Apple and Amazon report mixed fortunes

Michael Hewson MSTA CFTe Independent Analyst

It looks set to be a mixed open for Apple and Amazon shares when US markets open later today.

There was already a degree of nervousness heading into Apple’s Q3 numbers due to warnings from several chipmakers that demand for processors was slowing. Qualcomm, a key supplier to Apple warned earlier this week of lower demand, and Apple’s results yesterday appeared to confirm this trend as iPhone sales came in below forecasts, even though Q3 revenue came in ahead of expectations at $81.8bn.

Despite this outperformance Q3 revenues still fell from the same period last year, the third successive quarter that this has happened, and the first time this has happened since 2016. iPhone revenue fell $39.67bn, while revenues for iPads also disappointed, coming in at $5.79bn., while wearables also fell short at $8.28bn.

On the plus side services revenue rose to a new record of $21.21bn, while Mac revenue beat forecasts at $6.84bn, although it was still below the same quarter last year.

On a regional basis the reopening of the Chinese economy has prompted a continued rebound with revenue there of $15.8bn. What was also notable was that demand for iPhones fell in the US and Japan while inventory levels rose by 49%, perhaps not surprising given that September tends to see the launch of new products as well as upgrades.

Another bright spot for Apple was its stores in India which CEO Tim Cook said had exceeded expectations, indicating that Apple would probably be looking to redouble its efforts there. There was a passing mention of the new Vision Pro which Cook said was being shipped to developers.

On its guidance for Q4 Apple said it expects to see further declines in revenue with iPad and Mac revenue expected to see double digit percentage falls.

On the other hand, Amazon’s Q2 results were a strong set of numbers as revenues came in at $134.38bn, an increase of 11%, with outperformance coming from the online stores side of the business as well as AWS. Profits also comfortably beat expectations, coming in at $0.63c a share.

Online stores saw $52.97bn, while Amazon Web Services saw a 12% increase in sales at $22.14bn. Amazon also saw decent gains in its online subscription services, revenues rising to $9.89bn from $8.7bn with shows like Citadel and the film Air helping to boost traction in this business. Amazon also added to its international content, as well as sporting events.

Over the past 12 months Amazon has been cutting headcount after over hiring during covid and said that 5,000 jobs had been cut during Q2.

Amazon also upgraded its Q3 guidance for sales to between $138bn and $143bn.

To sum up, Amazon appears to have bounced back from a disappointing 2022, when it reported some significant losses, cutting costs as well as headcount, the outlook appears positive.

Apple on the other hand faces challenges when it comes to revenues and looks set for a fourth successive revenue decline in Q4, the first time this has happened in 20 years. One thing in Apple’s favour is its move into India where it currently has low market share. The potential here is huge and the hope is that growth here will offset any slowdown in its more mature markets.

Author

Michael Hewson MSTA CFTe

Independent Analyst

Award winning technical analyst, trader and market commentator. In my many years in the business I’ve been passionate about delivering education to retail traders, as well as other financial professionals. Visit my Substack here.

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