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Apple and Amazon both released their second quarter earnings on Thursday, a test of investor confidence in major tech companies amidgrowing concerns over exorbitant AI spending.
Apple revealed quarterly revenue of $109.4bn, beating Wall Street expectations of $108.65bn in revenue. It also reported $2.02 earnings per share, driven by sales of its marquee products such as iPhones and laptops.
Amazon reported that its revenue was $200.6bn compared with analyst predictions of $196.47bn. The company also grew its AWS cloud computing service and beat market expectations on advertising revenue, thoughfree cash flow declined. Amazon’s stock jumped more than 8% in immediate after hours trading.
It has been a tough month for several prominent tech companies, with shares in Tesla and Meta both plunging after they revealed huge spending on AI infrastructure in their latest earnings reports. A recent selloff in chip stocks like Nvidia, the result of loss in investor confidence and advances in Chinese chip manufacturing, has also rattled the market.
Investors have paid especially close attention in recent weeks to tech companies’ free cash flow after large capital expenditures – largely on AI – have caused concern. As the industry continues to plow money into building out AI capabilities in search of future profits, shareholders have become more jittery when earnings reports reveal larger-than expected AI spending.
Apple, meanwhile, has benefitted from the chip stock selloff as investors viewed the company as a safe haven amid the broaderAI-driven volatility. The company’s stock is up around 23% this year, leading the so-called Magnificent Seven tech stocks, which include Meta, Microsoft, Alphabet, Amazon, Tesla and Nvidia. Apple’s stock price dropped slightly on Thursday following earnings after it reported its revenue from its services division was below market expectations.
Thursday’s earnings call was also CEO Tim Cook’s final report before he steps down after 15 years as Apple’s top executive. Apple’s market value grew immensely over Cook’s tenure as chief executive, from around $350bn in 2011 to surpassing the $5tn mark days before Thursday’s earnings call. Earlier this month the company overtook Nvidia to become the world’s most valuable company.
Cook will be replaced by John Ternus, a longtime hardware engineering executive who has been at the company since 2001. Ternus stated earlier this week that he aims to expand the Apple’s entertainment business, which has had success with movies like the blockbuster F1 and streaming series such as The Studio.
“As you know, this will be my final earnings call,” Cook said on Thursday. “I am beyond excited for John to step into his new role and lead Apple into its next era. He is truly one of a kind and there is no better person to take the helm of the company.”
