In a groundbreaking move, Tim Cook, the visionary at the helm of Apple, announced the tech giant’s vigorous foray into artificial intelligence (AI) on Thursday. This strategic manoeuvre comes on the heels of Apple’s third consecutive quarter of revenue decline, marking its most prolonged sales slump since 2016.
For the fiscal third quarter culminating on July 1, Apple experienced a marginal 1.4% dip in sales, amounting to $81.8 billion. Despite this, the company defied expectations by raking in a profit of $19.9 billion, surpassing projections from financial analysts. While iPhone sales modestly fell short of the mark set by analysts, the resounding success of the services segment, encompassing Apple TV+ and robust sales in China with a notable 8% annual growth, more than compensated for any setbacks.
Tim Cook, the innovative mastermind orchestrating Apple’s strategic moves, disclosed to Reuters that the augmented investment in research and development (R&D) is, in part, a direct response to the burgeoning realm of generative artificial intelligence. This compelling field has also spurred substantial investment from tech titans like Alphabet and Microsoft. Cook affirmed that Apple’s been diligently exploring diverse AI technologies, and it is committed to investing, innovating, and responsibly propelling its products forward with these transformative technologies aimed at enhancing the quality of people’s lives. Beyond Apple’s fiscal landscape, R&D spending has surged to $22.61 billion thus far this fiscal year, signifying an impressive $3.12 billion escalation compared to the same point in the previous year.
Meanwhile, in a parallel tech universe, Amazon emerged as the star of the show with second-quarter earnings that astounded even the most optimistic forecasts. This triumph translated into a stock surge of over 10% during after-hours trading. The financial victories for Amazon were unequivocal, with earnings per share (EPS) soaring to an impressive 65 cents, outpacing the projected 35 cents, according to analysts surveyed by Refinitiv. Revenue came in at an awe-inspiring $134.4 billion, effortlessly surpassing the anticipated $131.5 billion, as analysts polled by Refinitiv projected.
Amazon’s groundbreaking achievement culminated in its most triumphant earnings victory since its report for the final quarter 2020. This awe-inspiring profit revelation is a testament to CEO Andy Jassy’s relentless endeavours to curtail costs, a strategy that is beginning to bear fruit.
The Amazon saga of transformation encompassed a record-breaking reduction of 27,000 jobs since the previous fall. This watershed moment saw the e-commerce behemoth temporarily halt corporate hiring as Jassy embarked on a mission to streamline expenses across various divisions. Amazon’s global workforce diminished by 4% compared to the previous year.
As the third quarter beckons, Amazon confidently foresees sales ranging between $138 billion and $143 billion, heralding a remarkable growth rate of 9% to 13%. The e-commerce giant has returned to the realm of doubt-digit expansion, revitalizing its trajectory after a series of quarters mired in single-digit growth. Jassy, who succeeded founder Jeff Bezos in July 2021, attributes part of this remarkable resurgence to the reinvigoration of Amazon Web Services (AWS). AWS experienced a stellar 12% surge in sales during the second quarter, amassing a staggering $22.1 billion, dwarfing Wall Street’s projection of $21.8 billion. Strikingly, AWS carved out a dominant slice of Amazon’s $7.7 billion operating profit, amassing an impressive 70% share. The company’s financial canvas painted a portrait of net income amounting to $6.7 billion, translating to an impressive 65 cents per share. This is a remarkable turnaround from the $2 billion loss, or 20 cents per share, incurred a year prior.
Amazon’s earnings release unveiled a pivotal role played by AI products from AWS, with esteemed customers such as Royal Philips, 3M, Old Mutual, and HSBC reaping the benefits. The advertising realm continues to flourish within Amazon’s dominion, as quarterly revenue catapulted by an astounding 22%, reaching $10.7 billion. In contrast, Google’s ad revenue increased by a mere 3.2% during the second quarter, while Facebook’s witnessed a comparatively modest 12% upswing.
As the final notes of the financial symphony resound, Apple and Amazon find themselves in the spotlight, culminating the earnings season for the tech titans. While many large-cap tech cohorts still strive to reclaim historical growth benchmarks, there’s a palpable resurgence in results following a challenging 2022. The judicious implementation of cost-cutting strategies has ushered in a new era of profitability. Notably, the fervour surrounding artificial intelligence is a shared pursuit among these mega-cap tech titans.
Sources: Bloomberg, CNBC, Reuters
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
