AMAZON AND APPLE EARNINGS LIVE | MARKET CLOSE

SUMMARY

Amit Kukreja and guests provided live coverage of Amazon and Apple earnings, focusing on the impact of massive capex guidance, cloud growth, and broader market dynamics. Amazon's standout AWS performance and increased capital expenditure contrasted with Apple's steady but less spectacular results, shaping investor sentiment across the tech sector.

MAIN POINTS

• Panelists discuss expectations for Amazon and Apple earnings amid news of the Leopold hedge fund liquidation and a strong semiconductor rally. [1:30]
• Contributors outline key metrics to watch for Amazon, including AWS growth, capex, and operating margins, with AWS expectations set at 32-40% growth. [6:02]
• Market participants debate whether the day's rally is sustainable, referencing global deleveraging, particularly in Korean markets, and the impact on high-beta tech stocks. [11:01]
• Amazon reports AWS revenue of $42.2 billion, beating expectations, with operating margins rising to 13.7% and EPS significantly above estimates, driving the stock up after hours. [15:03]
• Despite a negative free cash flow of $7.6 billion, Amazon's strong AWS growth reassures investors, with the market accepting short-term cash burn for long-term gains. [19:02]
• Reddit and Roblox earnings are reviewed, with Reddit showing strong user and revenue growth but experiencing post-earnings volatility, while Roblox misses on daily active users. [22:00]
• Amazon's AI and chip businesses are highlighted as rapidly growing, with annual run rates exceeding $25 billion, and advertising revenue up 26% year-over-year. [24:00]
• Panelists note the market's focus on AWS and advertising margins, while awaiting further details on Amazon's capex plans during the upcoming earnings call. [27:01]
• Discussion turns to the broader hyperscaler landscape, comparing Amazon's capex strategy to Google, Meta, and Microsoft, and the market's differing reactions to their spending. [31:00]
• Attention shifts to Apple, with expectations for continued growth in iPhone and Mac segments, but skepticism about the sustainability of high valuations and growth rates. [35:01]
• Panelists dissect the Leopold fund liquidation, drawing parallels to past financial blowups and emphasizing the risks of excessive leverage in tech investing. [41:00]
• Apple's earnings are released, showing beats on EPS and revenue, especially in iPhone and Mac sales, but the stock trades down slightly due to high expectations and China-related concerns. [43:00]
• Apple CEO Tim Cook addresses questions about supply chain challenges and the company's AI strategy, emphasizing partnerships and engineering collaborations. [47:01]
• Panelists discuss the volatility of smaller tech stocks and the lessons learned from recent market swings, with speculation about investor risk appetite returning. [53:00]
• Analyst Mark Mahaney weighs in on Amazon's capex and financing strategy, dismissing equity raises and highlighting the company's strong balance sheet for its investment cycle. [56:00]
• A technical breakdown of the Leopold liquidation is provided, explaining how leverage and declining asset values triggered forced sales and market disruption. [1:01:00]
• Amazon's advancements in robotics and AI-driven automation are detailed, including conversationally controlled robots and expanded same-day delivery services. [1:07:00]
• Amazon's earnings call reveals AWS revenue growth of 36.7% year-over-year, a $25 billion run rate in both chips and AI, and a capex guidance increase to $220 billion for 2026. [1:17:00]
• Management explains the long-term ROI of data center and server investments, projecting AWS as a potential trillion-dollar annual revenue business with robust free cash flow. [1:27:01]
• AWS operating income reaches $16.6 billion, with management emphasizing efficiency gains, custom silicon, and the linkage between AI and core cloud growth. [1:39:00]
• Amazon outlines plans to double power capacity by 2027, citing strong demand from AI labs and enterprises, and discusses the early stages of widespread AI adoption. [1:50:01]
• The company signals openness to selling Tranium chips to third parties, reflecting surging demand for its custom AI hardware. [1:54:00]
• Amazon reports significant traction in grocery and perishables delivery, with same-day services expanding rapidly and boosting customer engagement. [2:03:00]
• Amazon stock surges up to 9% after hours as investors digest the capex increase and AWS's trillion-dollar revenue potential, while Apple declines on China and services misses. [2:06:01]
• Panelists praise Amazon's confident capex messaging and clear ROI framework, contrasting it with more cautious tones from Meta and Microsoft. [2:08:01]
• Discussion concludes with optimism about Amazon's long-term profitability, the efficiency of future spending, and the positive implications for the semiconductor sector. [2:12:00]

DETAILED ANALYSIS

The live coverage of Amazon and Apple earnings unfolded against a backdrop of significant market volatility, driven in part by the sudden liquidation of the Leopold hedge fund and subsequent asset purchases by Citadel. This event, interpreted by many as a signal of the end of a deleveraging cycle, set the stage for heightened anticipation around the earnings of two of the world's largest technology companies. The market's mood was buoyed by a strong rally in semiconductor stocks, which many attributed to the perceived bottoming of the sector following forced liquidations and the expectation that structural risks had been flushed out.

