emily: i'm emily chang can san francisco. this is "bloomberg technology." amazon reports earnings with sales from amazon web services surging nearly 50%. we have full coverage and analysis over the next hour. billion wiped off of facebook's market cap and after earnings disappoint. this is the longest single loss for a single company in history. investors weigh in.

tech earnings continue to roll through with spotify reporting. we discussed were new users are coming from and how the company is fighting off competition from apple and amazon. our top story, amazon reported better-than-expected results and forecasts more of the same in the current one. investors were perplexed by the numbers. inres were teetering positive and negative territory in aftermarket trading. the company missed analysts on revenue -- analysts estimates on revenue. advertising was strong in the company beat massively on earnings. it shows amazon is managing to keep a lid on expenses while investing heavily on new businesses and expenses. joining us now is the ceo of the e-commerce platform boomerang and a former executive at amazon and working on the supply chain and retail merchandising.

you are excited about these earnings come alive? >> the profit -- earnings, why? >> the profit was awesome. margins improved across the board. one of the key things that jumpedone of the key things that jumped out was, looking at the itertising revenues, continues to be strong. 130% growth in the segment. a combination of advertising and the amazon program picking up and private goods are helping margins. that is driving this monster beat. the cfo talked about improving efficiency across the board. even as they are making the investments in alexa and other areas. right now, it is achieving a big snowball effect creating momentum.

there three plays they have perfect. number one is they have to play in the cloud services businesses. there are comparatives coming in like microsoft making a big getupition and acquiring and google going big on the cloud businesses. there are two other areas where they can play massive offense and gain a lot of revenue and margins. number one is the amazon marketing services. that is a very high profile and higher-margin business for amazon which is growing rapidly. fors a measurable technique packaged goods to get in front of shoppers. the other is the grocery business. -- having acquired whole foods and picking up momentum, that is a big opportunity, revenue opportunity for them. emily: amazon saying on the call

that whole foods is driving new prima memberships and on prime day they saw more new subscriptions than ever despite the big push. jitendra: i think the pace is accelerating at a smaller than expected pace. like you said, it is a very big market in penetration right now. they have to build infrastructure first. are there any red flags? slower revenue growth could be a strategy in terms of starting to capitalize are on some of the profitability level ships -- levels. they have a good way to capture customers and that allows them to reinvest all of that back into rmb -- r&d. that expense when up

significantly in the gives them competitive modes in the long run. emily: do not see a lot of challenges ahead? jitendra: we see about -- we challenges and if you look at the core business, especially the marketing services business, we are seeing google and facebook going after the traditional advertising dollars. amazon can go after both. and trade promotions bucket. they can grow without directly competing with google and facebook in a lot of ways. if you look at the traffic on the platforms in the u.s., they're getting very close to where google and facebook are. they have the at industry and we have seen alibaba do this successfully in china. we see rapid growth in profits from advertising. emily: they talked about

improving efficiency in europe and japan as they continue to invest heavily in india. guru: india is a big growth segment for them. the head of india is now the head of the senior team at amazon. having missed the boat in china, they are serious about india. they announced a big entry into australia but have bumps in the road with that. there's a big market to have over there. europe is very strong for them. all of these vehicles we talk about in terms of advertising other to be prime, subscribers, and groceries, these are all significant amount of opportunity internationally. emily: what about prime video? how big an opportunity is that? but forge for netflix, amazon, the division has had a lot of struggles lately. where does prime video go from here?

prime video is available in 200 countries and territories globally. prime, and it's true glory, is available in 16. content tog to use attract more people onto the prime bandwagon. the hits are missing largely, but the investments are there. from prime video, they saw good growth. version being2.0 the category king of video or books with kindle, it is a big opportunity for them to grow. it is a high gross margin profile for revenue business. emily: amazon continues to chase apple for the chilean dollar market cap finish line. gentlemen, thank you very much.

