Settle privacy concerns. And the proclaimed arrogance of Silicon Valley. Ripples ceo has called Facebooks Libra pitch to lawmakers somewhat presumptuous. We ask how the controversy is impacting the broader Crypto Market. But first to our top story, it is big techs turn, facebook, tesla, alphabet, all reporting secondquarter earnings. Amazon and alphabet reported results thursday. For alphabet it was all about sales and regulation. Our guests weighed in. If you look at the way google gets revenue, about 85 of revenue at google is coming in from the ad business. I think, given the competition they will be facing, you do not want to be in a spot where you have north of 80 of revenue coming from advertising. So i think that they are going to place a bigger emphasis on the Cloud Business. How much success are they going to have . It is hard to say. They have not been able to get out of that third slot, as you have said. They are facing massive competition against microsoft and amazon, who have had a lot of success and who do put significant dollars so i think it will be something that will be hard to get out of, that third slot, but it is still a significant part of their business that they will be focusing on Going Forward. Emily you wonder if acquisitions will be part of the story to beef up the Cloud Business. They did look earlier this year, and i asked if acquisitions in cloud specifically would make sense. She said, we are open to acquisitions where they make sense, and we are excited about the opportunity. At the same time she said they are still interested in acquisitions, she also said organic is doing well. It is interesting given the antitrust scrutiny that google might hesitate to do more acquisitions certainly in the near future. Is that what you would expect . Actually, i think the Cloud Business is important strategically for this reason. Look at what microsoft just did with open ai, investing 1 billion in that, i dont even know what you call it. It is a company, but kind of a nonprofit. I think google will look at the Cloud Business in a similar fashion. The technologies of the future that will be scaled out, obviously, the Cloud Business is going to be important for that. It is, in a sense, a platform for those new businesses. So while amazon will continue to push a lot of that Cloud Business to the bottom line, and as we have seen today, it is incredibly important for the stock price because it impacts csoi so heavily in the bottom line eps numbers. For google, i dont see it quite that way. I see it even more strategic to google than it may even be to amazon. Emily that was estimize founder and a forrester analyst. As for amazons earnings, wall street doubled down on the company. On the heels of the company after a recordsetting prime day, most advised clients to buy in, expecting Strong Revenue growth and operating income. I got insight after the giant reported. Aws is a bigger story here. We saw that decline to 37 growth, the first time we saw it dip below 40 . Given how much it contributes to operating profit, that is potentially the canary in the coal mine. It could also be a onequarter blip here. That is something more considering to investors Going Forward. Emily it is interesting given aws and api, given how we were talking about googles Cloud Business and how it is still in third place, so the Cloud Business in general is continuing to grow, and it is certainly not a zerosum game, but what do you think of the slowdown or the disappointing numbers have to do with it . Is it because of competition, or is it because of amazonspecific issues . I dont think it is amazonspecific issues so much as it is the competition. Microsofts Cloud Business is up over 60 recently, so we know that business is on fire. But i think the stalking horse is google. We dont have a lot of visibility into those numbers, but you hear under new leadership there are signs of life here. If that becomes a strong third player, now amazon is competing with two giants and i think that can eat into the top line Going Forward. Emily the cfo said the company did spend more than what they said they would on the same day delivery initiative, and that it has been more difficult to execute than expected. I can sort of echo that as a customer, when i tried same day delivery on amazon, it often does not work out. What do you see there . The topline growth is driven by the commerce business. I was expecting investment to pay off in q3 and q4. If we are already seeing an acceleration in q2, we could be looking at an explosive q4. Because consumers have to develop the habit, and that habit, they are not feeling the impact of that one day delivery. Those habits will get engrained in q3 and then cement themselves in q4. I think that is where we will really see the upside. Emily lets talk about the rest of the year, going into the holiday quarter, lots of acceleration is going to be happening. Youve got cyber monday, black friday, all of this competition ratcheting up. How do you expect amazon to perform, relative to the competition, in the ecommerce unit in particular . I think there is a few things that really advantage amazon in q4, particularly in light of the oneday shipping initiative. I dont know if a lot of folks are thinking about this just yet, but we got into a compressed holiday season. Last year we had 32 days between thanksgiving and christmas. This year it shrinks to 27 days. That really advantages someone like amazon. We always see them increase their share later in the season as consumers dont have the same confidence in getting no deliveries on time with other retailers, but they do with amazon. The compressed season will