Intel, Amazon report earnings, jobs data in focus: Market Domination Overtime

Market Domination Overtime host Alexandra Canal examines today's earnings reports from major tech companies. Amazon (AMZN) exceeded revenue and profit expectations, while Intel (INTC) beat revenue estimates, sparking a stock rally.

CFRA Research senior equity research analyst Arun Sundaram provides insights on Amazon's performance, while Moor Insights & Strategy CEO and chief analyst Patrick Moorhead evaluates Intel's quarterly results.

Looking ahead to October's jobs report, JPMorgan Asset Management Fixed Income portfolio manager Kelsey Barro cautions investors to take the upcoming numbers "with a grain of salt."

This post was written by Angel Smith

Video Transcript

That's the closing bell on Wall Street, and now it's market domination.

Over time, I'm joined by J and Jos for to get you up to speed on the action from today's trade.

Now let's see where the major averages ended up.

You're seeing red across the screen.

Thete heavy NASDAQ off of 2.7% the benchmark S and P down 1.8% in the Dow, shedding nearly 400 points here.

So, Jared, it seems like more trick than tree for the markets here on this Halloween day.

If you take a look at sectors utilities leading the way higher, So a bit of a defensive play there.

No surprise that xlk the tech sector down more than 3%.

Yes, And you know, I've been watching these bond market the bond market recently and yields been climbing high and Bank of America or Goldman Sachs was out with an interesting announcement, just saying that 3.4 0.3% just a huge level in the 10 year and arguably this huge rise we've seen in yields.

Maybe this is spilling over Now.

This is in our earnings story.

We're so seeing some weakness in Meta and also Microsoft.

But it could be that the bond market is also interfering.

So you take no Jared.

I want to bring up on the interactive, the NASDAQ 100 kind of take a look under the hood to see which names are really driving stocks lower.

I mean, Microsoft closing down more than 6%.

That's very significant here.

Yeah, we are seeing some weakness yesterday.

The chip stocks.

And if I just switch this over to the semiconductors, look at that.

NVIDIA down almost four or almost 5%.

Broadcom about 4%.

And here is over.

Over the last two days, you can see a MD down 13% Intel down 6% as we wait for some of these earnings to come out.

But here's a two day view on tech on all the sectors you can see XL K down 4.7% only energy and utilities in the green.

And that's also been kind of a theme that we've been seeing recently where, uh, we've seen energy and tech switch places.

We've seen a lot of sector rotation, but not a whole lot of that today.

Market seems to like utilities, but arguably kind of a defensive play.

Yes, we'll see what happens to leading up to the election next week.

I'm sure there's going to be more volatility.

We were speaking to some strategists earlier in the show about how, definitely in the short term, we're going to see more volatile action there.

You know what's really fascinating, though, is that we have not seen a lot of realised volatility.

So everybody is expecting to see all this volatility with the election.

But you take a look.

And if we can go back to the Wi Fi Interactive just briefly, briefly here, here is the S and P 500.

Now we had this big down day today that really sticks out, so that's a negative candle.

But we've just been camping out and kind of meandering around by these highs and throughout the month of October.

I don't think we had a single down day of greater than 1% until today.

So I would say we were due for a little bit of volatility, and it's manifested to the downside.

Is this something new?

Is this a start of a new trend?

Here's the 10 year T note yield Here is what I was looking at before.

This big rise is of concern for, uh, risk markets in general because of the speed of the move.

Uh, you take a look at a three year chart, you're not gonna say or you're going to say, Well, that's not that big.

But these things, uh, these bets in the bond market heavily leveraged.

And, uh, when we go up 50 basis point, that's a big deal.

Lava Jared, Thank you for that analysis.

Now I want to get to some breaking news.

Amazon earnings just crossing the wire.

And shares are higher on the back of the beat on both the top and bottom lines there.

So both revenue and PS coming in ahead of expectations.

Operating income also ahead of expectations.

Operating margins coming in at 11%.

The estimate there was for 9.3%.

Now for AWS, the cloud component of the business net sales hitting 27.45 billion.

The estimate was around 27.5 billion, so roughly in line a slight miss there for fourth quarter guidance.

They see net sales coming in between 180 1.5 billion to 188.5 billion estimate was for 186.36 billion.

So we're seeing shares climb as much as 6% as that fourth quarter operating income.

It was at the mid point and topped estimates there.

So it seems to be guidance once again, driving the stock higher.

And it's interesting because in the second quarter results, we saw guidance drive the stock lower.