reportingrk times is robert mueller is specifically scrutinizing negative statements from president trump about jeff sessions in the former fbi director, james comey. they also report mueller is examining whether the president actions at up to its auction -- obstruction. this news comes following word that 11 conservative house members introduce articles of impeachment against rod rosenstein, the official who overseas the russia investigation. for the first time since the sudden the parts are of the previous ceo in june. we will bring you the highlights. if you like bloomberg news, check us out on the radio and listen to us on the bloomberg radio app, bloomberg.com, and in the u.s., sirius xm. this is bloomberg. ♪

emily: intel reported results after the close thursday the give upbeat forecast for sales signaling they are staying competitive even after the departure of their previous ceo. for more but spring and romaine bostick in new york. what are the highlights? >> they beat estimates pretty much. the company came out last month and they basically gave guidance and analyst set expectations based on the guidance, and today, intel came in at the guidance or slightly above it. unfortunately, you do not get market for this

coming in at to guidance anymore. this is a growth market. people are looking for growth stocks. what intel give the market today was certainly reassuring in some market for coming in at to guidance anymore. respects, but not necessarily enough to generate enthusiasm. emily: and there is continued concerns about a slowdown ahead. this is as they are looking for a new ceo in the midst of a pretty big scandal. romaine: the fact that they did aboutally say a whole lot what the future of the top spot going toto be, that is take them some time given how abrupt the departure was last month. until people get a better sense of who is going to leave the company and where the direction is going to be, none of the analysts seem to be all that down on the strategy that the company had before we got to the end of june. has been a lotre

of questions as to whether this can be an opportunity to steal the company in a more aggressive direction so that they can keep the lead they have has been a lt of on some of the smaller competitors like amd and nvidia. we got off the phone with the interim ceo who talked about overall performance and said we had a fasting -- fantastic order -- quarter again. this quarter is another indication bond us building a journey. no mention of the big hole to fill. we're seeing earnings on the back of the qualcomm and nxp deal falling through. it is an uncertain future for the chip sector overall. where does intel fit? romaine: it is interesting. there is a little bit of an busy as him for the chip sector as a whole. think about today when you had the nasdaq down 1%, the philadelphia send -- semiconductor up 1.8%.

of the stocks in the index, you only had seven or eight stocks down and intel was one of the companies. that tells you about how people view the chip sector now. people are looking for growth and see it in a the and to a certain stack -- a certain nvidia.n intel is not growing as fast. maybe it is not fair to put that on their shoulders given the size they are, but that is where investors are looking now. they want to find the next big thing, see it in these companies, and they don't necessarily see it in intel. intel will move along and dominate certain sectors, but going forward, if you want to see a pop in the stock higher it is up 13%is, this year, but that is lacking compared to its competitors. emily: we had to talk about facebook, the huge plunge right after earnings in aftermarket hours continuing today.

what you make of this fact that recover?d not this is the single biggest drop for company ever. romaine: it was quite remarkable. it was a momentous day for all the wrong reasons to read we were talking -- reasons. we were talking about why people did not expected this. stocke 18%, 19% drop in a of this stature, to take people off guard like that raises questions, did zuckerberg and sandberg grind -- guide long enough to let them know this is coming or was analysts that dropped the ball? aep in mind there are still lot of analysts out there defending this stock today. you only had three downgrades and one of them was from a strong byuy to a buy. of facebook and

near monopoly they have in the space they operate in will continue to serve them well. they will have to work through these things. i think it is possible that you will see bidding back into the stock. you saw that at the tail end of the trade session as bidders came back in in the last 15 or 20 minutes. we will see what happens as the next few days and weeks go by. keep in mind, it took only two weeks to shake off the cameras analytica scandal. -- cambridge analytica scandal. i interviewed roger mcnamee who has been incredibly critical of facebook and he was even surprised at the drop and suggested this could be the trigger that leads to a much bigger market correction. would you agree? romaine: it is the fourth largest stock and the nasdaq 100

and is a pretty large weight in the s&p. the one encouraging sign you had was that you did not see the contagion. even when you saw earlier in the day twitter was down pretty significantly, but some of that had to deal with issues unrelated to facebook. then, use all stocks like spotify, pandora holding up pretty well. this could trigger some concern, particularly when you look at earnings out of amazon today which, while good, are not generating enthusiasm. there is a narrative that this sector as a whole, the broader orh sector, has peaked reached saturation in maturity level that it will have to be reckoned with read it is possible that could lead us to a correction given how much of await a weigh the stock has in the market. emily: bloomberg's romaine bostick, thank you so much.