really be to amazons advantage. That is another element to upside in q4. Emily coming up, tech giants visit the white house. The Trump Administration hosted some of the Biggest Tech Companies to talk about the fallout from the trade war and the ban on huawei. And if you like bloomberg news, check us out on the radio, listen on the bloomberg app, and in the u. S. On sirius xm. This is bloomberg. Emily white house officials are sending a delegation to china next week led by u. S. Trade representative robert lighthizer. This is after a highlevel meeting with the Trump Administration and ceos from google, broadcom, cisco, intel, and qualcomm. The meeting was geared towards easing a ban on sales to chinas huawei. I spoke to a representative from arizonas seventh district. It is a dangerous meeting. Huawei is not an independent actor, it is an arm of the chinese intelligence agency. We cannot and trust us doing business with huawei will not have negative consequences for us. If you read the Washington Post last weekend, huawei was working with a Shell Company in north korea, supplying them with technology that was explicitly banned through our sanctions regime. This is why we have joined in a bipartisan manner with congressman gallagher from wisconsin to make sure we enforce the huawei sanctions regime that we think is being effective. The president should not do oneoff trades for farm goods for something that could significantly impact the future of both our country as well as our allies countries in terms of Information Technology. Emily there are some in the u. S. Business community, including many highlevel tech ceos, who will tell you privately they see no evidence that huawei uses this equipment to spy on the u. S. Or anyone else. What would you say to that . I hope they would just read the panda Shell Corporation that was set up in north korea to allow huawei to do business with countries we have sanctions against. So clearly this company, huawei, is not operating on the up and up. Number two, it is well known that among chinese companies, it is part of their mandate they must make any Assets Available to the chinese government. And while i respect a lot of these companies, their goal is to have the highest Profit Margins for their shareholders. As a member of congress, the most important thing for me is our National Security. And this sends a bad message to our allies overseas who we are trying to convince not to incorporate huawei into the National Security apparatus, because it makes us as partners very difficult for us to share information with them. Emily you referenced a report in the Washington Post that huawei has partnered with a chinese stateconnected company, panda, as you have said, to improve things in north korea like the wireless infrastructure. They have partnered with this company, according to the Washington Post, for eight years. When the president was asked about this story, he did not seem particularly alarmed. He said the u. S. Will lead on 5g. We will see what north korea does. How does this new potential revelation about huawei and north korea huawei has denied any work in north korea how does that change your level of objection . It certainly makes me want to obviously, i object even harder. I think other corporations and other members of congress should be worried about this. The fact that the president does not seem to understand the problem, the scope, really tells you we should question his judgment when it comes to decisions on this very key National Security issue. Again, i think the president does not understand the full scope of what is happening or what could happen if huawei should be able to have access to our Information Technology market and our allies. It is essentially trying to play one trade war against each other. We should not be trading access to the 5g market for huawei for us to go back to what we had pretrade war, which is us being able to sell Farm Products to china. This should be separate from this trade war because this will have longerlasting effects to our National Security than this temporary trade war we have. Emily that is my next question. The leaders of these u. S. Companies will say the blacklisting of huawei has significantly hurt their bottom line. Some of these companies provide supplies, provide chips to huawei smart phones and laptops and Consumer Products that they say do not have much of a threat to National Security. What would you say to those ceos . Well, they are wrong. It has been the determination of the u. S. Intelligence community, as well as congress, that zte and huawei are dangerous operators. We have the right as a nation to stop corporations from engaging with other countries and other entities that put our National Security apparatus in danger or do not align with our interests. I dont see these companies complaining about us having a sanctions regime against iran or other bad actors around the world. They do not have a right to corporate profit at the sake of u. S. National security. That is just how it is. And unfortunately, hopefully we in congress get our way and are able to stop these people from getting their way. Emily what would you like to see the Trump Administration do . What do you think congress should do . Rep. Gallego i think the Trump Administration should continue with the sanctions regime they have and enforces them going stronger. Hopefully that stays. If the president does not do that, i think congress, the house and the senate, in a bipartisan manner should pass a new sanctions regime or continue the sanctions regime that continues on huaweizte to make sure we are enforcing good order and discipline to protect our