Amazon and Apple earnings beat expectations

Hey Josh. Yeah, Amazon stockp trading on both sides of the flatline after this report came out. So I'm going to give you the highle numbers here. Amazon

reporting revenue of 167.7 billion. That

was against a street estimate of 162.1 billion. So a beat on revenue there.

billion. So a beat on revenue there.

Also a beat on earnings per share.

Amazon posting adjusting earnings per share of $168 against a street estimate of a $1.32. I

do want to read some other key metrics for you here Josh. So the second quarter operating income that came in better than expected. Amazon posting second

than expected. Amazon posting second quarter operating income of 19.17 billion above an estimate of 17 billion.

But key metric here that I think has maybe perhaps held the stock back reading through the report I would have thought maybe up. You take a look at the third quarter operating income guidance.

Pretty wide range from Amazon here.

Amazon with a range of 15.5 billion to 20.5 billion for operating income. Of

course, that's perhaps where maybe tariffs could come into play, right? the

street was looking for an operating income in the third quarter of 19.42. So

Amazon with a wide range, the lowend range of that third quarter operating income is lower than what Wall Street had hoped for.

>> And Jeeoff, I want to bring you here as well because I think you hold this one.

Another metric is is AWS sales. Of

course, that's what folks are going to make a beline for. It looks like uh AWS net sales, XFX plus 17%. That is smack in line with estimates.

>> Wow. Okay. No. Yeah. AWS is where my attention goes to all this. That's the

growth engine uh for where Amazon's going to go. They obviously I'm assuming with the We'll find out in the actual text, but with that wide range, I'm assuming they're building in some tariff concerns especially around there on the

low end.

>> They have also I remember Jeff too and it'll be interesting how they comment. I

remember they've also talked about in the past being on AWS specifically being capacity constrained and I wonder if that's another issue that'll be brought up. Well, that's an issue with all AI,

up. Well, that's an issue with all AI, right, of capacity from a power perspective and just getting the the products here to continue to build and grow it.

>> I expect AWS to continue to be the growth engine. They have some headwinds

growth engine. They have some headwinds there obviously that we've we've touched on a little bit, but that's a great number for me. Um, and I definitely want to dig into that forward-looking guidance of what they're worried about.

>> I also wonder to the extent that, you know, obviously now this is the last the cloud giants to report. We had Google, we had Micros Microsoft and then Azure print which really impressed people. I

think it was 39% maybe. And I wonder did that I wonder if that was set some type of bar for them as well. AWS.

>> Yeah, it's it's tough if you're not the best looking girl at the dance and that's where kind of Amazon might be coming in here, right? next to Microsoft it looks bad in a vacuum of totality

with Amazon though it's a good number but compared to Microsoft I can see why the street might react negative >> yeah well I think when you think about that Microsoft Azure number I mean we were talking about this on the morning

show this morning to surprise Wall Street by over 4% like Microsoft did yesterday they hadn't done that in over two years right for that Azure growth so to see acceleration in that part of the

business is a huge story for Microsoft and it just sets perhaps a high bar for Amazon on. And you also brought this up

Amazon on. And you also brought this up earlier, Jeeoff. I mean, the stock was

earlier, Jeeoff. I mean, the stock was already up 2% today, too, right? So,

we're looking at a stock that's essentially trading almost flat over the last 24 like it's not it hasn't moved a lot and it's certainly not selling off.

I think this is a company where you definitely want to hear more on the call, especially when it relates to AI and what is AI doing for AWS, right?

That was a story Microsoft told very well last night on the call. Amazon

reporting a beat on earnings and revenue for the second quarter while its key Amazon Web Services segment saw sales increase 17 and a half% year-over-year.

Here with a closer look is Wedbush Securities managing director of equity research Scott Devbit. Scott, great to see you, sir, as always. So, Amazon

report. Scott, the just at least initial reaction in the after hours. Scott, we

got the stock down about 4%. What do you make of the results?

>> Uh, they're good. I mean, I gave it a B+. I'll tell you what's good and and

B+. I'll tell you what's good and and then why the stock's probably down. The

retail business overperformed healthily.

Advertising was very strong. Um

operating margin beat by 13%. And then

AWS it 17 and a half% growth is healthy but because of the overperformance of Google's cloud business and then Azure you know whispers were kind of creeping up towards 1819. So, it's not a miss

relative to analyst expectations, but relative to buy side expectations, you know, going into number, maybe that was a little bit light. And I think that's why you're seeing the response in the stock.

>> So, you think it's it's it's a compare and contrast story right now, Scott.

They're just the bar got set high by Microsoft, by Alphabet.

