Welcome back, everyone. Today on the Joseph Carlson
Show, we're going to be taking a look at two different companies
that just reported earnings. Yesterday it was Google, today
it's Amazon. Amazon reported just minutes
ago. I'm going to go through the
report. I'll give you my quick reaction
on it. And Google reported yesterday,
had more time to look at that one.
I'll give you the full breakdown of that one as well.
Now to start things off, we can just take a look at what's going
on with Amazon because this one literally just reported a couple
minutes ago. If we look at how the stock is
doing, we can bring it up here. Amazon stock will zoom into it
and it's up around 9% as of now. Very good start.
Obviously something went way above expectations.
Amazon beat, they beat on something.
My guess instantly would be AWS because it's all eyes on AWS
now. There was a lot of chatter.
The AWS would come in very low that it would come in far below,
you know, just dragging behind Google Cloud and Azure.
Haven't you heard that? Haven't you felt that a little
bit that Google Cloud and Microsoft Azure are kind of
running away with it? And poor old AWS is just kind of
old and bloated. It can't attract new clients.
I've been resistant to that because AWS has 4 + 1,000,000
customers. They're not all going to just
run away in a single day to Google Cloud or, or Microsoft
Azure. And they're not.
The reason that Amazon is up 9% as of right now is because if we
look at their earnings report, we can go through it, they
highlight a couple things and, and this all looks great.
We'll go through all of it. But I just want to highlight the
most important one here, the AWS segment.
Where is it the revenue growth? Let's take a look right here.
We, we got it right here. AWS segment sales increased 20%
year over year to 33 billion. What was that number, 20%?
People are predicting like 16% or 17%.
The Street had it at 18%. AWS came in and they said no,
20%. We're growing way faster than
anyone's really predicting. Maybe a few small investors, but
really this is fast growth. 20% is fast given the scale and size
of AWS. Now again, it's not as fast as
Google or Azure, but it's much larger.
This is $33 billion in 1/4. AWS is so big, it's almost as
big as Microsoft Azure and Google Cloud combined.
So we're working on an entirely different scale here.
Now to look through the the rest of Amazon's report.
And I just want to give a quick reaction here before we jump
into Google. And, and I, I say this again as
someone that's, I'm very invested in Amazon.
I can show you my position in it right here.
I have a $137,000 position, $42,000 in the green.
It's going to be up in the green if these gains stick around.
So I'm in it on Amazon. If you notice in the story, fund
this portfolio, Amazon is the largest position today.
But I'm also in Google across 2 portfolios.
When I combine Google across both portfolios, it's actually a
larger position than Amazon today.
But in any case, I am very invested in Amazon.
I want this company to do really well and I'm really excited to
see the AWS growth. But for me, there's bigger
things to focus on than even AWS.
When we look at Amazon, people discount the other businesses
that they're in, but they're in a lot of exceptional businesses.
The retail one is one that they're in that's exceptional.
Online retail is huge. Net sales increased 13% to 180.2
billion in the third quarter compared with one 58.9 billion
in the third quarter of 2024. Excluding 1.5 billion favorable
impact from a year over year change in foreign exchange.
So they grew from 158.9 to 180 massive growth in their total
sales. North America segment sales
increased 11%. International is growing faster
at 14%. Then AWS of course increased by
20%. So that's lifting up the growth
rate. Overall the operating income was
17.4 billion in the third quarter compared with 17.4 a
year ago. So basically the exact same, the
operating income staying flat. It says it excludes 2 special
charges, 2.5 billion. Some legal battle.
All these companies have legal battles, something with Europe,
I'm sure. Yeah, the Federal Trade
Commission, $1.8 billion. North America segment operating
income was 4.8 billion compared with 5.7 billion.
So their operating income actually went down year over
year. They have more operational
expenses. We'll probably get to that in
just a minute. International segment operating
income was 1.2 billion compared to 1.3 in the third quarter of
2024. The AWS segment operating income
was 11.4 billion compared with 10.
So AWS seems like the only part that's growing its operating
income year over year out of what we're looking at.
Now. Again, when investors are
looking at this, they'll look at the top and bottom line, but
they're focused solely on that AWS number.
That is all eyes are looking at that.
The net income increased to 21.2 billion in the third quarter or
1.9 five, $1.95 per diluted share.
That's crazy compared with 15.3 billion or $1.43 diluted per
share last year. So I, I don't know what the
growth rate is, but 143 to 195 is huge growth in net income and
they're already growing net income like crazy.
If we take a look at Amazon, we'll have these numbers in, in
a minute, but we can go ahead and just take a look at the
growth of their net income over time.
This is what the chart looks like.
We can see this exponential growth.
This is over a trailing year. This is still growing quickly,
very impressive to see. I love seeing the net income
grow. Operating cash flow increase by
16%. So we do have operating cash
flow growth very fast to 130.7 billion for the trailing 12
months compared with 112 free cash flow, this is going down.
Remember, free cash flow is the amount of of income from
operations minus your CapEx investment.
Since they're ramping up CapEx to take advantage of this unique
situation we have with artificial intelligence, it
naturally follows that free cash flow is declining.
