Earnings live: Apple tops estimates, Amazon stock slips, Reddit surges

Second quarter earnings season is largely positive, with S&P 500 earnings now expected to rise 5.6%. Key tech players reported strong results with nuanced market reactions: Amazon beat profit and sales estimates, with AWS revenue up 17% to $30.8 billion driven by AI-related spending, yet its stock fell 2% after hours due to wider Q3 operating income guidance. Conversely, Apple surpassed top and bottom-line forecasts with $94 billion in revenue and $1.57 EPS, fueled by double-digit growth across iPhone, Mac, and record Services revenue of $27.4 billion, leading to a 2% stock increase.

Analysis

The second-quarter earnings season is outperforming tempered expectations, with S&P 500 earnings growth now projected at 5.6%, revised up from an initial 5% forecast. This backdrop highlights a discerning market reaction to Big Tech reports. Apple (AAPL) delivered a clean beat, with revenue climbing 10% year-over-year to $94 billion and EPS reaching $1.57, both surpassing analyst forecasts. Growth was robust across its iPhone, Mac, and Services segments, with Services hitting a record $27.4 billion, now comprising nearly 30% of total revenue. The market rewarded this comprehensive strength with a 2% stock increase. In contrast, Amazon (AMZN) faced a negative reaction despite beating profit and sales estimates. Its critical AWS segment grew 17% to $30.8 billion, aligning with the AI-driven cloud spending trend seen at Microsoft and Google. However, the stock slipped 2% after hours, a move attributable to its widened third-quarter operating income guidance of $15.5 billion to $20 billion, which signals potential headwinds or margin uncertainty, possibly linked to tariffs.

Key Decisions for Investors

• Given the market's nuanced reactions, investors should prioritize a company's forward-looking guidance over its historical earnings performance, as demonstrated by the divergence between Apple's gain and Amazon's decline.
• For Apple, the record-setting Services revenue and broad-based segment growth reinforce its ecosystem's strength, warranting an assessment of whether its valuation fully captures this diversified and resilient business model.
• For Amazon, the negative stock reaction to strong results underscores the importance of scrutinizing the drivers behind its Q3 operating income guidance for potential margin compression or tariff impacts.
• The consistent strength in cloud results across Amazon, Microsoft, and Google confirms that AI-related spending is a durable investment theme, suggesting a continued focus on key players within the cloud infrastructure ecosystem.