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Amazon stock pops on Q2 earnings

Yahoo Finance Live anchors discuss second-quarter earnings for Amazon.

Video Transcript

- Amazon shares are popping following a big second quarter revenue beat and decent guidance for the second half of the year. Big winners for the company include Amazon Web Services and advertising. When asked about more possible layoffs, though, Amazon CFO Brian Olsavsky said it will continue to hire engineers for Amazon Web Services. However, in other areas, they are stepping back and questioning their hiring plans.

And that I think is one of the biggest takeaways from this quarter, at least from a Wall Street perspective. A lot of notes this morning giving Amazon a lot of praise for pulling back a little bit on CapEx, looking for a little bit of a margin improvement perhaps in the third and fourth quarter because of that pullback in spending. Wall Street loves hearing this stuff.

- Yeah. There's a lot to really break down when it comes to Amazon. And it's interesting to hear about not just what they're seeing in the cloud, because on cloud, they are seeing continued growth. They're very happy with the growth rate. They're happy with the adoption of the cloud. And they're looking at potentially this rough patch within the economy and evaluating that.

The last time that they actually saw a rough patch and correlating that with the cloud and did the type of growth that they saw, back in 2008. So GFC, global financial crisis, and they started to draw lessons from that, noticing their cloud business at the time launched and, ultimately, was able to still see even more consumers who needed to build on top of their data centers.

Also here, I just to point out with the cloud too, it comes back to energy costs right now as well. They acknowledged this on the call last night because as energy costs move higher, that means the overall ability to operate these data centers also moves higher as well. So that's a cost that they have to consider and larger question of how much of that they pass through to some of those cloud and data center customers too.

- Yeah. And then on the traditional retail side for Amazon, it also did better than estimated, particularly on the margin side. Obviously, there are a lot of concerns about discounting, about margin pressure across the retail space. We're seeing that in everything from Target to Walmart to Best Buy, obviously, that are having a lot of issues. And the issues there not as bad as feared given what we have heard from some of these other retailers.

If you look at fulfillment expenses as well-- how much does it cost them to get the stuff in boxes, ship it out to people-- 14% increase to $20.3 billion. That's at about the same level it was the prior quarter. And it's not as bad as some analysts had predicted. So that's something where maybe they're a little bit resistant to some of the trends we're seeing more broadly in retail.

- Yeah. This wasn't a recessionary-like quarter for Amazon. Strange, just given everything we've been hearing out through in retail, especially this week. Walmart and Best Buy earnings warnings. But didn't really get that vibe from Amazon. Also noting they're not seeing the level of discounting that other retailers are. So that was a little nugget that I stored away. Another one was they're about to pick up big time in media content spending, of course ahead of that Thursday Tonight Football launch. I believe it's in mid-September.

So they talked about that on the call too. And you have to think about, what does that mean if Amazon is out there aggressively going after content, original content, what does that mean for Netflix? What does it mean for Roku? Maybe nothing Roku because their stock quarter was still absolutely terrible. But still, what does it mean for the broader content landscape if Amazon is going out there very aggressively?

- Yeah. NFL, Major League Baseball, MLS, some of the biggest rights that they've been trying to compete and go after. And this is going to be a larger competitive landscape in even the sports right because the unscripted content and sports particularly, that's where you get even more of that time spent consuming because the game is naturally longer than some of the series that are scripted. And so that's exactly what Amazon would rely on in this capacity to also drive up that advertising revenue as well over time.

- I still got to check out the "Lord of the Rings" series. Have you guys watched it yet?

- I haven't watched it.

- I'm pretty excited about it. One more area where we saw Amazon sort of buck the trends that we've seen elsewhere, and that's in ad services, in which it saw a 14% increase to about $8.8 billion. So we definitely have seen, interestingly, some differentiation among ad spend between the various companies that rely on that for their revenue, from a Snap on the one hand to the likes of Alphabet, which seem to be navigating a little bit better, and now to Amazon, to show that in this post-Apple tracking changes environment that there are some companies who have seemed to have made the adjustment a little bit better than others perhaps.