- Apple beats on strong iPhone sales
- Amazon shares fall on cloud miss
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Apple edged out a slight beat on the top line after iPhone sales where stronger than expected. The Apple ecosystem continues to dominate, with the installed base reaching a new all-time high. Its unclear whether there was a significant pull forward of sales, but the word on the street is that this was a pretty organic beat, a good sign for underlying demand.
Apple is arguably the strongest brand in the world, and that gives it some breathing room as it works through a handful of big challenges. These include dealing with tariffs, shifting manufacturing away from China, navigating a sluggish Chinese phone market, and delivering a meaningful experience through Apple Intelligence. The AI story hinges on Apple Intelligence, but it’s a country mile from the ‘wow’ experience that was promised – there’s a lot of work needed but Apple customers are anything if not loyal.
Tariffs are still a bit of a wild card. For now, Apple’s products have been lumped in with other electronics and are somewhat shielded from the steep, retaliatory tariffs hitting other Chinese imports. But even at 20%, the impact isn’t insignificant, and it’s still unclear whether more hikes are on the way.
The good news? Consumers probably won’t feel too much pain as long as tariffs don’t land well beyond the 20% mark. And with Tim Cook seemingly in Trump’s good graces, there’s a decent chance that remains the case. At those levels, Apple should be able to absorb most of the extra costs, and with production in India ramping up, it shouldn’t need to make any major changes to its pricing.
Amazon shares took a sharp fall straight after results dropped, on what looks like a slightly weaker AWS result than some had hoped. Don’t forget, shares traded up into earnings on the hopes that Amazon could match its rivals Microsoft and Alphabet, who both saw better than expected cloud growth – AWS’s 17% growth hasn’t quite hit the mark. The key question to answer is whether Amazon, like we heard from Microsoft, is still seeing cloud growth limited by supply constraints.
The initial reaction might be a little harsh though, with Amazon’s second quarter revenue guide suggesting a 2% beat against consensus at the top of the range and a decent profit outlook too. This should really be seen as a vote of confidence in Amazon’s ability to navigate what are some especially choppy waters, especially for the retail business
