>> from the heart of where innovation, money, and power collide in silicon valley and beyond, this is "bloomberg technology" with emily chang.

emily: i'm emily chang in san francisco and this is bloomberg technology. a record june quarter for apple with revenue despite headwinds from a strengthening dollar, china lockdowns, and an expected slowdown in consumer spending. the iphone topping estimates but supply constraints hitting the mac and ipad. tim cook, we will tell you what he had to say. amazon surging in late trading after providing a strong outlook for the third quarter. a much different forecast than other retailers. net sales jumping in the second quarter thanks to prime day shoppers. we will dig into the data. the largest chipmaker for mobile devices is mourning the slow down in spending. -- warning of a slowdown in spending. we will talk about the weaker than expected forecast.

all of that in a moment but first, a look at the markets. another big day for tech results. apple and amazon out after the bell and we are seeing some green. ed: apple up 4%, narrowly beating the top and bottom line. strengthen iphone and ipad, missed on mac. it missed on services as well which was an area analysts hoped would be an area of strength. the rich consumer, the upper end of the markets holding up well. we had that conversation with tim cook. and economic headwinds in the third quarter. amazon surging after hours frankly on very strong outlook for the third quarter. overall, net sales beat pockets of strength. online sales missed north america, strengthen aws and advertising. up almost 13% after hours. the opposite of what we saw from other retailers like walmart and

target that cut their outlook on concerns consumers worshiping their spending -- shifting spending from discretionary. it the prime subscriber is a higher income earner. open to the headwinds in regards to inflation and in intel, it keeps coming. a really big mix on the top and bottom line. looks like it has been a drop in demand from pcs and data centers . more worryingly, we see intel cutting forecast for this fiscal year. a day we are trying to make sense of the global economy, look at the session. we have data that shows the u.s. economy contracted for a second consecutive quarter.

a day where bad news was good news. the nasdaq 100 up .9%. this is one of the best to day rallies we have ever seen in u.s. equity markets. a pullback and yields down almost 11 basis points following the gdp print. bitcoin caught up with this risk-on mentality. i cannot wait for friday. emily: ed ludlow, thank you. we have a pitiful analyst at forrester research. you just got off the phone with tim cook and we walked through the results. we see record revenue, the iphone strong. ipad demand also very strong, but mac was held by supply constraints. and also the macroeconomic environment is impacting wearables.

and when it comes to services, he talked about digital ad spend and they see the macroeconomic environment having an impact there. what are your takeaways. >> the first one is the good news. like many other companies, apple faces the same headwinds like inflation and uncertainty of the supply chain. apple benefits in a few ways. about two thirds of sales come from smartphones. it is considered to be a necessary device and they upgrade that far more frequently than pc or tablet. another thing that you and ed mentioned is apple does have a more fluid customer base. when you look at the united states, the iphone owner has a household income that averages $18,000 higher than an android owner. 35% of households have more than $100,000. apple does benefit from having a more fluid customer base. emily: this is interesting from

tim cook. he expects revenue to accelerate despite seeing some softness in some areas. they do believe there was some macroeconomic headwinds that affect business in the june quarter that i discussed. it sounded optimistic despite some of the softness we have seen. i was trying to get him to give me a real take on if we were going to recession. he is hesitant to sound like an economist, but what is your take away? julie: if i were tim cook, i would also be optimistic. it also has parallels globally. 60's percent -- 60% of consumers on an apple device and they are likely to stay with it. the second thing that we know is 18% or 19% of consumers only own apple devices and are locked into the ecosystem.

generally all companies are facing some headwinds but apple is looking at a customer base that should help them sail through easier than their competitors. emily: supply was another point of optimism in this discussion. when you look at the numbers, apple said that they would expect $4 billion to $8 billion. they could shave that off the top due to supply constraints. it ended up being lower than the lower end of that range. and they saw "significant improvement in the month of june in china on the supply side and demand-side." he talked about the june 18 holiday, the big shopping holiday in china. they saw strong results there. they are about to start a big promotion in china. a fairly rare sales promotion where a series of apple devices will be discounted for a few days. he said that had nothing to do with clearing inventory.

