Amazon and Apple Earnings Comparison: Who is Performing Better?

Amazon and Apple both released their latest quarterly results on August 1. While Amazon's stock slightly declined following the announcement, as it missed analysts' revenue forecasts and dimmed the outlook for the current quarter, Apple's stock held steady after a profit increase and stable short-term prospects. Amazon reported a 10% increase in second-quarter 2024 revenue to $148 billion, falling $760 million short of expectations. This shortfall was due to slowing growth in North American and international retail units, which offset accelerated growth in the Amazon Web Services (AWS) cloud platform. Amazon attributed the sluggish retail sales to more challenging macroeconomic conditions for consumers and lower average prices, which drove bargain hunters to seek deals. Events such as the U.S. presidential election and the Paris Olympics also distracted consumers and impacted their online purchases. Despite these challenges, AWS continues to grow strongly and competes effectively against Microsoft Azure and Alphabet's Google Cloud. CEO Andy Jassy credited this to the boom in Generative Artificial Intelligence, prompting many companies to upgrade their cloud infrastructure. AWS achieves significantly higher operating margins than Amazon’s e-commerce markets and can thus subsidize their expansion. For the third quarter, Amazon expects revenue growth of 8% to 11%, with the midpoint falling below analysts' expectations of 11%. Apple, on the other hand, exceeded analysts' forecasts in the third quarter of the 2024 fiscal year, achieving revenue of $85.8 billion – a 5% year-over-year increase. In the first nine months of the fiscal year, Apple generated 52% of its revenue from the iPhone, 24% from services such as the App Store and subscription-based platforms, and the remaining 24% from Macs, iPads, and accessory segments. While the services business continues to grow and now serves over one billion subscribers, it faces unpredictable antitrust challenges in the U.S. and Europe. iPhone sales weakened after the end of the 5G upgrade cycle, and Apple’s market growth was hampered by strong competition in China and a strong dollar. Mac sales stabilized following a pandemic-driven growth spurt, and iPad sales picked up again after the introduction of new models. Apple plans to stabilize growth with the launch of the iPhone 16 in September, expansion in India, and new AI tools. Both companies face macroeconomic and competitive challenges. However, the market was more disappointed by Amazon's sluggish e-commerce sales than by Apple's stagnant iPhone sales. Currently, neither stock is cheap: Amazon is trading at 39 times expected earnings, while Apple is valued at 30 times. Despite these challenges, Apple may be favored over Amazon due to its fewer hurdles and clearer future outlook.