Last Friday, I spoke about the newly coined “Magnificent Seven” stocks: Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL), Apple Inc. (AAPL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA) and Tesla, Inc. (TSLA).
Four of the seven stocks reported earnings during the last two weeks of July, and all topped analysts’ earnings expectations.
This week, two more of the Magnificent Seven companies reported earnings: Apple and Amazon.
So, in today’s Market 360, let’s dive into their earnings reports – and take a look at their latest artificial intelligence (AI) comments.
The Numbers Are In…
Both Apple and Amazon posted their quarterly earnings reports after the closing bell yesterday.
Let’s start with Apple…
Apple posted better-than-expected earnings results for its third quarter. Earnings came in at $1.26 per share, which beat analysts’ estimates for $1.19 per share. This is up 5% year-over-year from earnings of $1.20 per share. Revenue of $81.8 billion also beat expectations of $81.69 billion, although it dropped 1% from $83 billion in the same quarter last year.
iPhone and iPad revenue both came in lower than analysts’ expectations and fell 2% and 20% year-over-year, respectively. The iPhone is Apple’s flagship product and accounts for the largest portion of the company’s revenue. Tim Cook, Apple’s CEO, said that times are “tough” right now for the smartphone industry in the U.S. However, the company did report that it had a high number of “switchers,” or people who switched to an iPhone from an Android device.
The bright spot in Apple’s report was its Services revenue. Services revenue, which includes subscriptions, streaming TV, warranties, advertising, and payment services, rose 8.2% year-over-year to $21.2 billion. This shows that the company is growing. Currently, the company has over 1 billion paid subscribers.
“That’s up 150 million year-over-year and nearly double what it was just three years ago,” Cook said.
During the earnings call, Cook also had this to say about AI:
We view AI and [machine learning] ML as fundamental core technologies. And they are virtually embedded in every product that we build. And so if you think about WWDC in June, we announced some features that will be coming in iOS 17 this fall, like Personal Voice and Live Voicemail. Previously, we had announced lifesaving features like fall detection and crash detection and ECG. None of these features that I just mentioned and many, many more would be possible without AI and machine learning. And so it’s absolutely critical to us … And of course, we’ve been doing research across a wide range of AI technologies, including generative AI, for years.
Two weeks ago, Bloomberg announced that Apple is working on an internal ChatGPT-like AI chatbot, called Ajax. It is built on top of Google Jax, which is a framework developed by Google for machine learnings. While Ajax is accessible through a web application, it is still not yet available to customers.
Apple shares fell nearly 5% on Friday following the mixed results, though, as I write this, they are still up 40% year-to-date.
So, Apple’s earnings weren’t very “magnificent.”
Amazon’s results, on the other hand…
Amazon smashed analysts’ expectations for the second quarter. Earnings of $0.65 per share nearly doubled estimates for $0.35 per share. And revenue of $134.4 billion topped expectations for revenue of $131.5 billion.
This is Amazon’s biggest earnings beat since the fourth quarter of 2020.
This beat was helped in part by Amazon’s famous Prime Day, which was held this year from Tuesday, July 11, to Wednesday, July 12. Shoppers bought more than 375 million items worldwide over the two days of deals. This is up from the 300 million items sold last year. The top shopping categories were home goods, fashion and beauty, beating out electronics. Sales for Prime Day climbed 6.1% to $12.7 billion, and Amazon called the event its “biggest ever.”
Amazon Web Services (AWS) also proved profitable this quarter. Revenue from the company’s cloud unit increased 12% year-over-year to $22.1 billion, beating the $21.79 billion estimated by analysts. For the second quarter, AWS accounted for 70% of Amazon’s $7.7 billion in operating profit.
Also during the quarter, AWS introduced a cloud service called Bedrock. Bedrock offers developers access to foundational models of software that provides a way to build generative AI applications similar to ChatGPT. AWS said it is investing $100 million to start a Generative AI Innovation Center, which will pair customers with experts.
Andy Jassy, Amazon’s CEO, said during the company’s earnings call:
It was another strong quarter of progress for Amazon… AWS has continued to add to its meaningful leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models (Trainium and Inferentia chips), customize Large Language Models to build generative AI applications and agents (Bedrock), and write code much more efficiently with CodeWhisperer… We remain excited about what lies ahead for customers and the company.
Looking forward to the third quarter, Amazon anticipates sales between $138 billion and $143 billion, which would account for revenue growth between 9% and 13%. Analysts expect revenue of $138.25 billion.
AMZN shares surged more than 8% in the wake of its strong earnings report, and, as I write this, are up 66% this year.
How to Find Magnificent AI Stocks
Like the four Magnificent Seven stocks I wrote about last week, Apple and Amazon are both joining the AI revolution, either for internal company use or created for a customer base.
The reality is this AI revolution is going to play out fast… and create more wealth than any other previous technology in human history.
My fellow InvestorPlace colleagues Eric Fry and Luke Lango don’t want you to miss out on the huge potential upside while the AI revolution is still in the early innings. So, we created the AI Revolution Portfolio. Our AI Revolution Portfolio is made up of a handpicked list of 10 AI stocks found through my quantitative stock-rating system, Eric’s global macro investing expertise and Luke’s technology insights.
I should note that we added the tenth stock, which has a monopoly in its field, to our AI Revolution Portfolio yesterday. It’s still trading below our recommended buy limit, but we don’t expect it to stay down for long.
So now is the time to jump in and snap up shares so you don’t miss out on the company’s huge upside potential.
Sincerely,
Louis Navellier
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
NVIDIA Corporation (NVDA)
P.S. Last Thursday night, I sat down with my colleagues Eric Fry and Luke Lango to hold our first ever AI roundtable discussion called the AI Impact Event.
If you haven’t seen it yet, you can watch a replay here.
We discussed how a new development in AI is about to shake the entire stock market to its core, sending hundreds of stocks crashing in the process.
The three of us laid out the critical steps you need to make immediately to safeguard your money.
If you have any money in the markets, you should watch this now.
