent Rivian, that is, in the quarter. So that is likely messing with these results. The important thing is revenue. That came in greater than expected at $121.2 billion. However, I want to run through guidance, arguably the most important numbers to come out of this report. Amazon is expecting Q3 revenue of $125 to $130 billion.

$126.4 billion was expected by the street. It's expecting operating income between $0 and $3.5 billion. That is actually light I'm seeing. The street was expecting $4.4 billion. So we're going to run through this report, find out more. But remember, they took a $6 billion charge in terms of those extra costs relating to extra capacity, extra labor at the warehouses. We'll continue to run through this, Scott, and bring you more. But that loss of 20 cents, remember, likely has a lot to do with Rivian. Yeah, and I'm glad you put perspective, an important perspective on that, Thibaut. So thank you very much.

We'll see you again in just a little bit. So we got inflation, supply chains, recession, competition, post-pandemic world for a company like Amazon. What's your initial read on what you've heard here? Better than feared. I mean, because specifically, if you look at AWS numbers, you look at the top line growth, Armageddon expectations coming in. Remember, last quarter, they cleared the decks. And the narrative that's starting to emerge in big cap tech earnings with Microsoft, with Amazon. We saw it with Netflix as well. You know, I think you had a lot of bad news baked in. What you're seeing underlying,

not falling off a cliff, that's what the streets focus on. But just like Jason said, AWS, that continues to be the key in terms of the cloud. That, Jason, being AWS, the cloud part of Amazon, the real growth engine, if you will, of Amazon, that's where the results need to remain strong to make up for any weakness of what we said was being driven by an uncertain macro environment, the pull forward of all those sales during the pandemic. And now you're riding into the headwind of a macro slowdown. Absolutely, Scott. I mean, AWS is so important. As you mentioned, I mean, that's the engine behind the company here.

And I think with the guide being a little light, I think that's a read-in to the consumer. And as I mentioned earlier, AWS is slightly more levered to the consumer and not enterprise. So it would be really crucial to see that number continue to grow at a really nice pace. And as we've seen, as Dan mentioned. Go ahead. Dee, you have more on cloud? It's exactly what we're talking about here. What do you see now? I wanted to jump in. It actually was better than expected. So that's $19.7 billion versus $19.6. So a slight beat here, but there were some worries going into the report that even though Microsoft Azure was strong, there's a higher mix of enterprise. So perhaps AWS wasn't quite as strong, but continues to be that reliable engine of growth and profits for Amazon. I'll come back to you with some more stuff in a bit, Scott.

I know you will look forward to that. So here you go. I mean, the most important metric. That's why the stock's up 10 percent. Right. I mean, the most important metric, that's why the stock's up 10%, right? You have to have the growth engine of the business make up for any shortfalls in the other part of the business as we're riding into the headwinds we just mentioned. Right, and so I think it's real interesting. You see Meta as a juxtaposition with, you know, they're directly more involved with the consumer. They're down.

You still have the growth engine of Amazon, obviously, on enterprises with AWS. And so I think you're going to continue to see this dispersion with the FANG stocks of the Microsoft. We'll see a good read from Amazon. And we'll end the day with Apple, which probably is going to be strong as well. Let me just let everybody know as well that Intel's out. Our reporter on the case there, too, is going to come on. I see a miss here and a significant one in terms of revenues. And you can see a stock that's down some 7 percent. You talk about a host of issues that this company has been dealing with, too. Lack of or losing market share, I should say, right into a PC slowdown caused by these same headwinds in the macro environment that we've all been talking about.

And oh, by the way, as the company is trying to transform itself, which the CEO, Pat Gelsinger, has made awfully clear over the last many months since he took the helm of that company, you wouldn't own this, I don't think, for anything now, would you? No, I mean, I think Intel is frozen in time. And I think that's the issue. And if you look back five years, Intel, I think over the last five years is up around 12%. It's up five bucks in five years versus Nvidia is up about 300%. AMD is up even more than that. And that just shows you they just missed two big important cycles. And I think Pat is coming in obviously very brilliant. They're going to have to spend so much money.

And so I continue to think that even though you have a nice yield from a dividend, this is a value trap, not a good value. Yeah. Christina Partsenevelis, you have more here? Oh, yeah, I have more. Let's talk about Q3 guidance for the company because that came in much weaker than expected. They are anticipating about 35 cents a share for adjusted EPS in the third quarter. The street was anticipating 86 cents adjusted. Huge miss there. Revenue guidance, too, for Q3, around $15 to $16 billion in revenue. The street was expecting 18.6. EPS for Q2, so this past quarter, missed at 29 cents. Revenues, $15.3 billion. The street was expecting $17.9 billion. And we also had commentary from the company in the press release, and they're acknowledging that it is mostly, they're taking, I guess, the brunt of this. And I'm going to say, quote from the CEO,

this quarter's results were better or were below the standards we have set for the company and our shareholders. We must and will do better. And they went on to say that it was because of the rapid decline in economic activity that was the largest driver. So again, they are acknowledging that this environment is challenging and admitting that the standards right now or the earnings were way below their expectations. So you can see guidance came in light, top and bottom miss. Back over to you. Okay, Christina, thank you.

