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Behind the Numbers: Amazon and Apple Quarterly Reports Unveiled

Plus500 | Tuesday 30 April 2024

As April draws to a close, all eyes may be on the coming earnings reports of two of the biggest names in the American tech industry. Let’s take a closer look at what might be expected when Amazon’s and Apple’s latest quarterly results hit the market in the coming days:

tech earnings

Amazon Joins the Earnings Party

Amazon (AMZN) is poised to disclose its quarterly earnings following the ring of the closing bell today, Tuesday, April 30th, joining the ranks of other Big Tech firms whose recent financial performances have impressed Wall Street while also hinting at a degree of impatience regarding artificial intelligence (AI). Anticipated highlights of the report include updates on the advancement of Amazon's AI endeavors, the status of its lucrative cloud computing division, and the expansion of its advertising segment.

This impending earnings release from Amazon follows closely on the heels of Microsoft (MSFT), a competitor in cloud services and AI, which delivered a stellar quarter, surpassing market expectations largely due to the strength of its cloud computing operations with its April 26th report. Many traders greeted Google's parent company, Alphabet (GOOG), with even greater enthusiasm as it exceeded both revenue and profit forecasts, coupled with the announcement of a new dividend, aligning with a growing trend among tech giants.

Key metrics that traders may want to keep an eye out for include revenue expected to reach $142.6 billion (compared to $127.4 billion in Q1 2023), adjusted earnings per share estimated at $0.82 ($0.31 in Q1 2023), online stores revenue forecasted at $54.8 billion ($51.1 billion in Q1 2023), Amazon Web Services revenue projected at $24.1 billion ($21.4 billion in Q1 2023), and advertising revenue expected to reach $11.8 billion ($9.5 billion in Q1 2023).

Positioning itself as a frontrunner in the burgeoning AI field, Amazon is actively vying for market share and introducing new consumer services. In a strategic move in March, Amazon escalated its investment in the AI startup Anthropic, injecting an additional $2.75 billion to bring its total investment to $4 billion.

Similar to its industry peers Microsoft and Alphabet, Amazon leverages its dominance in cloud computing to gain an edge in the emerging AI landscape. AI technologies demand vast amounts of data and computational power, necessitating the infrastructure provided by cloud service providers.

AI Integration

Amazon's collaboration with Anthropic underscores the strategic advantage enjoyed by trillion-dollar companies as they compete to dominate the AI era. With Amazon Web Services commanding around 30% of the cloud market share, Amazon stands as a behemoth in the industry, trailed by Microsoft Azure and Google Cloud, collectively controlling about two-thirds of the market.

Despite its AI ambitions, Amazon has announced job cuts within its AWS division amid signs of decelerating sales in its most profitable segment. Concurrently, the company faced setbacks such as discontinuing cashierless checkout systems at Amazon Fresh stores and intensifying competition from e-commerce rivals like Temu and Shein.

Analysts, however, highlight areas of growth for Amazon, particularly its burgeoning advertising business, which holds the third position in the digital advertising market behind Google and Meta. With its extensive resources, vast consumer data, and the broad reach of Prime Video, Amazon is poised to expand its ad platform, notably with the introduction of an ad-supported Prime Video plan earlier this year.

As Amazon prepares to unveil its earnings report, the outcome will coincide with the conclusion of the Fed's May policy meeting. While the market expects the central bank to maintain interest rates, any indications of potential rate adjustments could impact Amazon and other major tech stocks, which have been driving this month's equity rally.

With its stock having joined the Dow Jones Industrial Average (USA 30) earlier this year, Amazon has seen an increase of just under 19% in its stock value so far in 2024, reflecting investors' confidence in the company's continued growth trajectory. Whether today’s earnings will assist the company in keeping up this momentum remains to be seen. (Source: Yahoo Finance)

Earnings to Take a Bite out of Apple?

Apple (AAPL) stock has faced a nearly 10% decline year to date, grappling with various challenges. As the company gears up to unveil its fiscal second-quarter results on Thursday, May 2nd, traders may be eager for some positive developments.

Some market watchers attribute this decline to concerns over a weak iPhone 15 cycle and apprehensions about Apple's China business facing structural impediments. However, others hold that the challenges in China are more transient than fundamental. The forthcoming iPhone 16 cycle, fueled by replacement cycle tailwinds and enhanced generative AI features.

Expectations seem to be relatively modest for Apple's fiscal Q2 report, with analysts forecasting earnings of $1.50 per share on $90.3 billion in revenue. This contrasts with the year-earlier period, where earnings stood at $1.52 per share on revenue of $94.8 billion. Traders may be particularly attentive to iPhone sales, especially amid reports of subdued demand, particularly in China. On a brighter note, the services business is anticipated to shine in the March quarter.

Additionally, investor interest is piqued by the performance of the Apple Vision Pro headset, which hit the market on February 2nd. Apple typically updates its capital return plans annually with its March-quarter report. Certain analysts are anticipating a conventional announcement akin to previous years, projecting a $90 billion augmentation to Apple's current stock buyback authorization and a moderate increase in its quarterly dividend to 26 cents per share.

Looking ahead, catalysts for Apple stock include a product launch event on May 7th, likely featuring new iPad tablets. Subsequently, on June 10th, Apple's Worldwide Developers Conference will commence, with analysts expecting insights into the company's plans for generative artificial intelligence. How all these factors will influence Apple’s share price trajectory over the near term is as yet unknown.

Conclusion

As April draws to a close, all eyes are on the upcoming earnings reports of tech giants Amazon and Apple. Amazon's report will highlight its AI and cloud leadership, while Apple seeks to address challenges like a weak iPhone cycle. Investors are eager for insights into revenue streams and new product performance. These reports coincide with the conclusion of the Fed's May meeting, adding anticipation to their potential impact on market dynamics and investor sentiment.


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