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Big tech is facing big challenges these days, and the latest earnings from Apple and Amazon suggest that they’re struggling in an increasingly crowded market.
Apple sank 2.50% despite reporting a record-high $94 billion in revenue in Q3, surpassing analysts’ expectations of $89.3 billion. Much of this was due to the iPhone, the company’s main moneymaker, which raked in $44.58 billion—well beyond the anticipated $40.06 billion.
This windfall comes at a time when Apple is facing the possibility that President Trump will impose a 25% tariff on iPhones unless the company starts making them in the US. Tariffs cost Apple $800 million in Q2, and the bill is expected to balloon to $1.1 billion in Q3. CEO Tim Cook assured shareholders that Apple plans to “do more in the United States,” like opening an Apple Manufacturing Academy in Detroit in August to help train US manufacturers.
But the elephant in the room is what Apple is doing about AI. Siri pales in comparison to competitors ChatGPT and Google, and although a “more personalized Siri” is expected to debut next year, skepticism is high. Concerns also linger over Google’s antitrust lawsuit, which could impact Apple’s agreement to use Google Search as the default search choice in Siri and the Safari browser.
Nonetheless, Cook promised that the company is “significantly growing” its investment in artificial intelligence, and isn’t afraid to pay for it, adding that the company is “very open to M&A that accelerates our road map.”
Amazon’s AI problems
Meanwhile, Amazon stock slid 8.27% today, despite beating top and bottom line estimates in Q2 with revenue of $167.7 billion and earnings per share of $1.68.
Despite the looming threat of tariffs, e-commerce sales grew 11% to $30.8 billion, in line with expectations. As CEO Andy Jassy explained on the earnings call, “We just haven’t seen diminished demand.”
Although online shopping remained robust, the company has been struggling to maintain its lead in cloud computing. Amazon Web Services (AWS) revenue grew by 18% year over year, and while this was in line with expectations, it trailed the insane gains made by rivals Microsoft and Alphabet, which posted cloud growth of 39% and 32% last quarter, respectively.
Still, Jassy pointed out it’s “very early days” in the AI race, adding that Amazon has the perfect monetization vehicle: Alexa+, a souped-up version of its original digital assistant. Launched in March, Alexa+ has been hailed for its ability to handle more complicated tasks and is less prone to respond with “Hmm, I'm not quite sure how to answer that.”
Is it enough to keep Amazon a leader in the AI race? Hmm, I’m not quite sure how to answer that.—JD