War in Ukraine, that's a problem. China supply chain, ongoing problem. Currency issues on top of everything else, a problem. Visibility, Dan Ives, across a lot of these tech companies, a big problem. The CFO, Justin June, headwinds, quote, much worse than what we had anticipated coming into the quarter.

Obviously, from these results, that hasn't abated at all. This is a horror show in terms of earnings. And I think, look, Pat's not a superhero. Because especially if you look at the PC exposure, remember, Microsoft Cloud was the pillar of strength. PC, we're seeing from our Asia checks, continue to be weak across the board. Just like she was talking about, I really do believe AMD and Nvidia, much better position. It's going to be an Everest-like uphill battle for Intel over the coming years.

Yeah, you can see the stock's down 9%. I'm looking at my computer because Roku earnings are out as well. The stock's getting bludgeoned in overtime here. It's a miss on the top. It's a miss on the bottom. We're going through all of that. Bryn Talkington, I mean, you're in the ARK stocks.

This is in the ARK. What's your reaction here to what you're watching? I haven't read the report, but like snap, if you're a no-E company, if you have no-E and you have low growth or no growth, the market's going to take your legs out. And so there's just like the market does not suffer fools in this type of environment if you have no E and you're not growing. Yeah. What's the biggest line here, Julia, that's driving the stock down more than 20 percent? Roku is plummeting after missing on both the top and bottom line, reporting revenues of $764 million versus the $805 million estimated earnings. Actually, a loss of $0.82 per share, greater than the 69 cent per share loss than analysts anticipated. But the key thing that is driving that stock down over 20 percent is the company's

guidance. The company guiding to Q3 revenue of 700 million. Analysts were looking for 902 million. So major shortfall expected in the third quarter. They also say that because of all the uncertainty in the market right now, they're not going to give full year guidance. And the headline here, the overall headline, the first line of their letter to shareholders, is that there was a significant slowdown in TV advertising spend due to the macro environment, which pressured our platform revenue growth. They also say consumers began to moderate discretionary spend and advertisers significantly curtailed spend in the ad scatter market. The reason why I read that, Scott, is because I do think that that has broad implications for other players

in the space as well. Roku shares now down 22 percent. All right. We'll keep our eyes there. Julia Borson, thank you very much for that. Dan Ives, so we take all of the mega caps into context at this point. Is the headline we walk away with better than feared? Not spectacular by any stretch of the imagination. You can't report a loss like Amazon has here and think that everything is fabulous, but it's better than feared. And that's why the stocks for the most part, ex-Facebook meta, have reacted the way they have. Yeah. And I think Street was expecting a C, C minus coming in. Instead, it was a B, B plus. And ultimately, if you look what's factored into a lot of the valuations, there's a narrative that's coming

across here. Enterprise holding up. Cloud continues to be strong. And even on some of the consumer areas in terms of digital, what we saw with Alphabet and some others, it's a bifurcation that we're seeing. On one side, snap. On the other side, it's Alphabet. And I think that's where we're going to continue to see play out. But the one thing I want to say is I believe it's the most negative I've seen tech investors going into earnings, I'd say, going back 2009. Well, I mean, for good reason, right? You can't fault them, can you? I mean, the macro is tough. And I should also add that even though we're not seeing a big enterprise drop off and Microsoft CFO talks about big deals still holding in place.

J-PAL said it clearly yesterday. A lot of what they have done has yet to filter through the system and have a big impact on what might still be coming. So let's not jump out of our seats and throw a parade just yet, Dan Ives. No doubt. And I think the important thing is that these management teams have now cleared the decks for guidance. The big reason, especially institutionally speaking, you couldn't really own tech, you felt like numbers cuts didn't happen yet. Now that they've had, now I feel like you start seeing more and more of a green light, not even just in the backdrop because of where earnings are. You feel like they're hittable and beatable second-half numbers.

Yeah. Jason Snipe, I mean, important too for, look, Andy Jassy is going to have to, you know, forge his own way and put his own name on where he wants this company to be after it's so long identified as Jeff Bezos's baby. Well, Andy Jassy is at the helm now. They've split the stock. They're moving into this post pandemic world. What do you want to see from him? They have to cut down expenses. He's made that painfully clear in the most recent months. And we'll hear from them coming up on the call in just a bit. Yeah, I mean, Andy's been there for 24 years. He's been there a long time. He's been part of

the executive team. I think for me, it goes back to what we were talking about earlier, continuing to focus on the cloud again that's the engine of the business and prudent uh strategy in terms of labor costs and expense management i think that's going to be very important and also managing into a normal cycle as it relates to e-commerce i think that's going to be very important there's a lot of pull forward throughout the pandemic obviously we're getting back to a more normal environment how How do they pivot into that? I think that's going to be the key moving forward. Back to Dee Bosa, who has more for us on advertising, Dee. There's always a lot to go through, Scott. Advertising, of course, Amazon has become a major player. And the effects it's seen, certainly from that slowing ad market growth, but not too