we will be speaking with bob swan tomorrow about these results. tune in for that. another story we are watching. --get pie said he stands by gitby pie -- a questioned the legality of a $3.9 billion deal spinning off stations to meet ownership limits. the deal will brought before a judge which could delay or killed the deal. coming up, facebook sought biggest one-day drop ever after the company reported slowing user growth in the second quarter results. we hear from an investor pushing back on company's actions in the past read that is roger mcnamee. --. -- past. that is roger mcnamee. this is bloomberg. ♪

investors are reeling

from facebook's earnings driven by investors are reeling from facebook's earnings driven by slowing user growth. the slide in the session talked the largest single loss for a single company in history. spoke with roger mcnamee earlier and here is what he had to say about the big red flag. >> i think they are running out of users in their most profitable markets. weighty, i believe the of the scandals over the past 's beginning to show up in user behavior. emily: for more reaction, the tosha joins us -- the tosha natasha joined us. how much does this hurt? >> it hurts a lot. i think facebook was pretty lucky to see the recovery after the cambridge analytica scandal. we have been calling on the company to a knowledge the risk of faces.

these are not new problems. what we saw in earnings was really the fallout from what we have seen in terms of corporate governance, platform and if you lay should in, whether that has been election interference, fake hate speech being propagated over the platform. it is pretty notable that we have now seen twice in one year and over $100 billion loss in shareholder value. that is due to issues that could have been addressed more proactively and earlier on. emily: what did you make of the earnings call or you had mark zuckerberg talking about a solid quarter, pumping up instagram, and you had the bombshell from oj talking about the

headwinds and that people are changing their privacy settings and blaming it on gdpr? >> it is a good time when there is negative news the pylon all of the news and really let investors understand the risk that facebook has faced all along. facebook is in over its head. expendituresting growing faster than revenue. that is never a good thing. headcount is up and all of the numbers seem like necessary investments given that facebook needs to fundamentally address some issues with the platform. concernedtart to get is on the revenue side. you bring up the new regulation in europe and how that is and we seesers active daily users go down in europe read -- europe.

the regulatory risk is coming to there is a huge erosion of trust because of the timing between some of the .ssues to election interference between when investors were asking for answers and the company knew there was a problem, and when the users discover there was a problem. it was nearly a year from when beforeted fighting it nine months later we learned 126 million americans were viewing russian propaganda over the platform in the lead up to the election. four months later, cambridge analytica with the 87 million americans data was compromised on. fix is a lot to have to going forward. even in their developed markets, the next step is to rebuild

their trust. emily: as you say, it is a lot to digest. revenue is growing 40% year-over-year. that is despite all of these negative headwinds. ten to what an early investor has been spoken -- who has been outspoken about privacy issues has been grappling with. >> there is a lot of growth opportunity. where we'll investors put that given isebook's underlying model based on promoting disinformation and hate speech. not because facebook approves of disinformation or hate speech, but rather because those are things that generate the most engagement. me he mcnamee also told thinks facebook is not unlike philip morris when you think about the harm it inflicts on people. it is a dramatic comparison.

what do you think? natasha: when we talk about issues of addiction, we can universally agree that people are addicted to the smartphones. the kind of information being viewed over facebook is often not that's great. we know for a fact there is -- there has been these huge fake news flows, that hate speech is an issue, and that sexual harassment being propagated online and over these platforms is an issue. said, thosebeing things are outside of the company's own terms of service read when user sign-up, that is not what they are supposed to be doing. the company has been incredibly culpable in terms of letting it go on.

what roger mcnamee is saying is that is been a benefit. emily: we could go on and on, but natasha lamb, thank you so much. amazon shut past all of the faang stocks in market trading. we will give you the latest. this is bloomberg. ♪ ♪

story,back to our top amazon out with better than expected earnings in the second quarter. -- above own target their own target but trailing analyst estimates. the cloud computing division showing movement with revenue, growing year-over-year. the nascent new ad business is showing promise as well and subscription services rose 57%. reality shares is an innovative asset management firm and index provider that has amazon among its biggest holdings.

