Apple surprises with mixed results for the ‘magnificent seven’ technology giants | Business News

At the end of a mixed fortnight of business updates from US tech giants, it was up to the biggest of them – Apple – to lift investors’ spirits.

The $3.35 trillion (£2.63 trillion) giant, established itself again in June as the world’s biggest company after five months during which Microsoft was higher, reporting sales of $85.78 billion (£67.32 billion) in the three months to the end of June.

This represented an increase of just under 5% over the same period last year and was also above the $84.53 billion (£66.34 billion) Wall Street had expected.

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Crucially, iPhone sales, which represent almost half of of the apple revenues, were also above expectations, at US$39.3 billion (£30.84 billion).

This represents a 0.9% drop from the same period last year, but better than the 2.2% decline expected.

This will be seen as a pretty resilient showing – it was certainly better than Apple’s own management had expected – in light of the fact that Apple is about to launch the iPhone 16 in September and therefore some customers will have been hesitant to replace their existing device.

The next version is expected to contain more new features supported by artificial intelligence.

Dan Ives, managing director at Wedbush Securities and one of Wall Street’s best-known technology watchers, estimated that about 270 million iPhone users have not updated their devices in the last four years — potentially making this the most important iPhone launch in many years. years.

Among other highlights in the latest numbers is the performance of Apple’s services business, which includes its app store, Apple Pay, Apple Music, iCloud and the Apple TV+ streaming service, which achieved sales of US$24.2 billion during the quarter – around 15%. above the same period last year.

‘Consistent growth’

Antonio Ernesto Di Giacomo, senior market analyst at trading platform XS.com, said: “This segment includes services… which have shown consistent growth and have become essential for the company’s revenue diversification.

“The increase in this area reflects Apple’s strategy of expanding its ecosystem of services and retaining customers with an integrated and varied offer.”

Another surprise in the numbers was the performance of the iPad – sometimes unfairly seen as something of a Cinderella product compared to the flagship iPhone – during the quarter.

Sales increased 24% to $7.2 billion following the launch of new products in May.

Defect

If there was any flaw in the results, it was probably in Greater China, Apple’s third-largest market after the Americas and Europe.

Sales reached US$14.72 billion, down 6% from the same period last year, reflecting stiff competition from local rival Huawei, whose smartphones and foldable devices have been taken up by Chinese consumers.

Apple was forced to offer price reductions in the country to compete with its cheaper rival.

If Apple brought a smile to the faces of technology investors, Amazon did the opposite, with sales for the quarter falling short of Wall Street expectations for the first time since October 2022.

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Amazon shares fell 8% in after-hours trading after sales in the three months to the end of June reached $147.98 billion – up 10% from the same period last year previous, but US$580 million below the Wall Street value. waiting.

Viewed in isolation, the numbers weren’t that bad, but what appears to have hurt Amazon was that expectations were too high – with shares having risen 20% so far this year going into results.

So while sales at the company’s cloud division, Amazon Web Services (AWS), rose 19% to $26.3 billion, this was seen as a somewhat lackluster showing compared to rivals.

Slow down

Microsoft’s Azure platform, for example, reported 29% growth during the quarter on Tuesday night – although at the time this was seen as disappointing as it represented a slowdown from the 31% growth seen during the previous quarter.

Meanwhile, although sales in Amazon’s core e-commerce business increased – the company’s largest segment, online stores, rose 5% to $55.4 billion – this was also seen as disappointing.

Investors fear the business is facing intensified competition from Chinese rivals like Shein and Temu.

Also disappointing was the guidance for the next quarter which, once again, fell short of expectations.

AI investment stress

The crux of the problem for companies like Amazon is that, although they are now investing heavily in AI, investors are increasingly concerned about the amounts being invested and are increasingly focusing on the returns generated by that investment, in a way that they weren’t just a few months ago.

This was also at the heart of Intel’s massive after-hours sell-off – which saw the chipmaker’s shares fall 21.5%.

Pat Gelsinger, the chief executive, announced plans to save $10 billion through a series of measures, including eliminating the company’s dividend, reducing investments and reducing Intel’s global workforce by 15%, that is, around 17,500 jobs.

Rivals

Intel has faced tough comparisons with rivals such as Nvidia, which is seen as a leader in AI chips, and Advanced Micro Devices, to which it has been losing market share in traditional chips.

It all capped off a pretty mixed reporting season for the tech giants.

Of the so-called “magnificent seven”, the Apple, Alphabet and Meta platforms surprised positively, while Microsoft, Amazon and Tesla turned out to be a little disappointing.

Attention now turns to Nvidia which publishes its next results – for the quarter ending on July 28th – on August 28th.