bad. I'm looking for it right here. Revenue coming in of $8.76 billion. That's growth of 21% year over year. So that's still pretty strong, especially when you compare it to the Twitters and Snaps and Metas. That's slowing from 25% growth last quarter. But remember, this is a now nearly $9 billion per quarter business within Amazon. Also, a little more color on that Rivian loss, Scott. It was a pre-tax valuation loss of $3.9 billion. Also, just want to tell you, of course, Amazon's core online stores, it was flat year over year. One of the biggest sticking points from last quarter was it was actually a small annual decline, which Amazon had rarely seen. So improving a little bit. Remember, Amazon took a $6 billion

loss in the last quarter. So maybe things are looking up, and that's why you're seeing the stock up 10%. Yeah, Dee, thank you for that. Dan Ives, I mean, who in your universe is managing this challenging environment you think the best thus far? By the way, we haven't even heard from Tim Cook and Apple, which we expect in some 14 minutes from now. I think it's that company in Redmond. Because ultimately, if you look what Nadella's done at Microsoft, it's really been almost a tactician approach in terms of cloud, in terms of what we've seen with customers, the expense profile. And I think really the second leg of that is going to be Cook and Apple. I think those are the two, we've talked about the two most

important earnings, I think across tech, maybe across the market, were Microsoft as well as Apple. What it's going to show you about demand, as well as what, especially on the supply chain side, what we're seeing for Apple with iPhone 14 around the corner. Last, I think, before we take a quick break, does this make you comfortable with owning big tech like you do? Certain aspects of big tech, certain aspects. You still have to be choosy. Have to be choosy, absolutely. I mean, I recently bought Facebook, but then, you know, that wasn't a great report. And also the FTC is not even letting them buy this small fitness app. And so that just has big challenges. I still think there's going to be more bifurcation between the Fang names of which ones you want to own. You can't just own that basket anymore. All right. When you're 17 minutes

in, rocking and rolling, still waiting, of course, Apple, bottom of the hour. Bryn staying around, Jason staying around, Dan Ives is sticking around with me right here as well. Let's get to our Twitter question of the day. We want to know which tech stock are you betting on after this week's big results? Is it Amazon or Meta, Alphabet, Microsoft? You can head to at CNBC Overtime. Cast your vote. We'll share the results as we always do later on in the show. I said we're just getting started right here in overtime. Up next, we have more reaction to Intel's quarter. The top ranked chip analyst is back with us today, Stacey Raskin. He has a sell on the stock. Does anything change his mind here? Maybe he doubles down on that. We'll get his take on the quarter straight ahead. Plus, the countdown is on, just minutes away now from

Apple's highly anticipated earnings report. 12 minutes and just north of 30 seconds. Our all-star panel standing by to break it all down. Stick with us. OT, back after this. All right, we're back in overtime. Intel shares hitting fresh lows in this after-hour session. The company missing on the top and the bottom lines. They gave weak guidance as well.

Now we ask the top-ranked semi-analyst Stacey Raskin of Bernstein what to do with shares now as you see them plunging in overtime. Stace, welcome back. It's nice to see you. Your reaction, you're smiling. I can't believe you're smiling because of these results. Ouch. Yeah, there's there's people knew it was going to be bad. I mean, the company has been publicly sort of talking down numbers, but I don't think people thought it was going to be this bad. This is an ugly, ugly print. PCs are weak. We knew that, but I'd say in their numbers, it's much worse than I think people would have thought, given even the weakness we're seeing in that market. My guess is they're probably dealing with channel inventories as well as weak demand. Data center looks absolutely horrendous. And this is the thing that's really getting me beyond just PCs. Data

center revenues were down 16% year over year. They missed consensus by like a billion and a half dollars. The operating profit in data center was down 90% year over year, printed a 5% operating margin. That is unheard of. The company's got gross margins now. They plunged through the 50% level. They're running in the mid 40s now. They're looking for under 50% for the full year. Like I said, ugly, ugly print. There's nothing to like here, at least in the numbers, nothing. Well, I mean, is this environment or execution or both? Well, they're blaming, I guess, to their credit in print,

they're blaming both, and it is both. We've been of the view, at least on the PC front, that not only have they been over-earning in the strong market, we think they've been over-shipping. And so I think that's correct. And what I don't understand right now is that data center number, because we've had a lot of other reports from folks in that supply chain, and people have been worried that data centers are rolling over. Everybody else seems fine. This is the worst data center result that we've seen so far in the industry, and certainly the worst that I've ever seen in Intel's, at least in my history of covering the company, which is almost 15 years.