,lso with this in new york garrett, i know you been listening in on the call. getting some new information about amazon and it seems overall that the company was more efficient across the board and was able to squeeze even more profit from all of its divisions. >> yes, and the profit forecast was quite above expectations and the main reason for that seems versions,third party these are the people who are not in amazon selling products on the website, but it's people who might have their own store and storefront. that's why the revenue is flatlining, but it terms of the that's why it is growing. emily: eric, is this what you want to see?

eric: absolutely, and something to look forward to in the future, with all the expenses we've seen over the years in the past, they are starting to bear fruit and were seeing revenue maybe flat for amazon but of around 35%, yet earnings are up almost 500% in the last year. so this is exactly what you want from a business like this, innovation that leads to profit margin expansion. emily: amazon still has a lot to work on in some of these new businesses is expanding into. trying to break into prescription drugs for a billion dollars, what do we expect to see they -- to see their? >> in terms of pillpack, is going to take some time. the plan that was presented to them from just be those seems to zosthe 1 -- from jeff be seems to be the one they're excited about.

the founders thought the amazon plan was the one at -- that align the most with what they wanted. there will be something interesting coming from amazon and prescription drugs are a huge am a multibillion dollar market. although undefined at this point, it's something i'm sure investors are excited about. emily: amazon is in a race with apple for that trillion dollar market camp -- market cap. do you think amazon can get their first? >> that's looking to be the case. they have come out of nowhere, and today after the earnings announcement, there are getting ever more closer to where they might crossover to apple's market cap and hit that trillion dollar number. it's a big number, the have a lot to prove here and everything is priced to perfection, but they continue to deliver on that perfection. and year out. the stock is not without volatility, either. 2015 andooking back in amazon down almost 30%.

and yet the stock just continues to plow forward and recover from those losses and inter-into new territory. another thing people are missing, and there's a time aid of u.s. the business is so much bigger than people think. blockchain is a buzzword that keeps getting buzzed around. blockchain is a service, they are all benefiting from this and iny of them are using aws their storage facilities. emily: let's talk about the cloud, we saw strong clout growth with microsoft and with google. it must be that this pie is expanding so rapidly and amazon is in the league. the key questions was exactly that. we saw microsoft come out with very good results and the question was, maybe choose

microsoft, taking more amazon's business than was expected and then google came out with good results, so if google and microsoft. we had the google ceo speaking about how this is bigger than just that company and bigger than just microsoft. like eric said, this is something all businesses are jumping on whether it's blockchain or just traditional retailers, whatever you have. a are going on -- they're going on to the cloud and using products like aws, and the pie is expanding for everyone. emily: let's talk about the at growth, there's so much optimism about amazon becoming one of the top two competitors in online at, with google being at the top and facebook being number two. the facebook performance over the last way for hours, maybe amazon really does have a shot of surpassing facebook even if it is in 3-5 years. how much potential do you see their? eric: it's one of those things, everyone pulls out that famous

quote, your margin is my opportunity. that is really what we are seeing here. if there is a business that has wide margins and great success and there is an entrenched incumbent, amazon is coming for you. this is one of those classic examples, and they are perfectly positioned for that. they have 100 million amazon rhine you -- users, and that doesn't even mention the others that are using it for though shopping services. they have the eyeballs, so they might as well start monetizing it. to mention the artificial intelligence and the investment they've made into that. so they can continue to step forward farther and farther down that path. the next area is health care and we have to watch out for financial services, but they are coming big. emily: on the call, amazon continue to tout the efficiencies across loud, advertising and all the

operations. what do you think is amazon's achilles heel? it is still a company that is turning a profit and a stronger than expected profit, but a smaller profit than some of its peers. >> that's the big thing, it's trading at almost 300 times earnings, that's not a cheap stock by any means, even based on the sector it is in. it's almost six times the valuation of most of its nearest competitors. so any kind of pick up, one could be political risk. we've seen trump talk about their use of the postal service is really just it's delivery boy, and i don't know if that's just enter or actually something that could cause some pain for amazon with wider margins getting crushed. if we see some political risk, is going to get the equity market immediately in the stock price and you could see some