>> Yeah. It's like being the cleanup hitter and and having the first three batters hit home runs in front of you. the bar r you know the bar is rising and then you have to do something even better and in

the case of Amazon it was a good AWS quarter but if all you're going to focus on is AWS and you look at the prior reporters most notably Microsoft and and Google their results for the three-month

period were better you know relative to expectations and so there's nothing wrong here but that's it's just an expectations you know miss in that regard for a stock that has been relatively strong in recent weeks

>> can I ask you in that big cloud fight.

Scott, now that you've heard from all three Microsoft Alphabet Amazon what are Amazon's competitive advantages there?

So, like Azure has, you know, a lot of affiliation with OpenAI chat GPT, which helps the revenue of the business.

Amazon's tied to Anthropic, which is smaller, but starting to grow and will be a more significant contributor in the second half. I think the moat that

second half. I think the moat that Amazon has which is the question that you had is that they are the legacy leader in providing the services. So as

they layer AI into their product portfolio as they've done their customer base gravitates towards that and they continue to grow but it's a it's a battle. There's three very good

battle. There's three very good companies, you know, going after this cloud revenue and um Amazon had it kind of all to itself for many years and now, you know, Azure looks like the um you

know, the the prettier the prettier girl at the prom, if you will, at the moment.

>> Let me ask you, Scott, about this other metric here. They they did project

metric here. They they did project operating income in the current quarter.

I I don't know if it fell short of your estimates. It does look like it did fell

estimates. It does look like it did fell short of consensus. Um operating

profit's going to be between 15 and a half to 20.5 billion. It looks like in the period ending in September. I'm just

curious what you make of that data point, that metric, Scott. Is that is that perhaps worrying folks? Well, maybe

they're turning on that spend spending spigot just a little too hard.

>> It shouldn't. I mean, the um the capex year to date, it's 57 billion. So,

they're probably going to ultimately do more than the 105 billion for the year.

But the reason why that guide is not an issue is that Amazon's been exceeding the high end of their guidance for many consecutive quarters. In fact, it guided

consecutive quarters. In fact, it guided to the second quarter of I think it was 13 billion to 17.5 billion and just did 19.2. So when you look at that guide in

19.2. So when you look at that guide in respect to what it just did relative to its prior guide, you conclude that estimates are just fine. It's just the way that Amazon guides, they put a low hurdle out there to beat. So if that's

driving, you know, some of the underperformance after hours, that's a non-issue. um where I think the core

non-issue. um where I think the core focus is to the extent that you're matching you know stock price performance to where actually there was disappointment it had to be in that AWS number >> and when you try to when you model out

the AWS growth and and margins from here Scott what what does it look like I >> mean this is a business that go 15% plus for many years I mean Andy Jasse has has has talked about the fact that only 15%

of workloads you know are in the cloud still so uh while it's a very big business if you take their quarter and annualize it's $120 billion run rate business. That's significant. There's

business. That's significant. There's

still a long way to go just in terms of taking in-house IT and and turning it over to the cloud. And then when you overlay AI on top of that, that's tens of billions of dollars of revenue

opportunity. So, this is still a very

opportunity. So, this is still a very strong long-term growth story with, you know, low to mid uh 30% margin and a big contributor to Amazon's value, you know, in the future from here. The thing with

Amazon, you know, as a stock now because they're in like three somewhat distinct businesses in retail, advertising, AWS and and when they report in the the earnings season, when others report in

front of them and expectations get set, they kind of hit have to hit the trifecta and they were like two for three, you know, today. And and it would have been better had the company exceeded the AWS number because that's

where more of the incremental value is perceived. How how Scott should we as

perceived. How how Scott should we as investors think about uh potential tariff implications for Amazon?

>> So they have that's manageable. I mean

that the um merchants you know to the extent that there are implications merchants will eat some. Amazon will

take on more one inventory and be more competitive in price. Um you know the the tariffs have proven to be less aggressive than initially thought. And

so there are workarounds in ways that you know you almost don't see it in Amazon's results as as you haven't seen it yet in the second quarter operating profit and with the way that a company

guided you know I don't think it's it's really going to be relevant unless you know this changes again but the way tariffs are looking right now I think it's more of a non-event.

>> We talked retail we talked cloud what what about that advertising segment Scott I'm curious what you see ahead.

