Apple and Amazon’s earnings up amid rising prices

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Image Source: Biz News

Earnings from sales from Amazon and Apple exceeded expectations, encouraging investors that the tech giants can withstand slowdowns in the world economy.

In a trading update, Amazon predicted that increasing the cost of its Prime membership would improve its bottom line, while Apple stated that demand for its crucial iPhone remained robust.

Despite prices increasing at a high rate, both businesses said they were making progress in managing costs. Shares rose as a result of the updates.

Customers avidly monitor Apple and Amazon’s quarterly updates to see how they are responding to the economy.

Official data released on Thursday showed the US economy contracted for the second consecutive quarter, a development that in many other nations would be regarded as an economic recession. However, the US requires other data to make that determination.

The results for the June quarter, in spite of the difficult operating environment, continued to show Apple’s ability to manage its business, according to Luca Maestri, Apple’s Chief Operating Officer. He further stated that the business anticipated that growth would resume in the next few months. Sales growth has, however, slowed significantly from last year for both businesses, and profits have decreased.

As it struggled with COVID-19 lockdowns in China, Apple’s profits fell by almost 11% to $19.4 billion (£15.9 billion), while Amazon lost $2 billion due to changes in the value of its investment in electric vehicle manufacturer Rivian Automotive.

Tim Cook, the CEO of Apple, said the company was receiving “a mixed bag” of economic signals, with the demand for iPhones remaining stable but declining in other sectors like digital advertising.

Between April and June, total sales of Apple goods and services increased by 2% on a yearly basis, reaching $83 billion. As supply issues hampered sales of other items, iPhone sales continued to drive the company’s profits.

Additionally, the company’s services division, which includes Apple Pay and its streaming music and television services, expanded by 12%.

Amazon reported that despite recent challenges to its e-commerce sector, its revenues were up 7% to $121.2 billion. The second consecutive quarter of falling online sales saw a 4% drop. However, the company is still shielded by the success of AWS, its cloud computing division, which saw a 33% increase in sales.

With its online sales slowing down and a warning that it had overspent on hiring staff and expanding its facilities in the hope that the pandemic-era purchasing patterns would persist, Amazon alarmed investors in the spring. But this time, it offered a more upbeat forecast.

Despite ongoing challenges from rising fuel, energy, and transportation costs, according to Amazon CEO Andy Jassy, we’re making headway on the more manageable expenditures we mentioned last quarter, especially by raising the productivity of the company’s fulfilment network.

Amazon claimed that because Prime Day, when discounts generally fuel a boom in purchasing, was pushed from June to July, its online sales were likely to look particularly dismal.

Big tech earnings skyrockets

According to Laura Hoy, equity analyst at Hargreaves Lansdown, “Big tech’s been a mixed bag this earnings season, but Amazon proved that the strong can survive even the hardest situations.”

According to Scott Kessler, global sector lead at Third Bridge, Apple and Amazon are too big to be unaffected by indications of a slowdown in the world economy.

However, they have some special power due to their stature to overcome those obstacles, especially when haggling over costs.

He added that since they are frequently one of the major buyers, Apple has done an excellent job of managing those expenditures and increasing its earnings.

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However, Christie Pitts, a general partner at the technology investment firm Backstage Capital, told the BBC that Amazon had some pressure on its results, in part because of the impact of inflation, “since customers have less disposable money to spend on impulsive items.”