BIG TECH EARNINGS
🚀 Amazon 'Saves the Market' with Incredible Earnings, Jumping 10%

😢 Last night was absolutely crushing, with the Blue Jays just barely losing the World Series in the 11th inning of Game 7.

🟢 And while it won’t make up for the devastating loss, at least it was a green week in the markets, with Amazon saving the day by hitting a home run in their earnings call on Thursday. Across the indexes this week:

• The S&P jumped +0.71%

• The Nasdaq-100 jumped +2%

• The TSX fell -0.3%

• And Amazon ($AMZN) soared +9%, Amazon's biggest one-day percentage gain since 2015

🤿 So without further ado, let’s dive into Amazon’s earnings…

📊 Amazon Earnings Breakdown

🔍 Looking first at Amazon’s numbers:

• ✅ Q3 Revenue was $180.2B, 1% higher than expected and up 13% from last year

• ✅ Earnings per Share was $1.95, 24% higher than expected

🎯 For Q4, Amazon projects Q4 net sales between $206 billion and $213 billion.

🔍 Let’s look at the key takeaways…

☁️ Soaring Cloud Revenues and Accelerating Growth

⭐️ While strong numbers overall, the most important number in Amazon’s earnings was its AI-driven AWS Cloud Revenue, which grew 20.2% this quarter to $33B, well surpassing analysts’ estimates of 18.1%.

🤑 While only ~20% of revenue, AWS accounts for ~60% of Amazon’s profits, so the growth of this segment is critical for Amazon.

🚀 The reason this 20.2% was particularly special is it was AWS’ highest growth rate in 3 years, and marked the 3rd quarter in a row with accelerating growth.

🤔 So what does all this mean for the markets and investors’ concerns about the growing AI spending spree? Before I try to answer that, a quick word from this week’s sponsor Purpose Investments!

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AMAZON EARNINGS CONT.
💰 Ammunition for More AI-Spending

🦸‍♂️ On Thursday, we talked about investors’ growing concerns over the AI-spending spree…

😮‍💨 Well, the reason some headlines are saying ‘Amazon saved the market’ is with this accelerating AWS growth, Amazon eased a lot of those worries.

🎙️ In the words of Amazon’s CEO:

💰 As a result, Amazon raised its forecast for capital expenditures (aka AI-spending) this year, from $118B to $125B.

✅ But unlike Meta, which got punished this week for its AI spending, AWS has the revenue growth to back it up, so investors were unfazed by the big increase in spending.

✨ This gave the market as a whole a lot more confidence in the AI spending, with Business Insider saying, AMG (Amazon, Microsoft, and Google) is a “money machine the world has never seen before” and that “the cloud business has created a powerful financial loop that builds momentum almost every quarter.”

🥊 AWS is Back in the Fight

🐢 Before this week, Amazon was lagging behind the other cloud providers, with:

• Google up +53% in the past year

• Microsoft up +28% in the past year

• And Amazon up only +14%

😰 The reason for this is that while AWS’ growth was impressive, Google Cloud and Microsoft Azure’s Cloud growth has been even higher, at 34% and 40%, leading to worries that they were stealing market share from AWS and that Amazon was lagging behind the others in its AI development.

📈 Well with this week’s numbers, Amazon is catching up, now up +25% in the past year.

👋 And according to some analysts, some of these worries are in the rear-view mirror, with one strategist saying:

🎯 Across the board, analysts at Barklays, Bank of America, JP Morgan, UBS, Morgan Stanley, and City all raised their price targets to over $300, a 23% upside from the current price, reflecting the renewed confidence in Amazon’s place in the AI race.

🫧 Bubble or Not A Bubble?

🤔 And that leads us to the same question we’ve been asking for the past 2 years… are we in an AI-bubble 😅

💡 I feel like a broken record at this point, rehashing the same arguments for and against, so this time I’ll just add one interesting new point that Federal Reserve Chair Jerome Powell added to the debate.

🔥 On Wednesday, Powell said he did not believe the AI boom is a speculative bubble like the dot-com era, when many companies were "ideas rather than businesses," saying that today’s AI leaders “actually have earnings” and have been a major source of economic growth. Based on the earnings reports this week, this continues to hold true.

⭕️ That said, personally, I still see the rise in circular deals as a concern, and it’s important to remember that the cloud providers are essentially ‘selling the shovels,’ and that this can only continue so long as there’s gold (aka real downstream AI applications that increase profits or reduce costs and justify the massive expenditures)

✅ So while I don’t think this week means ‘we’re for sure not in a bubble,’ it’s at least a sign that it looks like good times will continue for the near future…

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BIG TECH EARNINGS
🍎 Apple Up 3% After Strong iPhone 17 Performance

📊 While not quite as exciting as Amazon’s earnings, another big earnings report this week was Apple, which also reported a strong beat on earnings:

• ✅ Revenue was $102.46, fractionally higher than expected and up 8% from last year

• ✅ Earnings per Share was $1.85, 5% higher than expected 

🏆 iPhone 17 Sales on Track for ‘Best Quarter in History’

📱 The biggest number in the spotlight was iPhone sales, which fell ~$1B short of expectations ($49B vs $50B).

🎯 But while this quarter slightly missed the target, projections for next quarter, the first full quarter with iPhone 17 sales, are looking promising, with Tim Cook saying:

⭐️ 10% growth year-over-year would put Apple at $139.2B next quarter for the holiday season, 5.2% above the $132.3 expected by analysts.

👍 The new iPhone 17, which launched in September, has been received well by consumers, with one analyst saying it’s a ‘no-brainer’. Dave2D, a popular YouTube tech commentator, sums up some of the key upgrades, saying:

• 🤳 New 18MP, larger-sensor front camera with improved color/low light (aka much better selfies across all models)

• 🔋 Longer real-world life batter life (esp. on higher models) and peak ~40W fast charging when depleted.

• 💸 Stronger value at entry price: base model now starts at 256GB for $799, making upgrades feel worth it.

✅ Overall, many are saying the iPhone 17 is a great value for money, and giving the upgrade their seal of approval.

👨‍💼 Analyst Reactions

✨ Analysts were very happy with the results, with Goldman Sachs, Citi, JP Morgan, and Morgan Stanley all raising their price targets above $300, pointing to the ‘momentum of the product cycle’, ‘strong services revenue growth’, and ‘iPhone upgrades tracking better than expected.

📲 Analysts were also bullish on Apple’s 2026 product cycle, with Apple set to launch Advanced Siti, the Vision Pro 2, and most notably the first Foldable Phone and 6 new iPhone launches, with many expecting the strong iPhone growth will continue and accelerate into next year.

😰 Apple Gets a Pass on China and AI for Now

👀 Last time we covered Apple earnings, there were two major concerns: China and AI.

🇨🇳 On the China front, while Apple sales in China fell -4% this quarter, they largely got a free pass on that this quarter, with expectations that growth will return next quarter due to the strong reception to the iPhone 17.

🤖 On the AI front, it seems Tim Cook’s announcements in the earnings call appeased investors, saying

• Apple has introduced dozens of new Apple Intelligence features, including live translation, visual intelligence, image/writing tools) and that a more personalized Siri is “on track for next year.”

• Apple will keep a hybrid model with first-party and third-party data centers while increasing AI CapEx going forward.

• Apple is open to AI M&A if it advances its roadmap

⏰ Nothing really new, but with the strong numbers it seems investors are willing to give them a bit more time to figure out their AI strategy.

🍎 Overall, a strong quarter for Apple and a good week for Apple shareholders!

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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