>> Oh it's it's it's amazing. I mean, it's a $60 billion business now. You know,

doing probably close to a 60% operating margin. So, um, they're in third place,

margin. So, um, they're in third place, but a very strong, you know, third place behind Alphabet's business and Meta's business. And that's also a line item

business. And that's also a line item that's very high margin that should be able to grow 15% to 20% for some time because you have the layering on on top of the retail business, which they

benefited from for some years now. But

you also have the opening up of the video platform and off-platform opportunities that advertisers can now um attract with Amazon. So that's a 15 to 20% grower for many years ahead, you

know, um outside of yours when we have recessions.

>> Scott, always great to see you, my friend. Thank you. Appreciate it.

friend. Thank you. Appreciate it.

>> Thanks, Josh. Appreciate it.

>> Q3 EPS looks like 157 versus estimates of 143. I see uh revenue 94.04 04

of 143. I see uh revenue 94.04 04 billion versus an estimate of 89.3 billion. Um it looks like iPhone revenue

billion. Um it looks like iPhone revenue 44.58 billion. That is also a beat with the

billion. That is also a beat with the street was at 40.06 billion. Josh

Schaefer looking at you. What what do you see in these results as well?

>> Yeah Josh I mean that iPhone beat really popping off the screen to me right to see iPhone revenue coming in at almost 44.6 billion and that was above the street estimate of 40.06 billion. Also

some other beats across the revenue spectrum here. I'm looking at uh greater

spectrum here. I'm looking at uh greater China revenue coming in at 15.4 billion.

That's above a 15.2 billion estimate.

Then you go down to products revenue overall that coming in at 66.6 billion above a street estimate of 62 billion.

Again, that smaller Mac revenue segment coming in at 8 billion above an estimate of 7.3 billion. So it seems like some of the key products for Apple here driving better revenue than the street had

expected. Stock was initially up 3% Josh

expected. Stock was initially up 3% Josh right as this release crossed coming down a little bit now up about 1%. But

that seemed to be the instant read through. Of course we don't have

through. Of course we don't have guidance from Apple in this release.

That's kind of one of the key questions that I know I was seeing from analysts moving forward is they're have they're going to lock client inbound about where margins are going to be in the coming quarters and sort of the tariff story that relates to those margins. Right.

What happens to margins in the out quarters is a key question that there's no real insight to at least in the release.

>> Yeah. On the call for sure. I think

you're nailing it. That'll be a big how how do they address the guidance how they talk about the forecast? That'll be

a big focus. Tariff impact as well, Josh, is going to be in focus because you're looking for more clarity there.

They did say last quarter, remember to expect a $900 million impact, but what does the impact look like in the cores ahead is another key question that's going to come out on the call.

>> It absolutely is and I think it's going to be interesting to hear how they're able to walk you through that part of the process because of course the tariffs themselves are such a moving target, right? So where that range ends

target, right? So where that range ends up being and how they're able to explain that seems like a key piece here. Of

course, again, we're talking really about margins specifically when we're talking about that part of the line item. That's going to be where you're

item. That's going to be where you're looking to see how much are tariffs impacting margins moving forward. And

we'll have to see, I guess, really on the call.

>> For more on Apple earnings, we have Angelo Zeno, CFRA research, senior equity analyst. Angelo, it is great to

equity analyst. Angelo, it is great to see you as always. Those Apple's uh results just crossed. Your reaction to the report, Angelo?

>> Yeah, Josh. Thanks for having me. You

know, I'd say overall the numbers were pretty good, right? But the the question isn't necessarily about the quarter.

It's kind of about the guidance here for the September quarter and and maybe to the point that you guys had just talked about, you know, what is what is the outlook thereafter? And you know what I

outlook thereafter? And you know what I would say is you know there there was likely some sort of pulling effect here that went on in the June quarter given that that we saw such strength almost across the board as far as the product

revenue was concerned and likely that had some impact due to the um the uncertain tariff landscape at this point in time. So again it really is going to

in time. So again it really is going to be dictated on on what happens what Tim Cook has to say on this call as far as uh what that forward guidance is going to look like.

>> You know Angela you mentioned tariffs that is a key question here. I mean, as you try to model this and forecast, what what do you think that financial impact could look like for Apple in the

quarters ahead?

>> Well, so here's the here's the issue.

Nobody really knows and I don't think Apple knows themselves and and the problem right now is and and a big reason why um they're probably going to provide limited guidance here for the September quarter. I wouldn't even be

September quarter. I wouldn't even be surprised if they avoided um you know, guidance on potentially the revenue or the gross margin side of things. is

listen there's there's a lot going on here over the next five to six weeks for Apple right I mean you kind of look into the just the month of August alone you've got likely some sort of clarity

from the 232 pending semiconductor investigation where um that's really where the the tariff situation hinges for Apple and whatever you know number

comes out of there is it 25% is it 50% what have you um is going to partly dictate what Apple um is going to be penalized here at least um you know on on the tariff side of things and then

know the other issue is as we progress into September what does Apple do from a pricing perspective um if we were to see uh higher tariffs from this uh 232

semiconductor investigation. Our belief

semiconductor investigation. Our belief is they're going to look to offset that.