Wow. I'm looking at data center, data center revs down 16 percent. The company says Pat Gelsinger saying, quote, this quarter's results were below the standard we have set for the company and our shareholders. We must and will do better. The question to you is, how do they do better if it's as bad as you just said? I mean, they're looking for a little bit of a rebound into Q4. You can kind of back into the Q4 guidance because they gave the full year in Q3. So, I mean, they did 29 cents in Q2. The street was at almost 70. They're guiding 35 cents in Q3. The street was at 82. They're guiding about 79 cents in Q4, still below the street, but it's a rebound. So we'll have to see how that looks. And then we'll see what things look like going forward.

But I think people have to remember, Intel's on a multi-year transition, a multi-year journey. It's just barely getting started. This is just the beginning of it. So I don't know what this looks like as we go forward. I think the one thing, if you were looking for any sort of silver lining, people were hoping that they would kitchen sink it. So maybe this is a kitchen sink. Maybe that's the hope. But I mean, it also feels like it could be going down the drain. Like, I don't know. Like, this is it's not so good. I mean, they haven't done that. It feels like they've felt it feels

like they've already thrown the oven and the refrigerator into the into the pile. And now they're supposed to kitchen sink it after everybody kind of knew what the challenges were. But let me ask you this. The passage of the CHIPS Act, it's very meaningful for a company like Intel, which wants to build this plant, which it hasn't broken ground for yet, by the way, in Ohio. Is it meaningful to the bottom line? Well, yes and no. So they've got plans to build. And without the subsidies, those plans will cost more. But in order to get the sub-member, they're not just getting dollars and then putting it on their balance sheet and then buying back stock. They actually have to

put those dollars into the ground to get it. So they need to build those facilities. Results like this, you've got to wonder, do they actually need them? I don't know yet. So that's the issue with the CHIPS Act. It'll help, but their goals that they've laid out, assuming they stick to them, are grandiose. And they need the CHIPS Act in order to get it. But most of the dollars to build that is still going to be coming off of their operating results, not from the subsidies. The subsidies are a piece of it. They did cut their care tax, by the way, this year. It sort of brings those longer-term plans into question as well, I think.

Part of this is just they're just not in the hot space right now. I mean, Texan and NXP, they told you what's good, right? Autos, industrials still holding up well. If you have more exposure there than you do to consumer PCs and the like that Intel does, you're just going to do better. Agreed. But like I said, even within that context, I would have expected data center to be much stronger than it is. consumer PCs and the like that Intel does, you're just going to do better. Agreed. But like I said, even within that context, I would have expected data center to be much stronger than it is. I don't know what's going on with the data centers, but it looks really bad, much worse than it was. I'm going to look out for your reiteration of an underperformed by

morning. It sounds like it's coming. Stacey Raskin, I appreciate your time as always. You bet. You bet. Thank you. Yeah. He's the number one chip analyst joining us there to react right away to Intel. Don't miss a first on CNBC interview, by the way, with the company's CEO. I referenced him, Pat Gelsinger. There he is. Eleven a.m. tomorrow morning on Tech Check. He's got to face the music, certainly after these results. We are just moments away now from Apple's big report. We're going to take one more quick break. Do not go anywhere. We're about five minutes away. Breaking next. We are literally moments away from Apple's earnings.

There's the countdown clock approaching two minutes till those big results come out. Bryn Talkington still with me, as is Dan Ives and Jason Snipe. Back post nine as we await those results. Both Bryn and Jason own the stock. The bar has gotten higher because the stock has gotten higher over the last month, right? Yeah, well, the stock has gotten higher over the last two years because remember, prior to the pandemic, you know, Apple was only top line revenue growing about two and a half percent for five years, right? And they were buying their share backs and then COVID came

and then they got huge revenue growth across the board. So my question is that, are they going to mean revert back to the 2019, or are these higher multiples here to stay? But I definitely know, you know, the MacBook is about 10% of their revenues. I think that'll be lower, but because it's only 10% of their revenues, I don't think that PC issue will be as meaningful versus the service where they have higher margins probably continue to grow. Wonder about iPhone sales. Could be the first decline of iPhone sales in almost a couple of years. That's still 50-plus percent of the business, right, Dan Ives? No matter what you say about services, this is an iPhone company.

The hearts and lungs of the Apple story will continue to be iPhone. And that's why, of course, because of the zero COVID shutdowns, it was what we saw, $4 to $8 billion headwind. That's really going to be the focus. When Cook talks, everyone listens. What does services look like? What does ultimately iPhones look like? And especially this going to iPhone 14 cycle,

which is a key release as we go in the next few months. Yeah, I mean, they already warned that revenue growth was going to be hit by the supply chain issues that they're having in China. The question is, by what degree? Is it $4 billion?

$8 billion? We don't know. Are you looking out for that number? What do you think it is? We think it's probably somewhere about $6 to $7 billion. So right in the middle of that range. And I think the streets anticipating that. Also a big focus on when you back in what potentially ASPs looks like, potentially higher

ASPs coming out of China. And of course, this is all going to be the drum roll to guidance, especially the September quarter. We got less than 30 seconds. Jason Snipe, what do you expect? Yeah, I think it might be a slight miss here. I think the points that Dan and Bryn mentioned are obviously concerns. I mean, 58 percent of their business is done overseas. There's FX concerns. There's also supply chain concerns, which they've they've talked about earlier in the quarter. So let's see what happens. The iPhone is clearly the dominant player here. So I'm very curious to see what those numbers look like.

