Amazon (NASDAQ: AMZN) stock price is trading sharply higher Friday after the e-commerce titan reported strong results. Apple (NASDAQ: AAPL) also delivered a set of strong results, driven by yet another iPhone outperformance.
Amazon Beats
Amazon reported a bigger-than-expected loss as it reported earnings per share of -$0.20. Revenue came in at $121.23 billion to top the expected $119.09 billion
Revenue growth was reported at 7%, while the company anticipates its third-quarter revenue to increase by 13-17% to between $125 billion and $130 billion, compared to analysts’ projection of $126.4 billion.
After nearly doubling in size during the epidemic, Amazon reduced its staff by 99,000 individuals at the end of the second quarter. In the midst of the current economic turmoil, IT companies have been announcing layoffs, hiring freezes, and canceling employment offers.
Amazon will continue to hire engineers for departments like Amazon Web Services and advertising but will be careful about hiring in other areas, according to CFO Brian Olsavsky during a conference call with reporters.
“I think it’s right for people to step back and question their hiring plans. We’re doing that as well. I don’t think you’ll see us hiring at the same pace we did over the last year or the last few years.” Olsavsky said.
Amazon also suffered a $3.9 billion loss on its investment in the EV maker Rivian. Its overall loss on the investment for the year now stands at $11.5 billion. The company lost $2 billion in the quarter overall as a result of the Rivian write-down.
Due to the fact that online sales are no longer booming as they were at the height of the Covid-19 closure, Amazon’s main e-commerce business continues to suffer. The company’s online store saw a 4% decline year over year. Sales in physical stores increased by 12% over the same time last year.
Amazon’s advertising business, however, stands out as evidence that the corporation is gaining market share in one of its fastest-growing businesses. During that time, ad revenue increased by 18%.
Most importantly, Amazon’s cloud business continues to thrive as well. Sales at Amazon Web Services (AWS) increased 33% year over year to $19.74 billion, exceeding Wall Street’s $19.56 billion expectation.
Operating income, which does not include the loss on investments, decreased from $7.7 billion to $3.3 billion from the prior year. AWS generated an operating income of $5.7 billion, which is equivalent to all of Amazon’s earnings for the time period.
Apple Reports Mixed Results but iPhone Excels Again
Apple reported earnings per share of $1.20 on revenue of $8.30 billion, which is better than the consensus of $1.16 on revenue of $82.81 billion. Apple’s gross margin was 43.26%, higher than the 42-43% range the company had projected earlier this year. Analysts were calling for a gross margin of 42.61%.
As consumers struggle with recession fears and inflation, chipmakers and other computer suppliers have warned that demand for smartphones and PCs is dwindling. Even giants like Apple may be destined for a period of low or no growth.
CEO Tim Cook told CNBC that the company is not immune to high inflation. Cook also added that Apple had a record level in converting Android users to iPhone owners during the quarter.
“We do see inflation in our cost structure. We see it in things like logistics and wages and certain silicon components and we’re still hiring, but we’re doing it on a deliberate basis,” Cook said.
The fact that Apple’s iPhone sales beat Wall Street expectations suggests that demand for the iPhone 13 models is still robust even halfway through the product’s yearly release cycle. However, Mac sales didn’t meet expectations and declined over 10% on a year-over-year basis.
Apple’s iPad saw a 2% annual fall, though it also outperformed conservative Wall Street expectations. Accessories like AirPods, watches, and HomePod speakers, saw their sales growth fall by 8%f, also short of Wall Street projections.
Summary
Shares of Amazon and Apple are up 11% and 3%, respectively, after two companies reported better than feared results for the June quarter. The underlying trends remain strong with Amazon’s AWS continuing to grow at a high level while Apple’s iPhone sales came in strong despite China’s COVID-19 lockdowns.
