Apple, Amazon beat forecast numbers. Here are the top highlights

Apple showed strong 8 percent revenue growth in China, and set a record for iPhone sales in India — both “bright spots” for the quarter. (Representative image)

Silicon Valley tech giants Apple and Amazon bettered markets expectations with their earnings reports on August 3. Here are the top highlights.

Beating market expectations

Apple reported modestly higher profits in the recently ended quarter despite another dip in revenues, as a record performance in services offset lower iPhone sales. Performance was however better than expected.

Executives spotlighted increased sales in China and several key emerging markets that helped compensate for declines in the United States, where the iPhone sales have ebbed in a saturated smartphone environment.

For Q3, Apple reported profits up 2.3 percent to $19.9 billion year-on-year (YoY); but revenues declined for the third consecutive quarter by 1.4 percent to $81.8 billion. It also showed an all-time high services revenue from Apple Pay, Apple TV and the Apple Store among other subscription services.

The record performance was “offset by lower iPhone sales; with several emerging markets and China, compensating for declines in the saturated US market," AFP reported. The stock sank 3.2 percent in extended trading.

Amazon also reported profits of $6.7 billion for Q3, far beating market expectations. Strong sales and its yearly Prime Discount event in July helped push the results. The company said it continues work to optimise efficiency and lower costs of fulfilment centres. Numbers were also bolstered by Jassy’s 18,000 job cuts in January, followed by another 9.000 cuts laid out in March, AFP noted.

Revenue from cloud computing unit Amazon Web Services (AWS) jumped to $22 billion year-on-year (YoY), but high costs did knock some wind off in the YoY operating income. But costs climbed as well, resulting in a lower operating income than in the same period in 2022.

Amazon shares were up over 8 percent to $140.25 in after-market trades.

iPhone sales slumps

Apple reported revenue decline of 1.4 percent — also marking the longest streak of decline in two decades. Executive have blamed “foreign headwinds”, but admitted the major slowdown was in the US.

Notably, however, newer iPhone models are usually unveiled in September, invariably bringing in the bulk of the sales in the following Q1.

Executives said iPhone sales would improve in Q4, but did not specify numbers, Reuters reported.

"There is a real concern about when volume picks up and what the horizon is for iPhone sales growth," said Daniel Newman, chief executive and principal analyst at research firm Futurum Group told Reuters.

India & China, the saviours

Apple showed strong 8 percent revenue growth in China, and set a record for iPhone sales in India — both “bright spots” for the quarter, Bloomberg reported.

An industry-wide slump in demand for phones, computers, and tablets also hit Apple; while the iPad and Macbook showed better than expected 7.9 percent rise to $15.7 billion in China, Hong Kong and Taiwan combined. Wearables such as Apple Watch and AirPods also “did particularly well”, Cook said.

In India, iPhone sales jumped double-digits, as per the company, though numbers were not released. As per Bloomberg, Apple’s India revenues have grown close to 50 percent to $6 billion till March. CEO Tim Cook attributed the sales increase to more users switching over from Android.

The performance “vindicates” Apple’s renewed focus on the market, with expansion in the country posing a “massive retail opportunity and production base”, Bloomberg added.

The India import blow

The Indian government on August 3 announced restrictions on the import of laptops, tablets, personal computers, ultra-small form factor computers, and servers.

While the import of these items will be permitted against a licence, certain use cases have been exempted from the restrictions. These include the import of one laptop, tablet, personal computer, or ultra-small form factor computer through online portals, couriers, or post.

The restrictions are also not applicable to imports under baggage rules, the Directorate General of Foreign Trade (DGFT) said in a notification.

Speaking on the condition of anonymity, a commerce ministry official said the decision had been taken keeping national security in mind, with some hardware possibly posing risks to India's growing IT sector.

Electronic goods are India's largest import category after petroleum products. At the same time, the export of electronic goods by India surged 47.1 percent in April-June to $6.96 billion, the latest data shows.

The move is likely to hit companies such as Apple, Acer, Dell, LG Electronics, Lenovo, HP Inc., and Samsung and force them to boost local manufacturing, Reuters reported. “The intent seems to be substitution of certain goods that are imported heavily,” economist Madhavi Arora of Emkay Global told the agency.

"The move's spirit is to push manufacturing to India. It's not a nudge, it's a push," said Ali Akhtar Jafri, former director general at electronics industry body MAIT told Reuters.

AI in focus

Notably, both tech companies have also set their sights on the “new kid on the block” that is artificial intelligence (AI).

Analysts’ calls by Apple CEO Tim Cook and Amazon chief Andy Jassy had mentions of AI. While Cook was focused on machine learning as “absolutely critical”, adding that “core fundamental technologies that are integral to virtually every product that we build”; Jassy spoke about “building generative AI applications that reinvent and enhance their customers' experience”, AFP reported.

Cook outlined the uses as crash detection, emergency response and other iPhone features. "We're going to continue investing and innovating and responsibly advancing our products with these technologies,” he added.

Jassy too seems keen; stating that Amazon is seeing more businesses shifting systems to cloud, “where they can save money and tap into AI capabilities”. He added that cloud computing business AWS is “investing heavily” in training AI models to work for businesses, calling the process “democratisation of access to generative AI”.

Spending chop, job cuts pay off

Under “decidedly unsentimental” Jassy’s two years in the driver’s seat, Amazon axed 27,000 employees and seen “dozens of projects hacked off”, Bloomberg noted. Headcount is “pledged to remain flat” going forward too.

The Seattle-based company is increasing from services and independent merchants on its retail website. Case in point: Advertising sales increased 22 percent to $10.7 billion; and seller services revenue rose 18 percent to $32.3 billion in the quarter. Further AWS’ quarter sales rocketed 12 percent to $22.1 million.

Jassy has also noted that groceries present “big growth opportunity”, but the company needs to find the right “mass grocery format” worth expanding broadly, AP reported.

FTC a looming threat

The United States Federal Trade Commission (FTC) is finalising its antitrust lawsuit against Amazon as soon as this month, Politico reported quoting sources. The move could break up Amazon into multiple businesses.

Key issues of contention include fair competition via Amazon Prime and website and bundling of service sales through Amazon’s logistics and advertising services. Amazon Prime and digital advertising businesses will thus be targeted, the Politico report added.

Earlier, the FTC had flagged Amazon for enrolling customers into paid subscription without their consent and making cancellation difficult.

(With inputs from Bloomberg, AP and other wire agencies)