what does that signal to you about the state of play in china? julie: i'm not a specialist on the chinese market but i think it looks like they are willing to invest a bit. china is a gigantic market and apple has always been -- compared to the chinese incumbent, it has been a small player so it is worthwhile for apple to try to grow that base. one of the things we know about apple products is if they buy one, they are likely to get two or three. i think it's an important market for apple to invest in and try to gain ground. emily: a key question is, how are they going to invest if indeed we are looking at a recession ahead. mark gurman reports that apple plans to slow hiring and spending next year. which is a little less drastic then we have seen with layoffs and hiring freezes at other

companies. tim cook says we believe in investing through downturns and it made us stronger on the others. obviously, we are being deliberate in our decisions where to invest. what do you make of the word deliberate? julie: if i were tried -- to try to guess what tim cook is thinking, i would be focusing on what consumers notice. the hardware. there are a lot of upgrades and things that other companies are doing involving artificial intelligence, anticipating what i need, getting better at loyalty and security. some of those things consumers are less likely to notice. if i'm investing in the hardware side, that's what talks for consumers. and a long lead time for things with augmented reality, the metaverse, or entertainment. it has a bigger impact further down the road.

they are continuing to work on those things. take, for example, payment. have almost doubled the number of people using apple pay during the pandemic. is nothing to expect but upside in categories like that. there are a number of places apple pay is accepted for example. emily: he did emphasize the number of people using apple services, the rising number of people switching to the apple platform, the ios platform, and singled out the fact that these are totally new to the apple platform and ios. we are listening to the earnings call and we will let you know if tim cook has anything additional of interest to say. always great to have your instant reaction here on the show. thank you. coming up, amazon pops after a stellar quarter. we will have all the details next. this is bloomberg.

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emily: let's get a deeper look at amazon results. also strong beating analyst estimates. i want to bring in our guest who had a by on apple and amazon. tom, look at the top line here. the sales and sales forecast are better than expected after we have seen pretty dismal results from walmart, for example. why is amazon bucking the trend? tom: amazon greatly benefited in the second order by strong cloud computing sales and strong advertising sales.

when you think about the outlets for the third order, prime day this year in the third order versus the second order last year, it is still a mover. they reported the impact on sales growth, and it's a combination of june order, cloud computing, and advertising. and a september quarter of prime day. emily: when you take out prime day, how well is amazon really? i know we have another one coming up later this year. if you think about the health of consumers in an inflationary environment where they are paying more for gas and groceries, how did amazon fare? tom: amazon is not well-suited for inflation. 56% of sales are third-party. generally speaking, those products are being sold by someone other than amazon. they are less likely to raise the price given they are not going to want to lose the buy box to another competitor trying to sell on amazon.

yes they have whole foods and they have less discretionary products on amazon, but inflation is tough for amazon. a tough challenge for amazon. emily: is amazon and a better position because they have aws and cloud computing units? something that walmart and target don't have? tom: absolutely. if you look at amazon and go back to the third-party unit sales, their relative profitability is clearly the highest and cloud computing and strong in advertising. and much higher on third-party retail sales. so we compare them versus walmart or target, cloud computing helps a large percentage of their sales from third parties rather than through amazon. emily: let's talk about some of the challenges amazon has had

coming out a couple of years of pandemic spending. they grew too fast, built out warehouse capacity to quickly. they haven't been able to fill that space. how much of a headwind will that continue to be? tom: it is a headwind but the data suggests they had 100,000 less employees between the march order and the june quarter. amazon is more noble adjusting had -- nimble adjusting headcounts when it came to their fulfillment centers. if you look through the lens of shopify, they felt overstaffed and their current e-commerce demand had a 10% reduction of force. i think those are two examples of e-commerce companies acknowledging that they have too much capacity and their headcount is probably too high. emily: certainly big news about shopify's layoffs.

i want to tell you about the call with tim cook. the highlights he said, they expect revenue to continue to accelerate in the september quarter despite softness in some areas. they say they saw significant improvement in the month of june for supply and demand in china. this i thought was interesting when it came to spending and hiring plans which bloomberg has reported that they plan to slow hiring and spending next year. they said they believe in investing through downturns and continue to be "deliberate" about their decisions. what is your take away? tom: for apple, the question has been for a while how serious are they about getting into

electronic vehicles? and what do they want to do in the metaverse? so i interpret your comments on tim cook on deliberate investment spend, thinking about a future product roadmap. to what extent do they plan to get into electronic vehicles, augmented reality, virtual reality. we know that they are in cycle for the next generation iphone and other devices. but where do they want to expand and how will that affect investment spending? emily: what do you think the answer is? do they lean into cars or not right now? tom: my expectation over the long term is yes. if you look at apple's history, they are not the first entrant into a new category. smartphones being the best example. but they are often the second entry and a significant entry. i am of the belief that longer-term, they will have a car. it will be more than just apple play with the car. for metaverse, they will have

some sort of headset or other device. they are leaving it wide open for facebook or meta to disrupt them otherwise which i think would be a big mistake. emily: always good to have you on the show, tom. coming up, a closer look at the investment climate in china right now. so many factors at play in a big call between president biden and president xi jinping. this is bloomberg. ♪

