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Friday
May, 24

Earnings Season Wraps Up With Amazon’s Earnings Beat, Apple’s iPhone Sales Miss

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  • Apple and Amazon reported their earnings on Thursday after the market closed
  • While Apple delivered a soft performance driven by weaker product sales
  • Amazon’s Q2 earnings report yielded a nice boost to the tech sector with an all-around, high-quality beat

Thursday was one of the busiest earnings days of the year, with both (NASDAQ:) and (NASDAQ:) reporting earnings for the June quarter. While Amazon impressed with a beat across all business segments, Apple delivered a more muted performance with a rare iPhone miss.

A High-Quality Beat by Amazon

The e-commerce giant reported a strong set of results for its second quarter. On the bottom line, the adjusted earnings per share came in at $0.65, crushing the expected $0.35. Sales surged 11% year-over-year to $134.4 billion, easily topping the analyst consensus for revenue of $131.5 billion.

“It was another strong quarter of progress for Amazon,” said Andy Jassy, Amazon CEO.

The company’s online stores business saw its revenue rise 4.2% YoY to $53 billion, beating the average analyst estimate of $52.5 billion. Third-Party Seller Services grew 18% YoY to $32.3 billion, also ahead of the consensus.

AWS – Amazon’s cloud business – recorded a 12% increase in revenue to $22.1 billion, while analysts were looking for $21.8B billion. Still, the 12% growth marks yet another step in revenue deceleration as Amazon’s cloud business grew 16% in Q1. The cloud unit accounted for 70% of Amazon’s $7.7 billion in operating profit.

“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment, and AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models,” Jassy added.

Amazon also generated $10.7 billion from ad sales, while the Street was looking for $10.4 billion. Jassy noted “strong demand” for Amazon’s advertising services. Region-wise, Amazon generated $82.6 billion of its revenue from North America, while International sales rose nearly 10% to $29.7 billion.

For this quarter, Amazon said it expects sales of between $138 billion and $143 billion, or growth of between 9% and 13%, with the midpoint of the guidance of $140.5 billion coming in ahead of the consensus of $138.25 billion. Operating income is expected to be between $5.5 billion and $8.5 billion.

The company didn’t give segment guidance for Q3 on the earnings call. Amazon shares rose over 8% in early Friday trading. This is in line with expectations as, according to Tyler Corvin, lead options trader at The Trading Analyst, the options market was pricing in a ±7.1% move in response to the earnings.

A Rare iPhone Miss Sends Apple Shares Lower

Apple also reported results on Thursday after market close. The Cupertino-based titan reported a profit per share of $1.26 for its third fiscal quarter, topping the consensus for earnings of $1.20 per share.

CEO Tim Cook noted that Apple generated a record Services revenue with the number of paid subscribers now exceeding 1 billion.

“We saw continued strength in emerging markets thanks to robust sales of iPhone,” said Tim Cook, Apple’s CEO.

Revenue fell 1.4% year-over-year to $81.8 billion while analysts were looking slightly bigger decline to $81.55 billion. The biggest drag on FQ3 revenue was hardware sales with Apple also feeling the consequences of a weaker consumer amid higher interest rates.

“Our June quarter year-over-year business performance improved from the March quarter, and our installed base of active devices reached an all-time high in every geographic segment,” said Luca Maestri, Apple’s CFO.

The company generated $60.6 billion from product sales, which is a 4.4% YoY decline, and below the expected $60.7 billion. iPhone revenue stood at $39.7 billion, down 2.4% YoY, and just below the $39.9 billion that analysts were looking for. Similarly, Mac generated 7.3% less in revenues compared to a year-ago period, but was still ahead of the consensus by more than $200 million.

iPad had a poor quarter, with revenue coming in at $5.8 billion, a large miss compared to the expectations for $6.4 billion. Sales in the Other Products (wearables, home, and accessories) business segment were up 2% to $8.3 billion.

The weaker-than-expected product sales were partially offset by an 8.2% growth in the Services business – $21.2 billion vs. $20.8 billion expected. Overall, Apple’s gross margin stood at 44.5% in FQ3, a beat relative to expectations by 30 basis points.

Apple continues to be a cash flow machine with FQ3 operating cash flow coming in at $26 billion. The company returned $24 billion to its shareholders in the June quarter through dividend payments and share buybacks.

The board of directors declared a cash dividend of $0.24 per share, which is payable on August 17 to shareholders of record as of the close of business on August 14.

Speaking on the earnings call, CFO Maestri said that Apple expects September quarter sales results to be similar to its June quarter performance, which would suggest revenue of $89.25 billion, lower than the expected $90.2 billion.

On a more positive note, Maestri hinted that iPhone and Services’ year-over-year performance is expected to accelerate from the June quarter. Apple is widely expected to unveil the iPhone 15 lineup this fall with the latest rumors hinting at September 13 as the launch date.

***

Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.



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