Week in a Nutshell #28

Welcome to the twenty-eighth episode of the 'Week in a Nutshell’ series,

Tech giants like Apple, Microsoft and Amazon announced their Q2'2015 earnings last week. Wall Street expectations significantly affected these companies' stock prices.

Headlines:

  1. Apple Reports $49.6B Revenue, $10.7B Profit, $1.85 EPS For Q3 2015; Stock Slips 7.3%

  2. Amazon Spikes 14% After It Reports Surprise Q2 Profit Of $92M, Better-Than-Expected Revenue Of $23.18B


Apple Reports $49.6B Revenue, $10.7B Profit, $1.85 EPS For Q3 2015; Stock Slips 7.3%

Apple announced a very strong financial performance for the second quarter of 2015.

Q2'2015 
Revenue: $49.6 billion (32.5% growth vs. $37.4 billion in Q2'2014)
Profit: $10.7 billion (38% growth vs. $7.7 billion in Q2'2014)
iPhone sales volume: 47.5 million units (35% growth vs. 35.1 million units in Q2'2014)
iPad sales volume:  10.9 million units (18% decrease vs. 13.3 million units in Q2'2014)
Mac sales volume4.8 million units (8.8% growth vs. 4.4 million units in Q2'2014)

Revenue and profit growth rates around 35% are huge success and very hard to achieve for a company at Apple's scale. However, even though Apple managed to exceed the Wall Street's expectations of quarterly revenue and profit growth, Apple fell short of Wall Street's expectation of 50 million iPhones sold in Q2'2015. iPhone sales growth rate has been declining for the last 2 quarters, from 46% to 40% and then to 35%. It looks like Wall Street and investor might be questioning if the iPhone is getting closer to a saturation point in the smartphone market.

Decelerating iPhone sales growth and Apple's below the expectations revenue estimates for the following quarters of the year immediately affected the Apple stock prices and market cap. Apple stock prices decreased by nearly 8% and lost $62 billion in market cap.

We have seen two great examples of the impact of hitting or missing the Wall Street expectations in the last 2 weeks. Google increased its market cap by $60 billion and Apple lost $62 billion.


Amazon Spikes 14% After It Reports Surprise Q2 Profit Of $92M, Better-Than-Expected Revenue Of $23.18B

Wall Street was expecting Amazon to announce revenue growth deceleration and loss but Amazon surprised Wall Street and the investors by announcing a very strong quarterly financial performance.

Q2'2015 - Amazon:
Revenue:
$23.18 billion (20% growth vs. $18.6 billion in Q2'2014)
Profit: $92 million (vs. $126 million loss in Q2'2014)

Q2'2015 - Amazon Web Services (AWS):
Revenue: $1.82 billion (81% growth vs. $1.05 billion in Q2'2014)
Profit: $391 million (400% growth vs. $77 million in Q2'2014)

Announcing profit and revenue growth numbers as well as exceeding the Wall Street expectations resulted in Amazon stock price to go up significantly and closed the week by 10% increase. As a result, Amazon's market cap reached to $246.54 billion surpassing the market cap of one of the biggest retailers in the US, Walmart, $230.53 billion. For comparison, Amazon announced $89 billion revenue last year whereas Walmart announced $485.65 billion. This is not just about how much money you are making.


We came to the end of the twenty-eighth episode of ‘Week in a Nutshell’ series. Please comment, share, like and/or recommend this post if you enjoyed it.

Thanks,
Birkan