emily: president biden and chinese president xi jinping headed to our call on thursday talking about a range of issues from taiwan to the war in ukraine. biden reiterated support for the one china policy and both agreed to talks about energy and food. president biden is trying to find a new way to work with china and strategies to contain

the country's global influence. there was an in-person meeting planned between the two leaders. a principal at albright stonebridge group joins us to discuss. what are your takeaways from the headlines out of this call? it sounds like tensions were combed rather than inflamed -- calmed rather than inflamed? amy: the important thing was having the call. the u.s.-china relationship is so contentious. tensions are running so high that there are few members of the two governments who can talk and have frank conversations, raise issues in a constructive way. the two presidents can. they have a long-standing relationship. unfortunately, the state of the relationship in some way rests on them continuing as they did today for the fifth time since

president biden has been in office just to level set the relationship. there are areas where they fundamentally disagree and are continuing to work. but always that confrontation should not veer into the military zone. competition is fine, disagreements are fine and can be managed as long as they don't actually explode over a crisis like taiwan. emily: now you have house speaker nancy pelosi seemingly determined to visit taiwan. the chinese government has strongly expressed their disapproval. is this a good idea? what are the consequences going to be? amy: it's not unprecedented that the speaker of the house visits taiwan. it happened 25 years ago. newt gingrich did so. the u.s. china relationship was in a very different place 25

years ago. so the timing of the visit is particularly challenging. here in washington, we continue to ramp up areas of competition with china. we continue to complain about bad chinese behavior including more and more aggressive and assertive actions vis-a-vis taiwan. in beijing, there is a view that this visit is a provocation to demonstrate what official support for the government three months before china is having a major leadership meeting. it continues to be stressed that the timing is bad for speaker pelosi to be going right now. that doesn't mean she won't go. it doesn't mean it's going to lead to disaster. but the chinese government has been vociferous in saying that

there could be consequences for her taking that action. emily: at the same time, you have this $280 billion manufacturing bill that would bring chip production to the united states and a broader deglobalization trend that i'm sure china can't be happy with. how does that play into this? amy: the omnibus china bill was stopped in congress. the bill that you just mentioned is only one small part of that our church china bill -- larger china bill. elements of the bill reinforcing and invigorating the abilities of the u.s. to manufacture semiconductor chips and conduct r&d in the united states with funding from the government is all meant to enhance competitiveness with china. but what's not in the bill are some of the provisions that were going to speak to having the delisting of chinese companies

from american stock exchanges. and a potential outbound investment screening process. so this bill is actually very targeted just on american competition with china and not on constraining american and asian -- american engagement with china. this is what was passed by the house today. emily: we will see alibaba move to the telecom listing. the fcc chairman says a u.s.-china deal needs to happen so that more of these delisting's don't happen. is a deal a possibility? amy: i think it is absolutely a possibility. there is posturing by the sec and the chinese cfrc. what the chinese want is exceptions from across-the-board retirements -- requirements that companies face audit and

inspections by the u.s. the u.s. is holding firm that you've had that exception for much too long and we want you to comply. the talk about it not happening is a little bit too quick. there is still hope. emily: amy from albright stonebridge, good to have you here. thank you for joining us. ♪

emily: welcome back. on capitol hill, the house passed a bill that includes $52 billion for u.s. chip

manufacturers. now it goes to the white house for president biden to sign. this is a major legislative victory for president biden. i want to bring in the ceo of qualcomm for more on this and the company's earnings results. i have to ask about the chips act and how transformational you think this could potentially be to the industry. >> this is great news for the u.s. some conductor industry as well as the global semiconductor industry. we need more chip manufacturing. chips are an essential technology for our economy. for a company like qualcomm, we

need more manufacturing of chips. we are very happy about that. we are the number one customers of companies like samsung. to have more manufacturing capacity in for with even more suppliers, that is great news for the industry. we are very excited about that even though we are not a direct beneficiary of the funds. it creates more capacity and supply for our chips. emily: would this head off supply disruptions like we have seen with covid? >> the way to think about this, this is not going to have any short-term impact. this is about building a resilient and geographically diverse supply chain for semi conductors. we will build the infrastructure that will allow us to grow as an industry and have a more

resilient supply chain. emily: let's talk about your results. a beat on earnings come up with guidance came in light. you talked about a challenging macroenvironment. you said smartphone market will be smaller than forecast. let's talk about the word challenging. how challenging do you expect the macroenvironment to continue to be? >> i want to talk about that but also about what's good. we have macquarie economic headwinds. the end of quarter, it was a beat top and bottom. we are more cautious about what is the future outlook because of the macro economic headwinds, we know that can have an impact on consumer spending. we think the mobile market will be smaller. it is mature. it will be smaller as we look at consumer spending softness. the good thing about results is we saw a record diversification strategy.