But free cash flow is not declining because they're
bringing in less cash. It's declining because they're
out laying more cash to CapEx, a very important distinction.
And you can see that through the CapEx line.
You can see it through the free cash line.
You kind of put those together. It decreased by 14.8 billion in
the trailing 12 months, driven primarily by year over year
increases of 50.9 billion in purchases of property and
equipment. Purchases of property and
equipment is just a euphemism for CapEx or vice versa.
So we have the CapEx right there.
This is the commentary from the CEO, Andy Jassi, who he's taken
a lot of trash over the past five years.
People have really trashed his name across the Internet.
Nobody likes it when a stock stays flat for a wonderful
company. I've defended Andy Jassi only
because I'm following the fundamentals.
Amazon. Amazon's gaining in revenue.
They're gaining, gaining in operating cash flow.
They're gaining in AWS. Like he's actually running the
business really well. The stock price is just the
issue, he says. Quote, we continue to see strong
momentum and growth across Amazon as AI drives meaningful
improvements in every corner of the business, said Andy Jassi,
president and CEO. AWS is growing at paces we
haven't seen since 2022, re accelerating to 20.2% year over
year. That's right, Andy Jassi, lay it
down for him, lay down that 20 plus percent.
Incredible to see him be able to to drop that in an earnings
report. We continue to see strong demand
in AI and core infrastructure and we've been focused on
accelerating capacity adding more than 3.8 gigawatts in the
past 12 months in stores. We continue to to realize the
benefits of innovating in our fulfillment network and we're on
track to deliver to Prime members the fastest speeds ever
again this year, expanding same day delivery of perishable
groceries to over 2300 communities by the end of the
year and double the number of rural communities with access to
Amazon same day and next day delivery.
Now I just want to mention something I've I've gone over
Amazon a number of times and we went over this report.
If you recall, it was a semi analysis report and their
reporting showed that Amazon has a lot of capacity coming online
soon. Their report showed that Amazon
would re accelerate, AWS wouldn't be going down, it would
reaccelerate. They were right their their
analysis was correct. Amazon is reaccelerating and
like we discussed in previous episodes, if they accelerate and
they reaccelerate AWS, the stock's going up.
There's this no way around it. If AWS grows faster and that
narrative of AWS falling behind gets diminished, Amazon stock
will go up. Now, there's other things, and
this report, Amazon's is so long, we can't possibly go
through all of it. It's literally like 20 pages
long. It's just a library of content
that you can go through. But in the report, what I'd be
looking for over the next couple of years with Amazon and what
I'll be paying attention to is, of course, the AWS business is
great and we want to pay attention to that.
But Amazon's solved that. Like that's old news.
That's what Wall Street is focused on.
You don't want to be focused on the exact same thing that Wall
Street is. What we should focus on as
individual investors looking forward with Amazon is the story
of automation, of robotics, of their 1.5 + 1,000,000 employee
workforce. They have an enormous workforce
now. Tesla's great at creating
automation. They're great at robotics, but
Tesla doesn't have as many employees.
Tesla's already highly efficient, Amazon is not.
When it comes to to robotics and automation, Amazon has far more
low hanging fruits to be able to refine their business and raise
margins than Tesla does. And that's because if they
create a robot that can do simple, repetitive tasks, they
have the opportunity to replace millions of employees.
So like a million employees now that sounds terrible.
And it, you know, I hope all these employees find wonderful
jobs. I think they'll find better ones
with other companies that are being started and created.
So that that's one perspective. But as an investor, we have to
look at reality, not how we want things to be.
I'd love for everybody to never lose a job, but this is the
reality that we're working with. Automation is a real thing.
Many jobs will be automated and there's ways that we can benefit
and we can invest accordingly. For companies that will raise
margins over time. I've argued, and I'll still
continue to argue that Amazon is the best equipped to be able to
benefit from ongoing automation. So while these results, I, I
think are exciting and I love seeing the AWS growth.
I love seeing Andy Jassi just dropped that #20 plus percent
growth. Amazon stock is up 8 to 9% right
now. It could go up even further.
The only thing that could take it down is commentary on the
call that that shows a future that's less bright.
Maybe they bring down guidance or something.
But it also could even go higher if they say AWS is going to
continue to accelerate. So investors will be looking at
that. We'll see how it trades.
So overall, again, this this week has been quite the week.
I thought I was having a good week with Google.
To me, that was a massive victory.
You know, as Google investors, we can take a victory lap.
We deserve it. Google investors have have taken
some crap over the past year. There's many big investors
saying that Google is going to fail, that it was the next
Kodak. There were big investors that
said that about Google, not ironically, and here we are.
Google is at all time highs, the company reported yesterday and
it's it's just right up there, right close to its all time
highs, $282 per share or almost 300.
This stock is going above $300. Now.
It's always exciting when a stock goes up that you're
invested in. But I will say, and I'll admit
this selfishly, this one's particularly exciting for me
because I've put my neck out for Google.
I, I've really made a lot of content about this one.