We're seeing the opposite is true today.

Yeah, what?

I'm really focusing in O on the Oper operating margins.

Excuse me there.

So you take Let's begin with the operating income 17.41 billion.

That's up 56% year over year.

And that handily beats the estimate of 14.75 billion by about $3 billion.

Operating margin.

This has been a concern for investors 11% versus 7.8%.

1 year ago, the estimate was for 9.34%.

So, uh, North America looks like that was 5.9%.

That was a small beat international 3.6% a much bigger than the estimated 1.23%.

So at least on this one area, uh, things are looking a little bit better.

There are concerns about the consumer, So can they charge as much?

Uh, can they maintain their prices and also their margins here?

And I think the answer is a little bit of those concerns have dissipated.

Yeah, Jared Amazon stock.

Definitely seeing a nice pop here.

You pointed to that guidance, and it seems like that seems to be the key thing.

Perhaps driving the stock right now.

Net sales that range of 181 to 188.

The one thing I'd point out there is that's quite a big range to some extent, right?

We're talking about large numbers here and the hundreds of billions of dollars, but that is a $7 billion range, uh, Wall Street's forecast falling kind of right in the middle of that.

But other things to point out here that I think are standing out is just also another earnings beat from a big tech company, right?

This is now every single one of the mag Seven companies has had a earnings beat.

So again, a reminder that that's not really necessarily what's been driving these stocks, but a trend we continue to see when we talk about S and P 500 earnings overall to see beats from these mag seven companies.

Company after company after company, setting us up for 430 with Apple, right and and look, Amazon is this huge company multiple components to the business.

Andy Jasse in the earnings release.

He noted that as we get into the holiday season, they're excited about what's in store for customers.

They mentioned Prime Day.

Those big deals, obviously a huge component of the company, also mentioned the NFL Black Friday, a game Election Day coverage with Brian Williams on Prime Video.

We know Prime Video.

It has really stood out to me as someone who covers the media space.

They've heavily been investing in that business, investing in sports.

They just rolled out ads on the platform.

Advertising strength continued in the quarter.

So just another name like you said with the tech giants and the other thing I point out here to remember yesterday a couple of these big tech stocks I believe Microsoft was positive right after it reported before reversing down.

We don't have a clear view looking at this release into what Amazon is planning to spend on a I right, if we're talking about that being one of the key things right now that is perhaps weighing on some of these big tech stocks.

There's not a clear cap X read here on what they're spending on A I.

That's usually something.

You get a little bit more detail once we get on that earnings call at five o'clock.

But I think that's gonna be another key part of this story because it certainly seemed to be a big part of the story for its fellow big tech companies.

And we have another name that we're watching.

That's Intel Third quarter earnings crossing.

We're seeing shares surging up more than 10% on the back of this report now, third quarter revenue coming in ahead of estimates 13.28 billion.

The estimate was for just over 13 billion.

We saw in third quarter adjusted loss per share of 46 cents versus the expected 41.

I'm sorry the 41 cents was a year over year prior, so kind of losses continue to accelerate.

This is a company that we've seen turn around story be top of mind for investors Intel, CEO, P, Gelsinger Saying that this distinct but better together is the strategy here.

So as we see this in line forecast during this overall rebuilding plan, it looks like a better than feared viewpoint from investors.

It was a low bar, and they've cleared that.

They've stepped over it.

Let's take a look.

I'm going back to the fourth quarter forecast here see revenue of 13.3 to 14.3 billion.

Now that, uh, the estimate was just, uh was at the low end of that range.

So 13.63 billion and then the low end of the range was 13.3.

Again, the upper range was 14.3.

So they beat that, Then they're seeing adjusted EPS of 12 cents versus the estimate of 6.3 cents, and they're seeing adjusted gross margin of 39.5% estimate was 38.7%.

So you put it all together and they're beating some of these metrics.

And if I can go to the Wi Fi Interactive, I'm just gonna chart real quickly.

The year to day price action.

Uh, just a reminder.

This is a company that's going through a tough turnaround down 57% year to date.

Here is the last five years, and you can see they have been plumbing new lows here and on a max chart.

They are basically back to territory where they were about 10 years ago.

So this has been difficult, but they're trying to find the bottom right now.

And is this it hard to say?

But this is going to be maybe just that one little increment forward in that direction Once again, guidance as they're seeing with all these tech companies, that's been very, very important for investors.

I want to call out the data centre and a I revenue beating expectations.

3.35 billion estimate there was for 3.1 billion.