Amazon's earnings were the focal point of the session, with panelists zeroing in on AWS growth, capex guidance, and operating margins as the critical metrics. The consensus and 'whisper' numbers for AWS growth were set at 32% and 36%, respectively, with some hoping for an even more dramatic 40% increase. When Amazon reported AWS revenue of $42.2 billion, representing 36.7% year-over-year growth, it not only exceeded both consensus and whisper expectations but also marked the fastest acceleration in 18 quarters.

This performance was underscored by a significant beat on operating margins, which rose to 13.7%—nearly triple the 5% margin seen a year prior. Net sales and operating income also surpassed expectations, with EPS coming in at $5.75, although this figure was partially inflated by gains from Amazon's stake in Anthropic.

Despite reporting negative free cash flow of $7.6 billion—substantially worse than the street's expectation of negative $3.8 billion—investors were largely unfazed. The panel noted that Amazon's business model has historically involved periods of negative free cash flow, particularly during phases of heavy investment. The market's acceptance of this dynamic was attributed to the extraordinary growth in AWS and the company's clear articulation of long-term return on investment.

Management explained that while data center construction requires significant upfront capital, these assets have useful lives exceeding 30 years, and server investments typically break even in under three years, generating substantial free cash flow thereafter. This framework reassured investors that current cash burn was a necessary precursor to future profitability.

Amazon's AI and chip businesses were highlighted as additional engines of growth. Both segments now boast annual run rates exceeding $25 billion, growing at triple-digit percentages. The company emphasized its leadership in custom silicon, with the Graviton and Tranium chips gaining traction among top customers and AI labs.

Notably, Amazon signaled its willingness to sell Tranium chips to third parties, reflecting surging demand for AI hardware beyond its own cloud infrastructure. The company's backlog for AWS now stands at $469 billion, and management projected that AWS could ultimately become a trillion-dollar annual revenue business, a statement that sent ripples through the investment community.

Advertising also emerged as a bright spot, with revenue up 26% year-over-year and high-margin growth contributing to Amazon's improved profitability. The panel discussed the implications for the broader tech sector, noting that increased capex by Amazon would likely benefit semiconductor suppliers, while the company's robust cloud and AI growth could lift related software and infrastructure names.

In contrast, Apple's earnings, while solid, failed to ignite the same level of enthusiasm. The company reported beats on both EPS and revenue, with iPhone and Mac sales exceeding expectations and China delivering its third consecutive quarter of 20%+ growth. However, services revenue came in slightly light, and the stock traded down 1.5-2% after hours, reflecting the high bar set by prior performance and the stock's premium valuation.

CEO Tim Cook addressed concerns about supply chain constraints and the company's AI strategy, emphasizing partnerships with Google and a pragmatic approach to AI investment rather than heavy spending on proprietary models.

The discussion also touched on the volatility of smaller tech stocks, with panelists debating whether recent market swings would temper investor risk appetite or simply set the stage for renewed speculation once conditions stabilize. The Leopold fund liquidation was dissected in detail, with technical explanations provided for how leverage and declining asset values triggered forced sales and market disruption. The episode served as a cautionary tale about the dangers of excessive leverage, even among sophisticated institutional players.

Amazon's earnings call provided further clarity on the company's investment strategy. Management raised capex guidance for 2026 to $220 billion, up from a previous estimate of $200 billion, citing higher memory costs as a key driver. Importantly, they noted that even at this elevated level of spending, demand would still outstrip capacity, with 2027 and even 2028 already showing strong bookings.

The company outlined plans to double power capacity by 2027 and emphasized the linkage between AI adoption and core cloud growth. AWS operating income reached $16.6 billion, and management stressed the importance of efficiency gains, custom silicon, and the growing role of agentic AI services in driving future revenue.

Panelists praised Amazon's confident messaging around capex and ROI, contrasting it with the more cautious tones struck by Meta and Microsoft in their recent earnings. The clarity and conviction with which Amazon articulated its vision for AWS and AI infrastructure investments appeared to resonate with investors, as evidenced by the stock's surge of up to 9% after hours. The discussion concluded with optimism about Amazon's long-term profitability, the efficiency of future spending, and the positive implications for the semiconductor sector.

The company was lauded for providing a clear roadmap to sustained growth, with management's willingness to invest aggressively in the face of massive demand seen as a key differentiator in the current market environment.

In summary, Amazon's earnings set a new benchmark for hyperscaler performance, with AWS's explosive growth, rising margins, and bold capex plans positioning the company as a dominant force in the next phase of cloud and AI infrastructure. Apple's results, while strong, underscored the challenges of maintaining rapid growth in a mature business. The broader market context, shaped by deleveraging events and shifting risk appetites, provided a dynamic backdrop for these pivotal earnings reports.

LINKS

• Amit Kukreja's Twitter/X profile for market commentary and updates.
• Amit's Deep Dives Substack newsletter for in-depth stock and market analysis.
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