All right. The numbers are out. Steve Kovac, tell us all about it. Hey there, Scott. Yeah, we got a slight beat on the top and bottom lines for Apple. Revenue coming in at $82.96 billion. We were expecting $82.81 billion. EPS $1.20 versus $1.16 expected. And let's break down some of the most important segments here. iPhone revenues $40.67 billion. That's a slight beat. And services revenues $19.6 billion versus 19.7 expected and i want to highlight this one for you guys the mac had its first decline of the pandemic it's down 10 7.38 billion dollars uh the company blaming supply constraints and foreign exchange headwinds for that scott i'll send it back to you and i'll come back to you momentarily and i know that for a fact dan ives uh service is a little light not enough to disrupt the story or is this we're still trying to figure out which way we want to go here from a stock standpoint? I think service is better than feared. You look at that iPhone number. I mean, there was thoughts you could have maybe potentially a two billion dollar miss.

We'll get along a beat. I think this also is good breadcrumbs into what's going to be for the September quarter. And it just shows this continues to be just a rock of Gibraltar in terms of what you're seeing as ultimately demand, despite what we're seeing with zero COVID headwinds. Yeah. Jason Snipe, give me your reaction here. Yeah, I mean, these are good numbers here. I think the iPhone numbers are not disappointing. And I think the read through on on all these tech names, I think for me, has been really, you know, better than expected, right? Better than expected numbers. I think Apple is a great read into the consumer and the numbers of the numbers are solid here. So I'm happy with it here. Yeah. Tim Cook saying, quote, no obvious

evidence in the data of macroeconomic impact on iPhone sales. What else do you have from Tim Cook? Mr. Kovac? Yeah, Scott, I just got off the phone with Tim Cook. He told me, first of all, let's talk about this COVID supply constraints. Cook telling me, quote, our supply constraints came in slightly less than the low end of the range that we shared during the previous call. So remember, it was that $4 to $8 billion range. Cook wouldn't give me an exact figure what the hit was, but he did say it was less than that $4 billion warning that they gave last quarter. Cook crediting his operations team in China for mitigating the effects of the shutdowns in China, telling me, quote, it was excellent

operational support on the ground. And from here, we were very happy with how we were able to execute. Cook also adding, quote, greater China was only down 1% year on year, and that's despite this major COVID restrictions that took place for a majority of the quarter. And finally, I asked Cook about hiring. He wouldn't say hiring is slowing, but he did tell me, quote, we do see inflation in our cost structure. We see it in things like logistics and wages and certain silicon components, and we're still hiring, but we're doing it on a deliberate basis. So I'm expecting some more outlook from Cook on that call coming up at 5 p.m., Scott. All right. Good stuff. And we'll hear from you again, Steve Kovach. Thank you very much.

Let's hear from another voice here joining us right now. Alex Kantewicz, big technology founder and a CNBC contributor. You want to give us your initial reaction here? Yeah, you have to be happy if you're an apple shareholder um and hearing what tim cook is saying that uh the loss from supply chain issues isn't as bad as anticipated that being said the expectations coming into this quarter were low so you beat those expectations you're still looking at you know a slowdown this isn't the company that was growing uh tor growing by a torrent pace during the middle of the pandemic. I know Tim Cook said the macroeconomic factors aren't playing in right now,

but you're seeing the first decline in MacBooks since the pandemic began. And it's clear that Apple is, you know, another company in this economy that's being impacted by these factors. There's no way around that. Yeah, I mean, Dan Ives, I mean, we're still looking at a company with slowing revenue growth and slowing services growth. How do we get beyond that as we try and justify what is an above market multiple for Apple 24, 25 times versus where the S&P is 15, 16 times at this point? What justifies it? Well, I think first you got to look at the ultimate stall basement. You're going to an iPhone 14 cycle where we estimate about 225 million iPhones

have not upgraded in three and a half years. All of our checks coming in Asia actually shows flattish relative to iPhone 13. You combine that with the services that continues to ramp higher, the Apple bulls are going to sleep well at night because this was, if you

checked every box, I mean, Cook really comes out smelling like roses relative to what's obviously a tough macro. You see a bifurcation in tech. And Apple, in my opinion, I think this is just ultimately just the start of the stock going higher after what's been obviously a tough year. You want to address that valuation issue, too, because when we were discussing this and maybe it was in the break and not on camera, you said expensive. I mean, it's it's it's not cheap.

Well, right. Well, so that was my issue back from 2015 to 2019 when they were only growing revenues around two point seven percent per year. COVID hit and they have multiple expansion. So ultimately, as an investor, I own the stock. Can they keep this higher multiple when they have sales go back more towards those 2018, 2019 types growth rates? So I still think that's the question. But for today, people love Tim Cook. I think Tim Cook and Satya Nadella, you know, win the prize for best CEOs navigating through this same environment we're all navigating. So why don't you answer that question then, Dan? I mean, you know, when they revert back to other, you know, prior growth level, why do they deserve that?