we guided for the next quarter sequential growth. we are concentrating more in premium and high gears. as outlined in apple results as well. emily: you talked about how the smartphone market is going to be smaller, but the high-end is holding up. does that mean that iphone is carrying the market? >> the premium devices, what is really happening is we have a mature smart phone user base. when people think about buying their next device, they want a better device.

we have seen the mix continue to improve and our strategy to focus on share of wallet in premium and high tear is working out as we see the resilience of the premium tier. that leads to the great announcement we have which is our samsung agreement. for me, that was the key highlight of the qualcomm quarter. emily: you extended a big licensing agreement with samsung. there has been a concern that they're making more of their own chips. what does this mean for qualcomm's market share and where they betting on you for so many more years? this is quite an agreement. >> this agreement put a lot of things to rest. let me unpack that for you. first, it is an extension of our existing licensing agreement with samsung.

it extends to 2030 on the same royalty terms and it includes 6g. it's a great benchmark for renewables. the second part of the announcement, it's the most exciting one is the growth opportunities did a multiyear agreement that we are going to be powering the galaxy for samsung globally. we climbed up to 75%. upcoming products which will be impacted by this agreement, you see the share of qualcomm increasing more than 75%. we are going to be powering their solutions globally. that's very exciting.

if you have any concern about the qualcomm partnership with samsung as it relates to their solution, this agreement put that to rest. we are very excited about the agreement and we continue to have our strategy focused on premium and high tear. emily: i just got off the phone with tim cook who said they see significant improvement on the supply and demand aside in china. what are you seeing in the supply chain? is it going to get better or worse and how much longer are supply issues going to be with us? >> we were one of the few companies to call the supply shortage early on and took action early on. we also said we expect the supply demand to normalize in the second half of 22. that's exactly what is happening. now we see much more balanced demand supply equation. there are still pockets of shortages in some areas but they

are small. we are seeing as we guide with caution the next quarter on the mobile market, the impact of macro economics and the channel lock down but we all know those letdowns come and go. we expect the china market to bounceback. we are being prudent, but it is very likely a situation where we contingency growth and we guided 24% year-over-year growth in q4. emily: we have heard from a number of different ceos, dire predictions about the future of the economy. elon musk says he has a super bad feeling. jamie dimon says he is preparing for an economic hurricane. what is your take on the economy? how concerned are you or is qualcomm preparing for recession? >> it is very difficult to predict. i have been very focused on the things that we can control. what you see is doing is focus on what's important for qualcomm

in the long term. i can unpack that in just this quarter alone and how we guided q4. the samsung agreement is about bringing long-term stability. the markets went to go up and down. qualcomm is growing structurally. that's why we are going to end up the year with almost 50% year-over-year growth in the phone market. the most important thing is how we are being very actively diversifying the company. what we said is we have record growth with sequential growth projections for the next quarter and we are seeing that the enterprise and industrial segment has been very resilient.

while you have economic headwinds that provide softening computer consumer spending, enterprise is strong. other companies are focused on enterprise and the reality is digital transformation of the edge is somewhat recession proof, but we will see. emily: you are pushing into cars, networks, computers. will you be able to grow those businesses fast enough to whether what could be a serious need ash near-term. >> from what we saw in the coming quarter, we did size the macro economic headwinds on consumer. with that, we are projecting growth of 24 percent. qualcomm has a number of drivers of growth driven by

transformation as devices become connected, they become more intelligent and it is happening and a number of different verticals of the industry. we expect that to continue even though as we navigate to those challenging times. emily: always good to have you here. thank you for sharing your view of the future with us. coming up, el salvador's big bet on bitcoin. what is it worth now? we will discuss. this is bloomberg. ♪

emily: it is time for our group to report. el salvador's finance minister defended its strategy to adopt bitcoin as legal tender and double down on its plans to build a bitcoin city as critics urging the country to which the experiment with the main cryptocurrency suffering badly through a bear market. our guest have been following this closely. how is it going in el salvador? there is obviously crypto winter going on but i don't think winter is ever too bad in el salvador. is the bet paying off?

