Amazon, Apple jump in late trade

Shares in Amazon and Apple jumped in afterhours trading after investors concluded that, unlike Meta and Alphabet, both tech giants had done as well as could be expected in the volatile June quarter.

Amazon shares leapt more than 12% despite reporting a loss which was driven by another write down of the value of its investment in the Rivian electric vehicle maker. Apple shares were up nearly 3% after a better-than-expected revenue and iPhone sales.

Apple CEO, Tim Cook said revenue rose 2% to $US83 billion during the quarter, compared to 36% growth during the same period (that was post a Covid lockdown) last year and over 8% growth in the March quarter.

Net income fell to $US19.4 billion in the quarter from $US21.7 billion a year earlier.

Analysts had been expecting lower earnings and Apple said it took a $US4 billion hit from the impact of product and component shortages in the quarter. There was also a $US5 billion hit taken from the stronger US dollar in the quarter.

Cook said the results were better than expected and the company’s Chief Financial Officer Luca Maestri said it was a “challenging operating environment.” (comments similar to other company executives in recent days around the world).

While Apple didn’t provide any guidance for the September quarter, Cook told CNBC that “In terms of an outlook in the aggregate, we expect revenue to accelerate in the September quarter despite seeing some pockets of softness.

Cook told CNBC that the company is seeing inflation but will continue to make investments.

“We do see inflation in our cost structure,” Cook said. “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.”

Apple’s iPhone sales exceeded Wall Street expectations at $40.67 billion for the quarter – a rise of 3%. This suggests that demand for iPhone 13 models remains strong even in the second half of the product’s annual release cycle.

Cook also revealed Apple had success attracting Android customers to become iPhone owners during the quarter.

“We had a record level of switchers and saw double digit growth for customers new to iPhone,” Cook said.

The Services business was the fastest growing segment for Apple during the quarter. with a 12% rise to n$US19.60 billion. It includes monthly subscriptions, payment fees, warranties, search licensing fees from Google, and revenue from the iPhone App Store.

Revenues from sales of Mac fell 10% to $US7.38 billion with the higher dollar and component shortages restricting supplies – iPad revenues also fell – down 2% to $US7.22 billion for similar reasons.

Cook said Apple has 816 million current paid subscriptions, which includes anyone who subscribes to an app sold on the Apple App Store in addition to products such as Apple Music and iCloud.

Apple said it spent $US28 billion in the quarter on buybacks and dividends.

…………

Meanwhile, Amazon was helped by a 33% jump in its cloud computing revenues in the quarter.

The company topped market forecasts and surprised with a confident outlook for the third quarter.

Revenue grew 12% in the quarter to $US121.23 billion

Amazon said it expects to post third-quarter revenue between $125 billion and $130 billion, representing growth of 13% to 17%. Analysts were expecting sales of $126.4 billion.

Amazon reported a $US3.9 billion loss on its Rivian investment after shares of the electric vehicle maker dropped 49% in the second quarter. That took the total loss on the investment this year to $US11.5 billion.

Because of the Rivian write down, Amazon reported an overall loss of $US2 billion for the quarter.

The company’s online stores segment saw a 4% year over year fall in revenues. Physical store sales continued saw a 17% rise in revenue year on year (it’s a small business compared with the rest of the company).

Amazon’s ad business was a bright spot with revenue climbed 18% in the period. Rival Facebook reported its first ever decline – a dip of 1%. Alphabet (Google) saw weak performances at its core ad business and especially at You Tube where revenues were weak for a second quarter.

Cloud computing Amazon Web Services stood out with a 33% leap from a year earlier to $US19.74 billion, above the $US19.56 billion market estimate, which helped convince investors the giant was back on track.

As did some tough cost cutting as it tackled too many workers and too much warehouse capacity.

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” CEO Andy Jassy said in a statement.

Amazon cut its headcount by 99,000 people to 1.52 million employees as of the end of the second quarter after almost doubling in size during the pandemic.