And how can they preserve to better say it the way that Bryn eloquently did the higher multiple? And that's ultimately the key to be able to bear. I view it as serve the services business we believe is worth anywhere from one point three to one point five trillion. So in the sum of the parts, then the big thing that really now is starting to ultimately develop, you're going to have $100 billion services business that I believe is over a trillion. You start to factor that in with the core golden goose, which, of course, is the iPhone franchise. And I believe you could start to rationalize a valuation, even in this macro, that starts to approach $3 trillion. It feels like, from what Tim Cook was was telling Steve Kovac, Alex, China was better than expected or at least not as bad as feared. You pick however

way you want to describe it, because that seems to be the flavor of the moment to describe a lot of these these tech reports. And I don't know how they pulled that off, but maybe that's one of the more impressive points in this report. Yeah, you have to be thrilled reading those numbers from Cook if you're looking at the way that this stock is going to perform. You know, we spoke last quarter about this. Dan was here. I was here. Dan called this a Tom Brady quarter. And then they went on the call, talked about the fact that they were going to take a four to eight8 billion hit due to the supply chain issues. And the stock dropped.

And it's actually lower now than it was when we were here last quarter. So I think it's definitely a positive when you hear Tim Cook talk about the fact that it wasn't as bad as feared. But the bottom line is, you know, it was still bad. And this is going to be something that Apple is going to continue to negotiate, to have to negotiate. We're already two plus years into these COVID issues and we're still feeling those impacts. And Apple is really reliant on China to be able to deliver to its investors. So I think it's something to still watch. And I do think that it's a fundamental weakness for the company that's not over just because this set of lockdowns are done.

They get 19 percent of their revenue out of China. 24% comes via Europe. There are obvious FX headwinds that Jason Snipe are not just going to go away overnight because as Dan, I've said, Apple shareholders should feel happy today. A hundred percent. And I think, you know, with that major point

of just China only being down 1%,, I mean, that that's amazing. Thinking about not only the supply chains, but all the all the shutdowns that we've seen in China across kind of the covid spectrum. So I think that's very impressive. Apple has a ton of flexibility. We're 100 billion in free cash flow, free cash flow yields close to 4 percent. So they had the power and cash fortress to be able to navigate through this storm. So I really continue to like the name here, and I'm one of the Apple bulls. I mean, Dan, this isn't even a wheelhouse quarter for Apple, right? I mean, we start to look towards the fall and the introduction of new iPhones.

Now, who knows what the macro environment is going to look there and whether the consumer, which appears strong, certainly on the high end where, you know, Apple plays, is going to remain so. How concerned should we be about that issue? Well, this is just the appetizer to what's going to be the main course, which is ultimately iPhone 14. I think Cook's already seeing, they're not seeing any sort of major demand issues yet. Yet you look at ultimately China. Remember, China's the hearts and lungs not just from a demand in terms of 20 production so production rams then all of a sudden you start

to have what's going to be a better than expected iphone 14 cycle and i think that's really where i think more investors are going to start to play this and if there was a quarter for this to crack this is where it was going to crack in a dent but again do you worry about and this has been the case in the past uh dan that you know Apple shares have run up into the number before and then sold off on the other side. It's like a sell the news. You expect them to post better than expected results because of who they are. And then you're like, all right, now I'm going to take some profits for a little while. Yeah. And I just focus on our Asia checks in terms of iPhone 14. That's why we want to own it because iPhone 14 cycle.

And remember, a lot of the haters were saying that services was going to miss this quarter. Really didn't. So you start to combine those one-two punch and that's the key. Services were a tad light. And I mean, I wouldn't call Katie Huberty a hater. She loves Apple as much as any analyst ever has.

And her ratings while she was still covering the company were reflective of that. Now she doesn't cover it anymore. But she was still covering the company were reflective of that now she doesn't cover it anymore but she was really the one who raised that issue some six weeks or so ago that you know uh app store slowing could impact services and maybe on the margins it did but this wasn't a blowout beat by any magnitude from services no doubt but it started to snowball on the street and of course kia is one of the best out there but then it started to snowball on the street. And of course, Kia is one of the best out there. But then it started to snowball with many started to say services could miss. This is the start of what's ultimately going to be the golden goose that starts to fall off a cliff. And what you're seeing, you're not seeing that. Now you're actually seeing a business that could be on the trajectory

at 100 billion as we look into next year. Yeah, remember, but, you know, services revenue growth, Alex, has been slowing from the third fiscal quarter of 2021, where it was 33 percent year on year. Then the next it was twenty five and a half. Then it was twenty four. Then it was seventeen point three. Catch my drift. Right. You can't keep up these enormous growth rates forever in these kinds of businesses. Or can you? I mean, it's absolutely slowing. And I think when you look about the way that you're going to value this stock, you're starting to look at the fact that the Fed rate is up. Are you still going to put that, you know, big growth multiple on it the way that you did in 2021? You know,

