The US tech giants Apple and Amazon reported mixed earnings results for the June quarter. While Apple consolidated its position as the world's most valuable company, Amazon disappointed investors with its light guidance.
ADVERTISEMENTApple and Amazon have reported their June-quarter earnings, continuing to fuel market volatility on Wall Street. Apple surpassed market expectations and returned to growth after experiencing a sales contraction in the previous quarter. In contrast, Amazon shares slumped more than 6% in after-hours trading due to missing revenue estimates and providing a disappointing outlook for the current quarter.
However, overall sentiment soured as both earnings results revealed softening spending and competition from Chinese rivals impacting their profitability. Additionally, the massive AI investments by these tech giants sparked concerns about their returns.
Apple beats forecasts but still losing Chinese market shares
Apple reported revenue of $85.78bn (€85.78bn), up 5% from a year earlier, topping analysts' estimated $84.53bn. Apple Services remained the most profitable segment with a steady growth momentum, reporting revenue of $24.21bn (€22.36bn), an increase of 14% from a year ago. Services sales, which include revenue from Apple Store, Apple Pay, Apple TV+, Apple Music, Apple Arcade, and iCloud, contributed 28% of the overall revenue, up from 26% from the March quarter. Apple expects it will keep a similar pace of overall growth in the current quarter, as will the service segment.
Notably, iPad's sales jumped from several consecutive contraction periods, thanks to the long-awaited release of new models. The segment revenue increased 24% to $7.16bn (€6.61bn), compared with a 17% drop in the previous quarter.
However, the biggest revenue contributor, iPhone sales dipped 1% from a year ago, primarily due to continued decline in China. Apple has lost more market share in the country due to fierce competition from local rivals and weakened spending power.
Sales in China fell 6.5%, far more than analysts expected of a drop of 2.6%. For the first time, Apple dropped out of the top five China smartphone sellers, while the local rivals Vivo and Xiaomi both recorded double-digit growth in the second quarter. According to research firm International Data Corp, Apple’s market share in China shrank to 14% in the second quarter, down 2% from a year ago.
Apple Intelligence was also in the spotlight, with expectations that the adoption of artificial intelligence would boost further sales of Apple’s new products. CEO Tim Cook said:” During the quarter, we were excited to announce incredible updates to our software platforms at our Worldwide Developers Conference, including Apple Intelligence, a breakthrough personal intelligence system that puts powerful, private generative AI models at the core of iPhone, iPad, and Mac. We very much look forward to sharing these tools with our users, and we continue to invest significantly in the innovations that will enrich our customers’ lives, while leading with the values that drive our work.”
Amazon's online sales weaken, despite strong growth in AWS
Amazon’s second-quarter revenue missed market expectations due to weakened online sales and disappointing advertising income. The overall revenue hit $148bn (€136.7 bn), up 10% from a year earlier but missing the estimated $148.56bn. The most profitable segment, advertising sales, rose 20% year-on-year to $12.77bn (€11.8bn), slightly lower than estimates.
On a positive note, the core business, Amazon Web Services (AWS) exceeded market expectations, with revenue of $26.3bn (€24.3bn), up 19% from a year earlier. The growth rate has accelerated from 17% in the previous quarter. CEO Andy Jassy said: "We're continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth."
However, Amazon plans to continue pouring money into the AI infrastructure, which concerns investors. The e-commerce reported capital expenditure of some $30.5bn (€28.2bn) on AI development such as data centres.
Amazon's online sales increased only 5% from a year earlier, a notable slowdown from 7% in the first quarter. It may have been impacted by Chinese rivals Temu and Shein, which have aggressively developed into overseas markets, offering discounted products. Amid softening spending power, the company saw consumers opting for cheaper products, leading to lower average selling price.
The company forecasts a flat revenue growth for the September quarter, which is also lower than most analysts' expectations. CFD Olsavsky indicated that big events like the Paris Olympics might disrupt normal purchasing patterns.