>> the crypto winter has cooled enthusiasm a little bit on the ground in el salvador at least among average citizens. the price when they adopted it last year was near record highs around $60,000. now it is around $20,000. that has discouraged people from using it and investing in it. the government has bought about $100 million worth of bitcoin over the last 8-10 months. at today's prices, those are worth about $50 million. you see a decline of about 50% on their holdings. there are some signs that some businesses are accepting it as a company although the vast majority seem not to be at this point. among those who do, it's a small percentage of their sales that are actually in bitcoin. emily: what about here in the united states? there are bitcoin atm's here and there. are people actually using them?

>> that's a great question because the other day, i had a conversation with someone known as a macro economist and works on emerging markets as well as the u.s. economy. the question was why do you need bitcoin? he is a bitcoin skeptic. why do you need it when you have fintech? there are questions about whether it is the security or currency or commodity. look at what happened in el salvador and the idea of using it as legal tender started to define it as a currency in some ways. our other networks like lightning network taking off in another in a big white as company start to use it more? to his point, the price fluctuation has been very scary. another aspect, this comes as other currencies like the dollar a rallying putting other emerging markets in what my sources call severe stress.

if that is already an issue not bitcoin under pressure but other currencies, then you have a dual issue for countries like el salvador. emily: el salvador's government, why are they doubling down even though the prices is under so much pressure? why are they touting this success? >> from our interview yesterday with the finance minister, he sees it as a new technology that has potential in the future. i also think of the things he told us was that it has brought in some levels of tourism, some levels of foreign investment. some of that has come in via cryptocurrency exchanges, digital wallets, many companies that provide different types of cryptocurrency infrastructure. el salvador is also a country that relies heavily on remittances sent home from migrants that live mostly in the

united states. those migrants send home money usually via money gram or western union or traditional sources of money transfer services. i think the government is trying to save citizens fees on like this and the lightning network which tends to be cheaper than traditional blockchain. we are seeing companies trying to come up with ways to compete with that. money gram announced a project

with a stablecoin to transfer money faster via money gram network from the u.s. to el salvador. it is true, if you use something like the lightning network, you can save money another these more traditional networks are coming up with ways to compete with that and make it cheap and fast as well. >> people want to use this and make it work in el salvador. they think it can become more seamless over time in terms of transactions and payments. i think back to a white paper from the university of chicago on how many el salvadorans don't have mobile to use as means of payment. how much is there still friction and how is it keeping or helping other nations go by the way of what el salvador has done like the central african republic which is also adopting in a

bigger way? >> when you are in san salvador and the bigger cities, it is feasible to use this technology. most people have smartphones. the problem is when you get into rural areas and poor areas where people are working on farms and as fishermen, they don't always have the technology to be able to adopt this kind of thing. in those areas, cash is still king. there is a big learning curve with this kind of technology. it's fairly new to a lot of people even in the developed world. you bring it to a country like salvador that is still developing in a lot of areas, the learning curve is even steeper. emily: so fascinating. thank you to you both. coming up, more on apple and amazon's results. we have been listening in on the calls. we will tell you what has developed. this is bloomberg. ♪

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emily: it was another big day of earnings with apple and amazon reporting quarterly results. let's wrap it up with ed ludlow. there must be a sigh of relief today. ed: that's definitely the consensus. you were bracing for something wrong to go apple and it was a mixed bag. good iphone performance. apples suspended guidance is interesting. you spoke to tim cook. he gave some really clear indicators of how things are going. in china, things are getting better. revenue growth will accelerate the september quarter. that sounds to me like things are improving and investors like what they see based on the reaction. emily: he also said they expect revenue to accelerate in the coming quarter. you said i've had demand was

strong, but that was impacted along with the mac but supplied chain constraints. ed: he basically said we are in a recessionary environment, we are going to continue to invest in future bets. it sounds like augmented reality, electric vehicles. but also be disciplined. emily: he used the word deliberate. ed: deliberate about spending. amazon smashed it. everyone is focused on prime because of what walmart and target told us. subscriptions were up. people were paying even though prices were higher on subscriptions. forget about prime and remember the cloud. it's all about aws. it continues to be a juggernaut. it beats on the top line. it continues to support operating income. the worry was that a lot of it's

customers are tech startups yet look how it's performing. emily: a huge bounce in amazon shares after hours. how are we expecting investors to react to this? ed: friday is going to be a big day not just because the market cap of amazon. there is a sigh of relief of the staying power of these companies. frankly, there is faith that management can get us through worsening economic conditions. emily: what are the earnings to come that we will keep an eye on? ed: now, we move to the software providers. what about the pandemic era darlings? where perhaps corporate spending is being pulled and the chip story is just getting started. we have had qualcomm and and intel, what about the rest of the sector? emily: that does it for this edition of "bloomberg technology."

i'm emily chang i'm emily chang this is bloomberg. ♪

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