National Security interests. Emily since i have you, i have to ask you about iran. The president defends withdrawing from the nuclear deal, and meantime iran has seized a britishflagged oil tanker. Tensions seem to be escalating, so what do you think the u. S. Should do about the iran situation . I think we have to respond to iran in a measured manner with assistance and concurrence with our allies, especially britain and our european allies. I think at the same time we do have two recognize that us leaving the jcpoa without any plan, more as a kneejerk reaction to antiobama policies this president has, has created this situation. Iran says they will comply, even though they will not receive any of the economic benefits of sanctions lift, but there are still other areas we have to keep. The last thing we can afford, the last thing that we need is a war in the middle east. It is not even in our National Security interests to engage in this kind of war, but we have a lot of other tools in the toolbox to both keep iran in check, and at the same time, deescalate the situation through diplomatic means. Emily and speaking of the tensions here at home, the president is under fire for what some have called racist or raciallycharged language about four democratic congresswomen of color. Do you believe the president s remarks have been racist and that he is stoking racial tension, especially given his response, or lack thereof, to supporters at his rallies calling send her back . Rep. Gallegos yes, of course. This is not the first time the president has used race as a way to engage his base, and enrage his base. Lets remember this president started off his political career accusing president obama of being born in africa and snuck into this country for some weird crypto reason. Then he accused a mexicanamerican judge born in indiana of having dual loyalties. So it is not surprising that he describes four american women as essentially not being american and not loving this country. These women are of color. He does not describe nancy pelosi or any other women that are white as being unamerican or not loving the country. He is clearly trying to gin up a base of his support that is racist and does believe in these racist types of theories. Emily that was congressman Ruben Gallego of arizonas seventh district from capitol hill. Coming up, tesla sputters. Shares of the electric car maker fell in afterhours trading wednesday after the company pulled back on profit promises. We will break it down. And later, we talked to ftc commissioner Noah Phillips about facebooks record 5 billion fine to put its privacy violations behind it. This is bloomberg. Emily tesla posted losses and backtracked from a profit forecast as part of its secondquarter report. Cash and deliveries of emerged as the Biggest Challenges to growth. The Company Announced its longtime Technology Officer is stepping down, though staying on as an advisor. I covered the carmakers challenges with max chafkin of Bloomberg Businessweek and a tech analyst. I think the 5 billion on the Balance Sheet is a great number. I think margin is probably why the stock is down, but i think margin is actually, if you go through the numbers in detail, is better than expected. And i think Forward Guidance of being gappositive on that income is also good as well. It is kind of an overreaction to the downside, in my opinion. Emily if it is an overreaction, it is a big overreaction. I mean, shares are down 10 right now. Max, there is a disappointment here on profit. The company turned profitable at the end of last year. That reversed at the beginning of this year. Elon musk said the company would become profitable later this year. It looks like thats not going to happen. Max they are still trying for it. It should be said there are two things going on with tesla. One is that theyve been pushing like crazy for volume. They want to be, you know, a largevolume car manufacturer, one of the biggest in the world longterm. This car that they are selling, the model 3, does not have great margins, it seems. They pushed so hard to get the price down to that magic 35,000 base price, got there. It has come up a tiny bit, but you know, the margins are supertight on those lowend cars. As people buy the cheaper model 3, they are moving away from teslas more expensive cars, so there is this pressure on profit that is, at the very least, a nearterm problem, and critics of the company are going to say no, this is a longterm problem. This is a company that will have a hard time getting to profitability. Emily is it a near or longterm problem . Ben its not true that the model 3, they actually had better margins quarter over quarter, x credits, which is what Everyone Wants to look at. So its not true they are making improvements on gross margin here, so im not sure what that statement is. Emily max . Max yeah, yeah. The company is not profitable right now. Theyd obviously like to get profitable. I think in the long run, they want to be more efficient in the factory, be more efficient in their operations. Thats the message weve been hearing from elon musk basically for the last year, and then they want to get this, these new cars out, the model y, which could be a huge boon for the company. That is the category of car that most americans are buying, and also getting to china emily it is a cheaper suv. What is the status of it . Max they are working on it emily is it going to be here next year . Max well, you know emily inquiring minds want to know. Max i dont have any inside information. It is certainly the big effort tesla is doing right now on top of building a giga factory in china, which would be huge becaus