Image Source: Biz News
As expected, Amazon and Apple reported earnings were stronger than anticipated, thus assuring investors that the tech giants can withstand slowdowns in the world economy.
In a trading update, Amazon predicted that increasing fees for its Prime membership would increase its bottom line, while Apple stated that demand for its crucial iPhone remained robust.
Despite prices rising at a high rate, both businesses said they were making progress in managing operating costs. Shares soared as a result of the updates.
Customers eagerly monitor Apple and Amazon’s quarterly updates to see how they’re responding to the economy.
The US economy declined for the second consecutive quarter, according to official estimates released on Thursday. While many other countries would consider this a sign of an economic recession, the US utilizes additional information to reach that determination.
In Luca Maestri’s opinion, the June quarter results showed Apple’s capacity to efficiently run its business in spite of the difficult operating environment. He further stated that the business anticipated that growth would resume in the upcoming months. Sales and earnings growth has, however, slowed significantly from the previous year for both businesses, and earnings have decreased.
Apple’s profits fell nearly 11% to $19.4 billion (£15.9 billion) as it battled COVID-19 lockdowns in China, while Amazon lost $2 billion due to changes in the value of its investment in electric vehicle manufacturer Rivian Automotive.
Tim Cook, the CEO of Apple, said the company was receiving “a mixed bag” of economic signals, with the demand for the iPhone remaining stable but declining in other sectors like digital advertising.
Between April and June, total sales of Apple goods and services increased by 2% annually to $83 billion. As supply issues hampered sales of other items, iPhone sales continued to drive the company’s profits.
The company’s services division, which includes Apple Pay and its streaming music and television services, also saw a 12 percent increase in revenue.
Despite recent challenges in its e-commerce sector, Amazon’s revenue increased by 7% to $121.2 billion. For the second consecutive quarter, online sales decreased by 4%. However, the company is still shielded by the success of its cloud computing division, AWS, which saw sales increase by 33%.
With its online sales slowing down and a warning that it had overspent on hiring staff and building warehouses in the hope that the pandemic-era purchasing patterns would persist, Amazon alarmed investors in the spring. However, this time it offered a more upbeat view.
We’re making headway on the more manageable costs we mentioned last quarter, including increasing the productivity of the company’s fulfilment network, according to Amazon CEO Andy Jassy, despite ongoing inflationary pressures in fuel, energy, and transportation prices.
Because Prime Day, when discounts generally fuel a surge in purchasing, was delayed from June to July, Amazon claimed that its e-commerce sales were likely to seem especially dismal.
Earnings Go Up Despite Global Economic Downturn
According to Laura Hoy, an equity analyst at Hargreaves Lansdown, “Big tech’s been a mixed bag this earnings season, but Amazon proved that the strong can survive even the hardest environments.”
According to Scott Kessler, global sector lead at Third Bridge, Apple and Amazon are too big to be untouched by indications of a slowdown in the world economy.
However, they have some special power due to their stature to overcome these obstacles, especially when haggling over costs.
He said, “Apple’s done a good job of managing those prices—it doesn’t hurt that they’re often one of the biggest purchasers.”
However, Christie Pitts, a general partner at startup fund Backstage Capital, told the BBC that Amazon had some pressure on its earnings, in part because of the impact of inflation, “since customers have less disposable money to spend on impulsive items.”