After the earnings beats from both Microsoft and Meta yesterday, Wall Street will be buoyed heading into the open today. That despite the potential for month-end shenanigans as we look to wrap up July trading. But after the close today, investors will be faced up against another big test on the earnings calendar with Apple and Amazon both set to deliver their Q2 showing.
For Apple, it’s been a testing and challenging 2025 so far – not least with Trump’s tariffs. That has impacted iPhone demand in recent months, leading to a surge of panic buying in the run up to tariffs before cooling off especially in June. Analyst estimates are that iPhone sales could drop around 18% year-on-year last month.
However, that’s just one of the many strains faced by Apple on the quarter. The firm warned of potentially up to $900 million in tariffs-related costs for Q2 2025, so that will be a key figure to watch out for as well. As an aside, do be reminded that Apple’s reporting means that this will be fiscal Q3 2025 for them.
In any case, the AI era hasn’t been too kind to Apple with shares being down by over 16% year-to-date. Investors will be looking for new innovation, not just in existing product lines but also on the AI front. But in the bigger picture, the challenge remains clear at least for what is left of the year. It’s all about facing up to tariff costs and will Apple be willing to sacrifice profits for that or pass it on to consumers? If not, do they have a bigger plan to generate stronger revenue in the second half of the year?
As for Amazon, it’s been a bit of a contrast to Apple at least. There is plenty of optimism surrounding its retail and cloud services (AWS) especially. However, the one thing holding it back as compared to the other names in the Magnificent Seven is once again AI. Amazon has pretty much been rather lackluster in terms of progress in this space, and that’s something to be wary about.
While e-commerce is still Amazon’s main business, AWS will be what drives profits for the firm and that’s the key spot to watch on the numbers. But while AWS remains the main pillar in the cloud space, Microsoft and Google are definitely quickly catching up. So, that’s a warning signal to Amazon at least.
Besides that, advertising is the other main profit driver to keep an eye out for. It is one which has grown to be a notable contributor for the firm as well at the moment.
As for AI-related numbers, capital expenditure (capex) is still the main thing to watch much like how it has been for other firms. And as mentioned yesterday, the market landscape now dictates that you either increase spending or risk getting left behind. The same will apply to Amazon.
Their capex in Q2 is expected to hit around $25 billion will the full-year figure exceeding $100 billion. However, they need something to show for it.
But at least they can take in some comfort from the latest tariffs situation, with Trump putting an end to the ‘de minimis’ exemption. That means any shipments of imported goods into the US worth $800 or less will be subject to duties. So, that should keep Amazon’s e-commerce business in good stead.
All in all, it wouldn’t be a surprise to see Apple disappoint and Amazon produce a beat on earnings. At the balance, the market will take the former as one that is a given considering how the year has panned out. So as long as Amazon keeps up the positive streak on the earnings front, that is something investors can work with in search of fresh highs to start August trading.
As a reminder though, markets will be in for a quick check in to start the new month with the US labour market report due on Friday.
This article was written by Justin Low at investinglive.com.