that's an open question mark. Now you look at the source of this services revenue. You know, when inflation goes up and people have to cut back on purchases, you know, maybe they break the bank to go out and buy the iPhone. I think what Dan's saying about the iPhone 14 rings true. But do you cut back on the impulse purchase on the App Store, that $20 game, that upgrade of the service plan, that month or two of Apple television? It's going to be really tough to keep that up. And I think we're just starting to see the beginning of that. I don't think the services business is going to fall off by any means, but I think the growth rate declining is indicative of the trouble that it could see, especially as we move forward into a much more difficult economic climate. Yeah, I mean, Cook was deemed like to be

a master operator when he took this job, right? Supply chain guy. He's had to deal with so many things like that. And he's proving his met uh once again in the face of some incredible challenges that the china thing just jumps out at you let me ask you one last question before i let you guys go iphone 14 which you're as bullish as one could imagine anybody could be what happens if it does come out in a recession well i think ultimately then around the edges and around the edges you could see some demand come off but if you look what they're ultimately have from a unit perspective based on our asia checks you you're basically looking at a flattish from iPhone 13. That's why Cook, another Hall of Fame moment here, I'm going to go with ultimately what they're seeing in terms of the demand cycle. And that was a whirlwind. You want to have the last word?

Yeah, I was going to say, the iPhone came out in the Great Recession, 2007 and 2008 and 2009, and those are some of their best growth years for the iPhone. So I wouldn't count that out. We didn't know what we needed until we needed it. All right, Bryn, thank you. Dan Ives, thank you very much. That was a whirlwind. Jason Snipe, my thanks to you.

Alex Kantrowitz, I know I'll see you soon as well. Up next, we have fresh reaction to Apple and Amazon from another shareholder. What they want to hear is those conference calls get underway in just a few moments. Overtime is back right after this. Good to have everybody back with us in overtime. Another check now on shares of Apple. You see rallying by a little better than three percent after a top and bottom line beat. Amazon, a huge mover as well. Higher, as you can see, by better than 12 percent. Intel going the opposite direction,

though, plunging on the miss there on both the top and the bottom lines. Weaker outlook and Roku, the disaster of overtime, down by better than 25 percent. The miss, the weak guidance taking a toll on shares in those few moments after that earnings report came out. It's time for a CNBC News update with Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. A virtual sit-down today between President Biden and the Chinese leader Xi Jinping. A senior administration official tells Reuters they spoke for more than two hours, discussed a potential face-to-face meeting in the future. The official said President Biden had a direct and honest discussion about Taiwan.

The former acting Trump chief of staff Mick Mulvaney testifying before the January 6th committee today. At the time of the Capitol riot, he was actually serving as a special envoy to Northern Ireland, but he resigned that night. Former Secretary of State Mike Pompeo may soon follow. He said today he's had discussions with the committee about testifying. And Trader Joe's has its first employee union. Workers at a store in Massachusetts voted to approve it today. Two other locations starting the effort now. It comes amid a wave of union organizing efforts across the retail sector.

Tonight, Andrew Ross Sorkin talks inflation and recession, Phil LeBeau on the JetBlue and Spirit merger, and Jon Stewart joins us after the Senate Republicans block the burn pits bill for veterans. That's all on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, sounds like a great show. We'll see you then, Shepard Smith. Thank you very much. Up next, not just Apple and Amazon. We are tracking all of the biggest movers in overtime. Christina Parts and Nevelos is doing that as always. What's on deck? Well, we've got the parent company of Timberland and North Face

seeing its shares just bounce all over the place in the OT, while the maker of glucose tracking systems, Dexcon, is seeing shares plunge. I'll break down their earnings after this short break. We're back and we're tracking all of the big stock moves in overtime as we always do. Christina Partsenevalos back with us now to do that. Hi, Christina.

Hi. Well, let's start with shares of VF Corporation. Bouncing back from the after-hours drop, now just about half a percent lower, but they dropped dramatically after 4 p.m. Eastern. The apparel company that owns Vans, Shoes, The North Face missed on earnings. Revenues came in basically in line, but they are seeing a currency hit, like a lot of retailers, and highlighted a softer consumer environment. VF still maintains, though, its full-year outlook.

The company that develops and distributes glucose monitoring systems for diabetes management, Dexcon, is seeing its shares right now plunge 17% in the OT on a Q2 earnings revenue miss as well. Full year guidance also came in light. Look at that stock plunging right now. And then you've got cloud computing firm Five9. Q2 earnings beat on the top and bottom line with revenues of $189 million. The CEO attributes the revenue growth to the strength of their enterprise business, where subscription revenue grew actually 41% year over year. So you see shares up over 6% right now. And then lastly, U.S. steel shares are climbing about 4% higher on a 21 cent earnings

per share beat. The company's board also authorizing a new $500 million share repurchase program in Q3. So that's probably helping shares climb over 3% higher. Scott? Probably so. Christina, thank you. Christina Partsenevelos. Up next, we get fresh comments now from Amazon. Our own Deirdre Bosa just spoke with the company's CFO. She'll bring us those headlines next. To the results now of our Twitter question, which tech stock are you betting on after this week's results?

