Key Takeaways:
- Amazon plummeted more than 6% despite exceeding sales projections, owing to growing AI expenses and AWS’s lower operating margins.
- Apple’s shares increased 2.42% after strong iPhone and services sales improved earnings.
- Wall Street is currently favoring Apple’s immediate profitability over Amazon’s costly long-term AI ambitions.
The earnings announcements from Amazon (AMZN) and Apple (AAPL) highlight a key market dynamic, as the artificial intelligence (AI) revolution drives tremendous growth while Wall Street grows increasingly cautious about its massive cost. Overall markets remain slow, showing a slight pullback with Nasdaq down by 0.55% and S&P 500 down 0.37% at the time of writing.
Both tech giants, AMZN and AAPL, outperformed analysts’ predictions. However, during the post-market hours, AMZN fell over 6% despite beating revenue estimates, while AAPL rose 2.26% at the time of writing.
Amazon reported ideal second-quarter results, with year-over-year (YoY) revenue rising 13% to $167.7 billion and earnings per share (EPS) of $1.68 rising by 33% exceeding analyst expectations. Despite beating analyst estimates, the company’s stock dropped more than 6% during the post-market hours. Investors are concerned because the forecast for third-quarter operating income is lower than expected, due to rising costs. Amazon’s capital expenditures are expected to total roughly $120 billion this year as it rushes to develop capacity for AI demand. This significant spending, along with growing US tariffs and a drop in the operating margin for its very profitable Amazon Web Services (AWS) sector, could potentially put pressure on overall profitability.
In sharp contrast, Apple’s shares climbed 2.42% as the company reported revenue of $94 billion, up 10% YoY, and EPS of $1.57, up 12% YoY, because of strong iPhone and services sales. Despite being widely perceived as late in the fight for AI, the markets rewarded Apple’s more measured spending and reliance on its formidable hardware ecosystem. CEO Tim Cook acknowledged that the company is actively seeking AI acquisitions, emphasizing a strategy centered on making advanced technology accessible and simple to use.
The current diverging market reactions depict an important argument for investors: Apple’s proven, hardware-first strategy is perceived as a secure harbor, while Amazon’s foundational and costly role in establishing the AI revolution is now being viewed with a new level of financial scrutiny.