massive sellouts. just,her thing is innovator sometimes fall off their innovation wave. as they get more comfortable, someone else works coming in a source the takeover and the stop being priced at astronomical highs starts to lose that luster and may never see that peak again. we saw that with cisco and a lot of companies in the late 1990's and early 2000, and they never recovered. that's the biggest risk to an investor at amazon right now. emily: we are all waiting for that next tweet. thank you both. trump waited into controversy of reports that twitter is limiting the visibility of some republicans on this platform. it's a known practice, and the president tweeted on thursday, twitter shadow banning targeting republicans, not good. we will look into this practice

at once. twitter shares dipped after that tweet. the music streaming companies keeping apple and amazon at bay. this is bloomberg. ♪

emily: spotify seems to be overcoming its apple threat. out with earnings, and it gained more subscribers than expected things to customers in latin america and emerging markets. 108 million in the second quarter, and paid subscribers

reached 83 million, more than any other music service. spotify analyst join us now. what is really driving subscriber growth? craig i think it is a couple of things. they are still in the early stage of secular growth of streaming music. you have a lot of devices like the amazon echo proliferating right now. subscriptions have gained more awareness with customers. from aare shifting traditional purpose to a rental model and there's a lot of growth across the globe at this time. the ad supported free services also big driver. how big? >> it varies from company to company. it's about 10% of revenue, it missed a little bit this quarter due to some gdp related issues, markets a $25 billion

globally and there's a lot of room for spotify to grow that. emily: talk about the competition with apple. this is a company that obviously has deep pockets and long-term relationships with artists that spotify has to compete with. that's a great question, apple does have a platform advantage. he can push apple music out to all the iphone and ipad owners in the market. that said, if you look at the global market, apple really has a small market share relative to other devices and the market share further fragments when you after in the amazon echo is the dominant speaker. when you look at what's going to be the winning factor for streaming business, it's device ubiquity. andify is in switzerland works on every device and is starting to build up a data advantage that will be difficult for others to compete with. but amazon has a music service it's trying to push on users. justin: it's going to be a

unique situation, yet spotify right now is the market share leader. if i look at each one of those businesses, they do one device well, but but not every device well. none of them work on other devices. emily: talk about the data spotify hasn't why it is so valuable. justin: another really great question. if i look at the way artists are compensated these days, it's more toward live performances and building of an audience. what spotify is doing with the spotify for artist initiatives is bringing the date of that musicians, helping them grow their audiences. in the past quarter, spotify increased listenership by about 5% for independent artists, that's something that can build up over time. and help artist be more

successful. emily: how does that differ -- differ from amazon and others? justin: with 180 million users around the globe, spotify's multiples bigger than any other player in the market. consumes, it substantially more hours listened. -- pandora only looks at the u.s.. so if you're being a global player and trying to build a global audience, you need spotify's data. emily: what are the trends we should be watching for any emerging and global markets? justin: it's a function of market launches at this time. spotify's mostly in developed markets at this time. it is starting to launch in the rest of the world a little bit more. the first launch in africa last watching the trends, it is it getting partners to help

push the application in the market, and what exactly is the price point? discretionary income gets a little less and you need to price it accordingly for different markets. emily: what about non-music content they are investing in, podcasts and the like? podcasts, you look at you've got great engagement, but historically not too much monetization on those platforms. often it is still someone reading spoke in on their and you don't have the same degree of ad targeting that google or facebook gives you. is stillthing that being experimented on, something that can be modified a lot more overtime, but i would call that a 3-5 your driver versus something you will see next. emily: thank you for stopping by. coming up, investors may have been disappointed by third quarter forecast. talks to us next.

this is bloomberg. ♪

for users,w product credit cards. these and mastercard will be the card networks for the strike business. they making it simpler for companies to process them. we talked about keeping the competition at bay. >> we think all of those consumer payment assets would all be really successful overtime, but what has always been lacking is a platform for an businesses to just manage abstract complexity of doing business online in 2018.