The wig winner, Amazon, 36%. Alphabet following closely behind with 35. Very interesting results there. Take another look at Roku meantime and overtime. The stock is plunging on top and bottom line misses. Guidance also weak. It's the third biggest holding in the ARK ETF. We're going to hear much more about that plunge tomorrow

in a CNBC special, The Tech Trade. ARK Invest's Kathy Wood joining us exclusively. You can catch it tomorrow, 6 p.m. Eastern time. And guess who is hosting that? We're getting more news on Amazon. Deeposa just caught up with that company's CFO, Deirdre. Yeah, busy weekend. We got lots of good color from the CFO, actually, on that media call. On cost pressures, he says that Amazon moved quickly and they improved efficiency. He did say, however, that inflationary pressures remain and he actually sees them being stronger in Q3. On consumer demand, a very different picture here than what we heard out of Walmart at the start of the week. He said that demand increased in the past quarter, during the quarter.

He said that in-stock returned to pre-pandemic levels and there was no step down in demand in June. So very healthy picture there on advertising. You know, he said that their type of advertising holds up well because it is efficient. It's very measurable, transactional. He said no one's immune to budget cuts. However, they have a strong value proposition. The last thing I would mention, Scott, is on hiring. Of course, Amazon went on that huge hiring spree over the last few years. CFO Olszewski telling us that they are now questioning hiring plans and they likely won't be hiring at the same pace as they have in recent years. Back to you. Excellent color. Thank you,

Deirdre Bosa, for joining us once again. Let's bring in now Mark Lehman, CEO of JMP Securities. He owns both Amazon and Apple. It's nice to see you. Let's take Amazon first. How would you characterize what you heard? I heard a quarter that had modest expectations that was exceeded. Obviously, they're being cautious in their guidance, but they had great expense management. We haven't even mentioned the cloud business, which continues to chug along really strongly. And I question whether some of these consumers who are used to getting in a car and going to Target and Walmart went online and bought from Amazon. Maybe we're seeing some of

that flow through to the earnings. Interesting what the CFO told our own Deirdre Bosa about that demand increase during the quarter. No slowdown in demand. When you heard what Walmart delivered a week or so ago, were you concerned the spillover was going to be this afternoon in Amazon's report? Well, we continue to see the low-end consumers having a harder time with gas prices and some of the other inflationary pressures. I think Amazon's consumer is probably a little bit above that Walmart core customer. So, of course, you have some concerns about that slowdown. But we continue to get this anecdotal evidence that the recession fears are high. It's particularly acute at the lower level of the income spectrum. And maybe we're seeing more evidence that the

middle or higher end of that spectrum of the Amazon customer is being a little muted in their inflationary pressures. And maybe that's why the quarter was that much better. Real quick, before I spin over to Apple, does this jumpstart shares again? Yes, they've had a nice move off of the bottom, but they've been a dramatic underperformer. Listen, they needed some sort of a catalyst here. I think there's such a big engine that it's been a long time coming to really understand where their customer is and what they're going to do with the varying businesses. They've also clearly invested in a lot of businesses that have not really taken off. So I think they're getting their footing on some of those things. I think it does reignite, and you had that

poll just recently, where there's some people who are taking a fresh look at that, particularly in the light of, and we didn't even mention it, you haven't mentioned it on the show, we don't even use the FANG acronym anymore. So those people who used to clamor to these names aren't really worried about the FANG index anymore. Maybe they're going to go individually. And that's why these stocks are outperforming some of the old FANG names that are clearly missing. Yeah, maybe we said Netflix doesn't belong in there. Who knows? All right. So we have less than a minute left. Let me get you over to Apple. They had all sorts of challenges, and somehow they seem to have overcome many of them.

They clearly did. I mean, the China execution, I think, is outstanding. And Tim Cook is probably the best operator, I think, that we've seen across the CEO landscape in technology. I think they did a great job with expense management. Obviously, they talked to the street in a great way through the quarter about some of their challenges. They have a product cycle coming up, which is evident in September. We'll get bigger indication of that. But to me, that's a bigger proxy for the global economy and for the global growth. And where that stock, it didn't go down quite as much as any of the other stocks. It hasn't come back quite as much. It didn't have as much as far to go. But

what a good quarter from a company that is as good a proxy for global growth as any. Kudos to them. And we're going to learn a lot more about what's going to happen in the third quarter and beyond shortly. Yeah. Yeah. I guess, you know, a sigh of relief quarter for many of these companies is how we would characterize all of it. Mark, I appreciate your time so very much. I'll talk to you again soon. That's Mark Lehman again joining us from JMP Securities. He's the CEO. Well, the conference calls are about to get going. Fast Money is going to pick up that story and a good one it is right now.