Now Pat Gelsinger did say he intends to keep the company together.

A big question, of course, moving forward is, you know what?

What is this strategy?

What is this?

Go forward strategy for this company, but and be sure to tune into Yahoo Finance later because we will be speaking with Pat Gelsinger, the Intel CEO.

That interview will be airing tomorrow at 9 a.m. Eastern Amazon Announcing a third quarter B on earnings and revenue.

Joining us now to break down the report is Arun Sanam CFR, a research senior equity analyst.

So Arun, high level here.

What's your take on this earnings report?

It seems like overall strong and investors are proving Yeah, no O.

Overall, I thought it was It was a terrific report.

Uh, you you I mean, really, you got the you got the ingredients you needed for the stock to go up one you got the AWS B or AWS was in line, but most importantly, AWS growth accelerated to 19 a little bit over the 19%.

Uh, we needed to see that acceleration, given that both Microsoft and Google saw accelerated growth.

Uh, and then, uh, I think the real standout here is on the operating income line.

You know, we saw, uh what was it we saw, uh, about over 7.

$17.4 billion in in operating income and operating margins were 11%.

Um, that's the strongest operating margin going back.

Uh, you know, at least several several years, Uh, and you really saw margin improvement in all uh, three business segments.

The North America business segment, which is mainly the retail business, saw margin improvement.

The international business, uh, is now profitable.

Uh, which is Which is great and even AWS uh, you saw you saw margins in AWS accelerate the 38% from about 36% last quarter.

Uh, so really, every you know, uh, everything you really need to to to, uh, for the stock to go up today.

Arun There seemed to be some conversation.

I know.

Microsoft pointed to this on their call about spending on a I perhaps weighing on margins.

Right.

It doesn't seem like we're seeing that at least from this quarter.

With Amazon, I guess.

Why is that?

How does the a i story sort of work with Amazon where it might be different?

Maybe.

Perhaps what they're spending on it than it would be at other companies.

Yeah.

Yeah.

Great question.

Yeah.

I mean, all the hyper scalars are are increasing their Capex spend, you know, even this quarter for, uh, for Amazon.

It looks like they spent, uh, about 20 uh, about $22 billion in in Capex.

Uh, this quarter, which is a pretty a pretty notable notable acceleration from, uh, Q two and Q one.

but yeah, you're right.

You know when When you're initially investing in in a I and and servers and chips, uh, there's usually a margin headwind, um, associated with that.

I think what's unique with Amazon?

Uh, there's a few unique things.

One, you know, Amazon is not, you know, solely reliant on chips from NVIDIA for they also build, uh, and and and and create their own A I chips, uh, that are, you know, more cost effective and and, um, of more value, Uh, so they may not be seeing the same type of capacity constraint issues that that, you know, Microsoft is seeing, um, at the moment.

And then the other thing I I would I would point out to is you know, Amazon has multiple levers to grow margins, you know?

So even in a in a given quarter, if in a given quarter, AWS margins are down, you know, then they can you know, they can flex their ecommerce business and and try to improve margins there.

And we do believe that Amazon has, you know, significant margin potential uh, in their retail business.

It's still, you know, margins are still relatively low about, you know, five fiveish percent right now in the, uh in that in that retail business, about 6% in the North America retail business.

But I think over the next, you know, year or two, the margins will improve.

There's a lot of efficiencies, I think, in that retail business.

And then and last, I'll just point out in advertising.

That's a very high margin business, uh, for Amazon, and advertising is growing faster than their than their, you know, core E commerce, business.

And that bodes well for Amazon's overall margin profile.

So you sound very bullish on Amazon.

But in your notes, you did say that they are cautious that growth for its profit and free cash flow may not be linear.

What are the biggest concerns there?

And and what could those possible headwinds mean for some of that growth and the stock in the longer term?

Yeah, yeah, no, I we thought expectations.

You know, expectations for Amazon are always really high.

And, you know, uh, this quarter in in in particular, there are some unique, uh, I think headwinds two margins.

Number one, You know their business called Project Kipper, which is their satellite business.

Essentially, you know, uh, a competitor to Elon Musk's star StarLink business.

Uh, but they're just starting to to to launch satellites into the sky, Uh, for example.

And there's production costs associated with that.

And, you know, we thought that would, you know, Dent, uh, margins in the near term.

Also, all the all the money they're spending in in data centres and chips.

Um, you know, that's typically, you know, margins had to win over the near term.

So we just wanted to to warn investors that, you know, you probably won't see that, you know, gradual linear, uh, increase in margins.