So you're probably going to see some sort of pricing hike if you see um you know these higher tariffs. So, um, you know, our view is is they're going to try to sustain some of those margins,

but again, it's tough to really know.

Right now, we're pegging in about a 25% um expected semiconductor uh tariff and um likely, you know, some sort of, you know, 50 $50 bump up or what have you in

terms of uh pricing with the iPhone 17 cycle. But listen, it's um it's very

cycle. But listen, it's um it's very fluid in nature. We just don't know the details at this point in time. And Apple

themselves um the bigger problem doesn't know as well. So when you think there could be price hikes, Angelo, for those new devices in the fall, have you tried to put a number on that? What kind of hike we could be looking at? Quantify

it?

>> Yeah, I mean like like I said, you know, we're thinking potentially and and this is important, right? When you look about at um Apple specifically, they haven't increase the the base price of their iPhones, right, since the iPhone 12

cycle. The reason they did increase the

cycle. The reason they did increase the the price on the iPhone 12 cycle was because of, you know, the the the move to 5G. 5G has significantly higher

to 5G. 5G has significantly higher contact costs attached to it and as a result they they you know they were able to uh pass through those higher prices to the consumer. It was expected um they

at over the last couple year years they've done a number of things to avoid any type of price hike. We again we think it's probably going to be something along the lines of let's call it about 50 bucks or so across the board. It could potentially be more than

board. It could potentially be more than that again um if the tariffs are higher than we anticipate. So um you know again it's it's it's very um uncertain in nature but the fact that Apple

historically has you know tried to prevent these price increases um to the consumer is very important. I think also Apple wants to um you know make sure the optics doesn't look bad with all of

this, right? I mean you've got a Trump

this, right? I mean you've got a Trump administration at this point in time that probably is looking very closely at some of the moves that Apple as well as others are doing whether or not they're passing on these higher costs to the

consumer. So Apple wants to avoid um any

consumer. So Apple wants to avoid um any sort of bad optics at this point in time as well.

>> Uh you know a key reason Angela stocks in the red this year heading into the print has been some disappointment over the company's AI position and role and strategy. How as an analyst are you

strategy. How as an analyst are you thinking through that dynamic?

>> So that's a good question and to and to be honest with you I mean I think that's probably the the biggest reason for the the share underperformance at this point in time year to date. I mean, when you think about what else is going on across

the markets, across the tech space, um it's very difficult to justify um owning, you know, an overweight position in Apple when, you know, you've got these great stories going on across the

rest of the tech space. But I I think, you know, that what you do have going for yourself here is we're going to get some good clarity here over the next couple of weeks um across a number of uncertainties, whether it be tariffs,

whether it be um you know, the the pending search monopoly case that uh Google is going through. we expect some sort of outcome in in uh August as well.

When you look past that, um I think the street starts looking at what Apple can do as far as AI is concerned. They have

to get this right, I'd say at the very latest by the next uh developers conference next June. So, we expect them to figure this out at some point here over the next nine months or so. They've

got all the money in the world to throw at this. Um my guess is they probably uh

at this. Um my guess is they probably uh get this thing done via some sort of partnerships because they've lost some, you know, great talent here over the last couple of weeks and months. So um

again, you know, it's something that the the street is really kind of hanging on at this point in time, but we're believers here of the management team.

We think they get this thing somewhat resolved here over the next six to nine months.

>> Final question, Angelino, in terms of what could be coming. We do have reports, Angelo, maybe a slimmer iPhone model could be on the way this fall. How

excited should investors be about that?

>> Yeah, I mean I'm not overly excited about it to be honest with you. We're

actually going into the iPhone cycle essentially assuming very low to no unit growth on a year-over-year basis. So um

you know maybe you know there there's some excitement towards that that device but overall um it's not something where we think consumers going to rush to upgrade. Um, but yeah, I mean at this

upgrade. Um, but yeah, I mean at this point in time in terms of, you know, on the on the unit growth side of things, we're not looking for any type of growth for the iPhone 17 cycle versus 16. Where

we are more excited about is the potential iPhone 18 cycle where they can start unleashing, you know, something along the lines of a foldable device.

>> All right, with the stock up 2% right now in the after hours, Angelo, thanks as always, sir, for that instant analysis. We appreciate it. All right.

analysis. We appreciate it. All right.

Thanks for having