When I figured out that Google was going to win, when I came to
that conclusion months ago, I leaned in big time on this
company. I've believed for months that it
is the best risk adjusted reward company, the best risk reward
stock in the market. I made that message very clear.
And as a content creator, that's a little bit more risky, I think
then even when you just have an individual hidden investment
that nobody else knows about. Because it's not just win or
lose, make money on the stock or lose money on the stock.
For me, it's my brand value, it's my reputation.
It has downstream effects. So if I'm really leaning in on a
company, if I feel really bullish about it, I'm putting my
reputation and long term trust with you at stake.
So I love seeing that pay off. The fact that this has been a
huge winning stock, that's part of the reason why I'm excited
about it. I'll admit it's selfishly
because I just think it's great for my brand.
It's great to have a win. I love winning with stocks and
making money on them. That's just a a selfish
perspective. But the non selfish perspective
and the reason that I'm actually even more excited about this
company doing so well is that when I was invested in company
like Netflix and that one was a big comeback and it had a great
report. It was very exciting for me, but
there weren't that many people to share it with.
I feel like I was alone with Netflix.
Like there's like 10 other people invested in it.
There's really no Netflix investor community.
There's a small one now, but it's it's nothing notable.
The community for Google and the amount of individual investors
like me that are in the stock is massive.
And I like seeing them make money.
It's great when individual investors have a thesis.
They're head of Wall Street, they don't buy into the fair and
the Kodak and that ChatGPT is going to destroy the company.
They stay invested, they build a position and they reap the
rewards. So this is a shared V1 that I
see the community buzzing about. People are making money.
Google's such a fun investment because it's done so well and it
still remains at a reasonable valuation.
So I've gone over the thesis many times and nothing has
really changed with Google. It's just performing exactly how
I expected it to. I made a video earlier this week
saying I think that this earnings report will crush it,
and they did. It wrote up 2.5% on the day into
earnings and it was up another 2 1/2% after earnings.
This stock has been on a tear up 50% year to date and just the
past week. It's up 9%, the past month 15%,
the past three months, 47%. Incredible performance by this
company and there is more to go in terms of where Google sits
now. I think I have like an 80,000,
maybe $85,000 gain in the stock. It's about $170,000 position.
It's the biggest position in My Portfolio.
As of right now. I am not selling a single share
because I've seen what happens when you want to lock in gains
of a big winner. You want to lock in gains, but
big winners happen in most cases because things are going well
for the company. Companies aren't static.
They're not fixed. It's not just a set of numbers.
Companies evolve. They change strategically over
time. They get stronger or they get
weaker. Google's stronger today than
it's ever been before, by far stronger than it's ever been
before. Management can't say it because
they'll be worried that regulators will use that against
them in the future, but I can. I'm not worried about what
regulators are going to say about Google in the future.
This company is stronger today than ever before.
They have more things aligned for it.
There's more things moving in the right direction.
YouTube reached record highs that grew like 14 percent, 15%.
YouTube Premium and Google One subscriptions passed 300
million, an all time high. Waymo's expanding international
Google search grew up 14 1/2 percent, a percent higher than
Wall Street estimates. It's growing super fast, like
Google search is a fast growing company.
Everything we're seeing with Google right now points to a
company that's incredibly strong.
And again, when we look at the valuation, we try to, we try to
be careful and conservative as investors and sell companies
when they get to unreasonable valuations.
For a company with this many bullish catalysts, with this
much strength, this well positioned for the future, with
its own AI models leading the market, is a 27 PE ratio really
that expensive? I argue that it's not.
It's not the cheapest it's ever been.
I don't think Google's cheap per SE, but I also don't think it's
expensive. To me, it's entering into that
category where it becomes a hold.
And if you choose to sell, that's a fine decision.
You're right. You can make your money and you
can exit and look for different opportunities, but opportunities
as good as Google, as good as this company is today, are few
and far between. There's not many companies in
the world. In fact, I think Google's very
unique in the world owning the assets that they own.
There's other investors that wanted to lock in gains when
they made money with Netflix, and you can see what happened
there. You can look over the past five
years, investors wanted to lock in gains from buying it at $200
per share and selling it at 400. They got a double, but they
forgo the gains that they got when it traded the 600.
Now Netflix went from $600.00 U to 900 from 900 U to 1100.
If you sold at the reasonable valuations when the gains had
already been had, you missed out big time.
I hold on to companies that I believe are trading at
reasonable valuations. They have very bright futures
that are getting fundamentally stronger over time.
I sell companies that are getting weaker over time, their
markets getting clouded, and the developments look like they're
going in the wrong direction. The quality overall is being
lowered and with Google, the quality is higher now than ever
before. The valuation is reasonable and
I continue to hold, so I'll have a more in depth report on these
companies. We'll have more content in the
future, especially on Amazon's report.
I'll be diving into that one and the earnings call.
But as of now, I think it's time to celebrate.
We have so many investors that are in Google and Amazon.
Congrats to all of you. You deserve it.
You put your money at risk. If you've worked for your money
and you've invested it, you deserve the gains.
That's going to be it for this time.
Hope you enjoyed, see you in the next one.