Apple Stock – revenue beat on strong hardware sales
- Revenue rose 8.1% to $90.1bn, which was better than analysts expected. Product and Services net sales increased, with iPhone sales jumping 9.7% to $42.6bn. There was growth in all regions apart from Japan
- Total operating expenses rose to $13.2bn from $11.4bn, with operating profit increasing 4.7% to $24.9bn
- Apple’s board of directors has declared a cash dividend of $0.23 per share
- The shares were unmoved in after-hours trading
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown:
“Apple’s ability to sell highly priced hardware in the current environment defies all the rules. At a time when US savings rates are plummeting and borrowing is rising, it doesn’t add up that customers are still flocking to Apple’s products. Yet this is the situation quarter after quarter, with the ceiling of Apple’s appeal still seemingly of reach. The exact location of that ceiling may well be found when we hear from Apple in January’s quarterly results. The key festive season is a crucial barometer for consumer sentiment, and there’s a possibility Apple is going to lose some steam year-on-year when it comes to Christmas sales.
In usual times, a revenue beat would be applauded by the market. However, iPhone sales weren’t quite as high as the market was hoping for. What we’re also seeing is a muted reaction as investors demand a lot more than basic good news to become excited in the current environment. By that token, the avoidance of a sharp sell off following the results is a genuine accolade.
An unhelpful development comes as Apple’s iPhones will switch over to USB-C chargers for its upcoming iPhone devices, following an EU ruling in favour of universal chargers. Over a billion people already have a device that uses Apple’s Lightening charges, so this is not a happy change for the tech giant. Having unique charging systems is another way of backing Apple customers into a corner, which equates to more revenue, in much the same way the group’s digital ecosystem of apps and hardware does. This isn’t going to knock Apple off the rails, but it’s unhelpful changing of the tracks.”
Amazon Stock – earning disappoint as Q4 revenue guidance raises questions
- Third quarter revenue came in at $127.1bn, which was slightly worse than expected. Q4 guidance is for revenue of $140-$148bn- also lower than expected.
- Operating profit decreased to $2.5bn, with Q4 estimates of $0-$4bn.
- AWS revenue grew 27%, with operating profit of $5.4bn.
- Advertising services revenue grew 25% to $9.5bn.
- Free cash flow decreased to an outflow of $19.7bn for the trailing twelve months.
- Shares fell 17.7% in after market trading
Matt Britzman, Equity Analyst at Hargreaves Lansdown
“Q3 results for Amazon disappointed largely across the board, with the biggest worry for investors likely coming from the guidance for the fourth quarter, traditionally the most important period of the year for e-commerce. Revenue expectations of $140-$148bn were well behind expectations and operating income’s a disappointment too, with a guide of $0-$4bn.
The core e-commerce business has come under pressure from changing shopping habits from the boom seen over the pandemic and a consumer with less disposable income. Clearly, Amazon went too big too soon on its expansion plans and it’s had to put the brakes on and then some to try and get costs back under control. Operating costs were up close to 18% in Q3, so those cost cutting actions haven’t made their way through as fast as we’d like to see, weighing heavily on the bottom line.
AWS, the darling child of Amazon and arguably the core reason the group trades on such a high earnings multiple, disappointed on revenue growth, coming in lower than the 30% markets were looking for. Weakness in this area suggests enterprises may be considering where to allocate capital and upgrading cloud tech given such an uncertain backdrop could be something that gets kicked down the road.
There was some positive news in the advertising business, which fared much better than the likes of Meta and Alphabet who saw ad revenue weakness. Amazon’s advertising business has been growing rapidly, offering businesses an alternative to traditional slots on social media or search engines. And Amazon can offer something differentiated, with a host of real time data of consumers spending habits. But it’s a small piece of the pie.”