But, you know, you know, at least this quarter, you know, margins were much better than we expected.

Like I said, uh, 11% operated margins.

Um, you know are quite strong.

Especially given that, you know, a few a few years ago, Uh, you know, Amazon was, you know, posting a loss, Uh, you know, for for for a few quarters.

So they've gone a long way from, you know, becoming unprofitable to now, You know, 11%.

You know operating margins and over 17 billion in operating income.

Strong margin story here for Amazon Again the stock is up nearly 5% in after hours trading.

Arun thank you so much for your thoughts and for joining us today along with Josh Schaper.

Appreciate you as always, joining us coming up Intel shares jumping on the back of a strong revenue be.

We're joined by an analyst on the other side to break down the numbers.

Stay tuned.

More market domination over time is coming up.

Intel reporting third quarter earnings moments ago, the company beating revenue estimates coming in at 13.28 billion Q three Data Centre and A I revenue also coming in above expectations at 3.35 billion for more, we're bringing in Patrick Moorhead, founder and CEO and chief analyst at more insights and Strategies.

So, Patrick, I mean, expectations were certainly low coming into this print, but we're seeing the stock up double digits after hours.

What's your biggest takeaway here?

Biggest takeaway is solid operational performance with a solid guide.

The street is definitely reacting to that $260 million beat, uh, on revenue and while EPS is a little bit harder to get underneath because there were, um, some impairment charges that that went into non gap EPS gross margins.

When you adjust for all that is in the forties and, you know, the street was expecting a three cent loss on, uh, non gap EPS, which turned into a 1517 cent.

Uh uh, gain, uh, depending on how you want to do the calculations.

And I think any good news was good news for this stock that is trading well below, uh, book value and and I'm reading in the release that those restructuring charges meaningfully impacted Q three profitability as we took important steps towards our cost reduction goal.

So what's the read through there when you think about these restructuring charges, when you think about all the cost cutting that this company has been doing to get this, uh, your business back on track, how should investors be looking at all of that in totality?

Yeah.

So the company is still spending a lot on investing in go forward profitable businesses, but they are taking the right steps to, uh, reduce, uh, overlaps.

And and you know, when you're a company that could do no wrong for for 20 years.

And, you know, you get into a speed bump, you have to make some pretty drastic changes.

That's exactly what the company is doing.

And for this quarter, right, they took about 15.9 billion in impairments.

Uh, 3.1 made its way into into non gap EPS.

But those who are looking for, uh, a long term opportunity there literally is no other way than going up.

The the number one factor that I look at is, uh, the five nodes in four years.

So that's, uh, the ability for the company to manufacture not only its own chips more efficiently, efficiently, but also to better compete with with TS MC and then the a T a node, which is the turnaround node at a time when TS MC is raising prices and also coming under regulatory scrutiny is all good for Intel.

The data centre and a I group number was up.

Uh, thanks to, uh, Zion.

Not necessarily, uh, an a I GP U, which is coming in 25 or 26.

But the best is really yet to come.

Uh, for this company and and requires some patience, uh, and belief.

So how does this report set up the next phase of intel?

Especially?

It's positioning within the chip space.

You mentioned some of those competitors a MD another one that I've been hearing about as well taking some of that market share away from intel, right?

Uh, tw 2025 and the beginning of 26 is really going to be the ultimate proving ground for Intel.

They're going to be on their latest node with their latest devices.

And this latest node should be much higher performance at a much lower cost at scale.

And then you're to me you're truly going to see the capabilities on the CPU side.

And then also in 2025 Intel brings out a new data centre A I GP U.

Uh, Intel has a data centre accelerator very similar to the ones that the hyper scaler are are producing.

But, uh, to compare side to side with a MD, we're going to have to wait for again till till 2025 in a chip company.

These turnarounds, they take five years, and we're almost into the fifth year here under, uh Pat Gelsinger's leadership.

And even though the stock has been, uh, battered, uh, and disrespected, uh, it it is setting the ground for the ultimate showdown with a MD and Intel In 2025 and the first half of 26 you mentioned Pat Gelsinger and there's been a lot of talk about this company and and really, if he's the right man for the job, do you think this report does it give you the confidence that he's doing the right things to get this company back on track?

It does give me confidence.

And I think it should give investors, Uh uh confidence.

I mean, the company can can have no mistakes.

And the thing that I always get back to is OK, is it the right strategy or the wrong strategy that that intel is on, which is fundamentally to keep manufacturing and design in the same place?

