Apple Beats Expectations and Amazon Falls Short in Latest Tech Earnings Reports
In the midst of a flurry of mixed trading updates from US tech giants, Apple emerged as the shining star to boost investor confidence. The company, which is valued at a staggering $3.35 trillion (£2.63 trillion), reported sales of $85.78 billion (£67.32 billion) for the three months ending in June. This is a 5% increase from the same period last year and exceeded the Wall Street estimate of $84.53 billion (£66.34 billion).
One of the key factors in Apple’s success was its iPhone sales, which make up almost half of the company’s revenues. The sales of $39.3 billion (£30.84 billion) were slightly down from last year, but still better than the expected decline of 2.2%. This impressive performance is particularly noteworthy considering that the highly anticipated iPhone 16 is set to launch in September, causing some customers to hold off on purchasing a new device. The new iPhone is expected to incorporate advanced features supported by artificial intelligence, making it a highly anticipated release.
According to Dan Ives, managing director at Wedbush Securities, approximately 270 million iPhone users have not upgraded their devices in the last four years. This makes the upcoming launch a potentially crucial moment for Apple, making it the most important iPhone release in recent years.
Aside from iPhone sales, another standout in Apple’s latest earnings report was the performance of its services business, which includes the App Store, Apple Pay, Apple Music, iCloud, and the Apple TV+ streaming service. This segment achieved sales of $24.2 billion, a 15% increase from the same period last year. Antonio Ernesto Di Giacomo, senior market analyst at the trading platform XS.com, noted that this growth is a result of Apple’s strategy to expand its service offerings and build customer loyalty.
The success of the iPad, which saw a 24% increase in sales to $7.2 billion, also stood out in the latest numbers. This was attributed to the release of new products in May, challenging the misconception that the iPad is a less significant product compared to the flagship iPhone.
However, Apple faced some challenges in its third-largest market, Greater China. Sales in the region came in at $14.72 billion, a 6% decline from the same period last year. This was largely due to tough competition from local rival Huawei, which has seen high demand for its foldable smartphones and devices.
While Apple celebrated its strong performance, Amazon faced disappointment as its sales for the quarter fell short of Wall Street expectations for the first time since October 2021. The company’s shares dropped by 8% in after-hours trading after reporting sales of $147.98 billion, a 10% increase from last year but $580 million lower than expected.
This was largely attributed to the high expectations for Amazon, with its shares having risen by 20% this year prior to the earnings report. The company’s closely-watched cloud division, Amazon Web Services (AWS), saw sales increase by 19% to $26.3 billion. However, this was seen as a lackluster performance compared to its competitors. For instance, Microsoft’s Azure platform reported 29% growth during the quarter, though it was slightly lower than expected.
Amazon’s core e-commerce business also saw a 5% increase in sales, but it was still considered disappointing by investors who fear the company is facing tough competition from Chinese rivals such as Shein and Temu. Furthermore, the company’s guidance for the next quarter fell short of expectations, adding to the disappointment.
This trend of high expectations and underwhelming performance was also seen in Intel’s latest earnings report. The chipmaker’s shares fell by 21.5% in after-hours trading following the announcement of plans to save $10 billion through measures such as scrapping the company’s dividend, reducing investment, and cutting 17,500 jobs globally. Intel has been facing tough competition from rivals like Nvidia and Advanced Micro Devices in both traditional chips and AI chips.
Overall, the latest earnings reports from the tech giants have been mixed. While Apple, Alphabet, and Meta platforms exceeded expectations, Microsoft, Amazon, and Tesla fell slightly short. All eyes are now on Nvidia, which will report its earnings for the quarter ending on July 28 on August 28.