business models are changing, they are more global and more complex, like a multiparty interaction or something like that. that's what we are focused on. apple pay has been growing like a weed and that's phenomenal for strike. second quarter results topped estimates wednesday. investors were not celebrating just jet. the digital payment company announced third-quarter sales projections that fell short of analyst estimates with slowing user growth of its mobile payment at. investors are concerned about its competitive edge. the paypal's cfo caught up with caroline hyde to talk about report and future mna. >> we thought we had a very good quarter and gave very good guidance for the year. we had recorded 23% revenue growth. to your point, we announced a $10 billion share buyback. for the back half the year, we

increased revenue guidance by $100 million in increased our etf guidance by one cent. we are pleased with the progress were making. think it's a little is aligned with what wall street expect and that's perhaps why you are seeing what you are seeing with the stock. caroline: what a record-breaking day in terms of the move we seen on facebook. do you think market valuations, you've seen your share price up in 2018. and so far does it make it harder and harder to live up to these expectations? i can't predict what wall street is going to do or the stock price reactions, but i can focus on what we control it paypal. that is growing digital payment. we are growing at a rate that's 25% year on year and you're seeing a lot of interest in digital payments and fin tech in general because the way people are changing the way they move

and manage money. we're positioned well let paypal, having a two-sided network with almost 250 we and 20rs on one side million merchants on the other. that's why you see a lot of interest in our stock. facebook at times is a friend me, sometimes being -- sometimes a frenemy. >> i can't speak to facebook that i can take you that we do partner with a lot of technology platforms and marketplaces. one of the things we have done, we pivoted a couple of years ago to where we haven't open digital payments platform. we want to partner with companies like facebook and many other large technology platforms , but i can't speak to what's happening with facebook. buy,ine: you also want to you are still on the hunt for

acquisitions. where would be the best place to invest at the moment? >> are capital allocation strategy has three pillars, what is investing organically, internally. another is returning cash to shareholders, and lastly, going out and acquiring companies for growth. last had a pretty busy quarter. we announced for acquisitions. these all help the merchant side of our platform. we also want to focus on the consumer side. as we look at opportunities to acquire different companies for growth, we want to make sure we are continuing to offer capabilities that are complementary to our platform for merchants. things like risk or payouts that are things the companies we acquired do. at the same time we want to make sure we go out and provide consumer offerings on the consumer side that are appealing to them and continue to bright -- provide services like are one touch technology.

caroline: does it frustrate you when you're looking at merchants , it still 20% of online sales. do you need to get in with a partnership with amazon? what has been delaying that? next we would love to partner with every large company in the world. as we look at opportunities for growth around the world, one of the things that is obvious to us is that we are underpenetrated in many markets internationally. we have a strong presence in the u.k., but there are probably five or six core markets where we have a full suite of products rolled out. we are focused on increasing our penetration among digital users in some of these large international markets like china, mexico, or brazil. caroline: international is a key focus. there was some concern about the slowing growth rate, you're looking at 78%, but it has been slowing. how do you want to see it

continue to protect -- to progress and how do you make it more revenue-generating? >> it had its best quarter for growth that we've ever had. customersore venmo than we ever had before. around $60e is billion of total payment by him that room 78% in the last order. there are few companies that have that amount of payment volume that are growing at that rate. to your point, one thing we are o.cused on is monetizing venm it is largely a peer-to-peer application where you might exchange money with a friend or someone in your network. what we are moving toward in the last part of last year is to allow our customers to actually shop at merchants. that is very appealing to merchants because of the social aspect of this platform. it's akin to free advertising for them. paypal ceo's the

with our own caroline hyde earlier on bloomberg markets. amazon second-quarter results, the company missed estimates on revenue and the forecast revenue growth for web services and advertising were both strong and the company beat massively on earnings. the results show amazon is managing to keep a lid on expenses while investing heavily in new devices and selling groceries and prescription drugs. >> we had what i attribute it to continued shrink them some of our most profitable areas. consecutive quarter of accelerating growth. advertising also had strong growth. elsewhere we saw probably better than expected deficiencies in operations. this: that does it for

edition of bloomberg technology. friday we will break down twitter's results. can the company beat high expectations after turning around his performance this year? we will discuss. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver.

>> amazon eases some of the gloom with better expected earnings and forecast of more of the same, shares rising in late trade. bath, they still took a $120 billion has been wiped away. >> elsewhere, the u.s. and china washingtond threatens sanctions on a nato ally. >> and the ecb is sticking to its bond by and rape