Amazon topped estimates in results released after the bell on Thursday.
Total revenue in Q3 was $180.17 billion, up 13.4% YoY and ahead of estimates by just enough. Consensus was looking for a little less than $178 billion.
Andy Jassy described “strong momentum and growth” across the company, attributable in no small measure to AI which is “driv[ing] meaningful improvements in every corner of [the] business.”
The current quarter revenue guide was solid. Taking the midpoint, sales for the holiday period will be $209.5 billion, the company said. That’d be better than the $208 billion consensus expects, and it’s a fairly safe bet that the actual result will be better than the midpoint.
Q3’s top-line growth was the quickest since the holiday quarter of 2023 and AWS sales of $33 billion were up 20%, the briskest pace in three years. Analysts expected AWS revenue of $32.5 billion, give or take. Advertising sales of $17.7 billion were up 22% (more than that on a constant currency basis) and beat estimates.
On the bottom line, EPS of $1.95 was in line. Free cash flow fell sharply measured on a rolling 12-month basis. Amazon cited the cost of “property and equipment.” “We continue to see strong demand in AI and core infrastructure,” Jassy went on. “We’ve been focused on accelerating capacity.”
I won’t presume to dictate to markets how they “should” trade the results, but a top-line beat, an above-consensus revenue guide and the quickest AWS growth since 2022 is a trifecta for Amazon. I’ll just leave that there.
The company was front-page news twice in October, once for a massive AWS outage and again for mass layoffs. Both made for bad publicity, but the job cuts were at least good news for shareholders.
Meanwhile, over at Apple, Tim Cook sold $102.5 billion worth of gadgets and services last quarter, narrowly ahead of consensus.
Recall that sales growth was nearly 10% during the prior quarter, the best result in years. Although fiscal Q4’s 8% growth represented a slowdown, it was still faster than every other top-line result since 2022 with the exception of this year’s June quarter.
Cook said iPhone sales and also total revenue should rise double-digits in the current (i.e., holiday) quarter, a forecast which, if realized, would top estimates. In the quarter ended September, iPhone sales were $49.025 billion. That figure included only a week or so of new-model sales.
Most of the line items beat, including EPS which, at $1.85, was a dime ahead of consensus. But Greater China sales disappointed, and not by a little bit either. $14.5 billion there was lower versus the same period a year ago and short of consensus by almost $2 billion.
The shortfall in China was apparently down to unexpected delays in launching the iPhone Air. Cook indicated sales in the country will grow during the current quarter. Supply constraints are an issue for Apple on “several” of the new iPhone models, he said. “We’re filling orders just as fast as we can,” Cook told Reuters. “It’s a good problem to have.”
In the press release, Cook cheered the product line-up (“the most extraordinary” roster of gadgets anybody’s ever laid eyes on) and Kevan Parekh ran through a highlight reel of full-year stats, all of which were impressive and perhaps suggested the stock’s 2025 underperformance not just versus its mega-cap peers but also against the Nasdaq 100, isn’t warranted.
Ultimately, Cook likely said enough to shore up confidence. It sounds like Apple’s going to have a good holiday quarter. If he sings the same song on the call, the stock will be fine.
Has anyone gone to any of the lead AI companies and asked how they are benefiting from AI in their own operations. That is, show mo on paper, show me in action and explain how you calculated the benefit. It would be nice to have some real world data at this stage. It would help evaluate the investment thesis.
Agreed, it always feels like the boom is in the ‘idea’ of AI and its ‘potential’ but what is it really doing for us and companies? Yes, a ton of money is being spent building data centers but for what? So we can make fake pictures and videos? Help us write better? Identify unknown birds from a photo?
Where are the medical advances we were promised? Where are the robots? How is AI really going to help improve our lives over the next 10 years?
My daughter is a senior software product developer in AI products. I had this discussion with her a couple weeks ago. We know how Nvidia and other AI hardware producers make money. But how does the rest of this “non-industry” do it? The definition of an industry is a group of firms making products that are essentially close substitutes for one another. Firms making software are not in the same industry as Nvidia, for example. Software is nothing like hardware, economically or otherwise. We know how hardware guys make money but who else is out there? How do the software guys make money? They try to convince customers that they can use their software to make more money from using this software. How does that work exactly? AI involves several smaller industry groups whose business models are not really well defined at this moment My daughter’s Silicon Valley company currently produces products that support the management, marketing, and data support for pharma companies. This sort of thing is just one small part of what folks think AI will become. So far none of this is a foregone conclusion. By the way, my daughter has been toiling in this AI pit for more than 10 years and still no one really knows where the real cash flow is except at the top.