Richard Parks Apple and Amazon recently announced their earnings for the September quarter, revealing contrasting performances amid a competitive landscape driven by artificial intelligence (AI) developments and challenges in the Chinese market. Following the release, Apple shares fell by 2% in after-hours trading due to persistent sales declines in China and lackluster guidance. In contrast, Amazon’s stock surged over 5%, buoyed by robust growth in its AI-driven AWS cloud services and a positive forecast for the upcoming holiday season.
Apple Reports Continued Weakness in China but Strong Overall Performance
Apple’s sales in Greater China, its third-largest market after the US and Europe, decreased by 0.3% year-over-year, marking a continued decline over the past year. Although this drop is less severe than the 6.5% decline recorded last year, investor expectations were high for a significant recovery fueled by the introduction of AI-enhanced products.
The company launched its latest smartphone, the iPhone 16, just over a month before its earnings report, alongside the rollout of iOS 18.1, which integrates new AI features. However, this timing may have negatively impacted iPhone sales amid fierce competition from local Chinese manufacturers. Despite this, Apple achieved a record revenue of $94.93 billion (€87.22 billion) for the September quarter, up 6.1% from the previous year and surpassing the anticipated 5.7% growth. iPhone sales alone reached $46.22 billion (€42.47 billion), reflecting a 6% increase from the same quarter last year.
Nevertheless, Apple faced a significant hit to its net income due to a one-time charge linked to the reversal of a European General Court decision on State Aid, resulting in earnings per share of $0.97 (€0.89). Without this charge, earnings would have shown a 12% increase to $1.64 (€1.51). For the December quarter, Apple expects growth in the low-to-mid-single-digit range, falling short of the anticipated 7% increase.
The company’s Services segment, which continues to be its most profitable area, reported revenue of $24.97 billion (€22.94 billion), an increase of 12% year-over-year, although this is a slight slowdown from the 14% growth seen in the previous quarter. CFO Luca Maestri expressed confidence that Services revenue will maintain double-digit growth in the current quarter. iPad sales also rose by 8%, down from a significant 24% increase in the June quarter.
Despite these challenges, market analyst Josh Gilbert from Oanda remains optimistic about Apple’s long-term prospects, suggesting that current setbacks are temporary.
Amazon Exceeds Expectations Across the Board
In stark contrast, Amazon reported a strong performance, exceeding market expectations on all fronts. The company generated overall revenue of $158.88 billion (€146 billion), an 11% increase from the previous year, surpassing the projected $157.2 billion. The advertising segment, Amazon’s most lucrative area, grew by 19% year-on-year, reaching $14.3 billion (€13.14 billion), although this fell slightly short of estimates.
Amazon Web Services (AWS), bolstered by AI advancements, saw revenue growth of 19%, totaling $27.45 billion (€25.22 billion). AWS remains the market leader, outpacing competitors such as Microsoft’s Azure and Google Cloud. Online store sales, the company’s largest revenue driver, also increased by 7% to $61.4 billion (€56.42 billion).
Looking ahead, Amazon’s projections for the December quarter anticipate revenue of $188.5 billion, driven by expected strong holiday sales, which exceeds the forecasted $186.4 billion. CEO Andy Jassy expressed excitement for the holiday season and hinted at upcoming AI advancements, including numerous new deals and enhanced cloud capabilities.
However, Amazon’s capital expenditures surged by 81% year-over-year to $22.62 billion, reflecting a broader trend among tech companies to invest heavily in AI infrastructure. CFO Brian Olsavsky noted that this spending is primarily aimed at meeting the increasing demand for technological innovations. Despite disappointing earnings in the previous quarter, Amazon is under pressure to demonstrate that its substantial investments will support its growth trajectory.