I am absolutely a believer.

Uh, they must be in the same place.

We looked back to a MD when it split off its manufacturing, which became global foundries.

That was a nightmare for both companies.

And it was, uh, too too much Uh uh, too early and then if you're questioning Pat as the leader, Well, who else?

Right.

Uh, if you believe in the strategy, uh, then who else coming in?

And And I think this earnings announcement will pull back any any questions or discussions about how how Pat is doing right now.

Now he has to continue it quarter after quarter after quarter, uh, to keep this going.

But I think this quarter and particularly the guide is a is a very good sign.

Patrick Moorhead, Thank you so much.

Appreciate your insights and tune in.

Tomorrow morning, Yahoo Finance Executive Editor Brian Sazi will have an interview with Intel CEO Pat Gelsinger in the nine o'clock hour.

You won't want to miss it.

Tech stocks dragging down the broader market.

But with the results tonight, tomorrow could be a different story.

Especially as investors wait for the October jobs report ahead of the Open on Friday.

Joining us now is Kelsey Barrow, JP.

Morgan Asset Management fixed income portfolio manager.

So K see, let's start there on that job support.

There's going to be a lot of noise, right with the weather, the strikes.

So how should investors really look at this report?

because it's probably not just all about that top line number.

That's right.

So we you have to take the number with a big grain of salt.

If I look at the estimates out there, the range is abnormally wide, so you have the lowest estimate at minus 10-K and the highest estimate I've seen out there of 180,000 jobs for the month of October.

That's a massive range, right?

And what people are trying to understand is one You have weather.

We have two hurricanes and then also Boeing strike.

The estimates are that's going to put downward pressure on on payrolls to the tune of about 50 to 70 K. So OK, so what should we do with that?

Well, what I would recommend is to actually what we're focused on is to look at the backward revisions to September.

So if we turn back to a month ago, the payrolls report was really a scene change in terms of the assessment of the labour market.

It was a strong report that really made people question.

Is the labour market still cooling, or is it actually inflecting higher?

So what?

I'm looking to see is if that 254,000 jobs that was created last month is that going to be revised down and by how much?

And that's going to be a really important signal, particularly because we know the October data is going to be so noisy.

Got it?

So revisions for tomorrow's job support and your base case, you still have a soft landing right in.

So what's the risk that you let's say, if the jobs number comes in hot?

We've seen hotter GDP.

I mean, to me, it feels like a no landing could potentially be on the horizon.

How do you see that all playing out of the year?

So the one question that I'm always trying to answer when I look at the labour market data because this is the way the Fed looks at it is is the labour market and inflation source for the economy or not.

So if you think back to 21 and 22 there was a clear labour shortage.

There was an imbalance between the demand for labour and the supply of labour.

Wages went up dramatically and that was a source of inflation that the Fed was very concerned about.

Now when I look at the mosaic of labour market data now, I'm not seeing the labour market as a source of inflationary pressure anymore.

So even though we've seen a strong jobs report last month and we we have seen some volatility, I look at things like the employment cost index which came out this week, or the job openings labour turnover Survey jolts, which also came out this week.

And what is indicating to me is I think that the labour is still on a moderating trend, one where inflation will remain under control and that's what allows the central banks to continue to extend the cycle.

And that's really where the idea of the soft landing comes from.

Got it?

Now you specialise in fixed income.

We have seen the steady rise in yields over the past month, the 10 year moving higher today.

What do you attribute to that rise and what it is trying to tell us about the current market environment?

Well, it gets back to the last jobs report.

I mean, that was really the first catalyst that caused yields to start moving materially higher.

So if you think back to that time the market was debating between If the Fed was going to cut 25 or 50 that was really the debate and the view was you cut 50 Because the risk of the labour market are rising, the unemployment rate is rising and we need to protect against that downside risk.

What What's changed is really not the base case, but how investors are interpreting the tails so that tail risk of recession and of materially weaker labour market that's been priced out.

And as a result, you've seen the 10 year yield move higher and you've seen the market start to price in more gradual rate cuts.

So the market is still pricing in rate cuts for this year and for next year.

But to terminal rate, that's that's still above levels that we've seen over the last 20 years.

So to a level around 3.5 to 4% it's been a very interesting market, A lot of moving parts.

We'll see what happens next week at the Fed.

Also the election.

We didn't even get to that so a lot a lot happening.

Kelsey, thank you so much for joining us appreciate it coming up.

Apple, set to report their latest earnings results, will get you the numbers and analyst reaction on the other side.