For tech’s biggest titans, growth has been an issue of late. But one is shaking off the slump.
Apple and Amazon might seem to have little in common. But both need to move a lot of goods and services to make their numbers work. The two now generate combined annual revenue of more than $920 billion, putting them among the six largest companies in the world by that measure, according to data from S&P Global Market Intelligence. That makes delivering significant new growth numbers a challenge that has lately been afflicting both. Amazon has posted single-digit year-on-year revenue growth for five of the last six quarters—a major slowdown from the mid-20% range the company averaged even before its pandemic sales boom. Apple’s revenue has been in actual decline for the past two quarters.
But June quarter reports from the two on Thursday afternoon showed some divergence. Amazon posted revenue growth of 11% from a year earlier, compared with the 9% Wall Street was anticipating, according to FactSet. Revenue also beat projections across all the company’s segments, including the vital cloud computing business known as AWS. But an even bigger surprise was Amazon’s operating income of $7.7 billion, which more than doubled from the same period last year and beat analysts’ targets by 58%.
Apple, meanwhile, is still in a lull. Revenue fell 1.4% on-year to $81.8 billion. That narrowly beat Wall Street’s projections thanks to a pickup in growth for the company’s services arm. But iPhone sales fell short of projections, even in what is typically the weakest seasonal period for the iconic smartphone. Apple also projected a similar overall revenue decline for the September quarter, missing projections calling for a slight gain. That would make for four straight quarters of revenue declines—a streak not seen by Apple since 2001, according to data from S&P Global Market Intelligence.
Amazon, meanwhile, gave a surprisingly sunny outlook for the same period. The company projected another quarter of 11% revenue growth and operating income of $7 billion at the midpoint, both of which exceeded analysts forecasts. The latter is what typically trips up Amazon on its quarterly reports; the company’s operating income projection has missed Wall Street’s targets for the past 11 quarters, sending the stock down following nine of those reports, according to FactSet.
Amazon’s shares thus jumped 10% in after-hours trading following the results Thursday, while Apple’s ticked down by 2%. Both stocks have been on a strong run this year, with Amazon shares up 53% and Apple’s up 47%. But Apple’s run has put that stock into new record-high territory, while Amazon’s is still down 31% from its own high in mid-2021.
Going forward, Apple’s near-term prospects rest primarily on the new iPhone models expected to hit the market late next month. Wall Street expects an improvement from the current cycle, with iPhone revenue expected to rise 6% in the next fiscal year compared with a 2% decline this year. Much of the stock’s run this year stems from hype over the Vision Pro AR headset Apple finally introduced in June. But that won’t hit the market until sometime next year, and—at $3,500 a head—seems highly unlikely to become a mass-market hit.
Amazon, meanwhile, appears to be on a stronger roll. The company has caught up with the earlier overbuild of its fulfillment network that severely crimped profits last year. It also said Thursday that growth in its AWS business has stabilized following several quarters of deceleration. There is still the risk that Amazon could get caught up in the spending war over generative artificial intelligence that is consuming cloud rivals Microsoft and Google. But that, at least, seems to be one market that investors are still happy to write blank checks in.
