So, let's get straight to the point. Yesterday, two of the largest companies on the planet reported earnings on the same day: Apple and Amazon.
Both beat analysts' expectations. Both posted numbers that would have seemed almost unimaginable just two years ago.
And then what happened?
One stock fell. The other surged more than 9%.
Let's break it all down.
APPLE'S BEST JUNE QUARTER EVER
Let's start with Apple, because that was where all eyes were focused.
Revenue came in at $109.42 billion, up 16.4% year over year. Earnings per share reached $2.02, compared with analyst expectations of $1.89.
Tim Cook said it plainly: this was the strongest June quarter in the company's history.
And the iPhone? A massive success.
iPhone revenue reached $54.25 billion, up nearly 22%. Cook described the performance as an "incredible blowout" and said that customers upgrading their phones came out in full force.
The Mac business performed even better in percentage terms. Revenue reached $10.35 billion, up 29%, helped by the affordable MacBook Neo, powered by an iPhone-based processor.
And China, which investors have worried about for years? Revenue climbed 22% to $18.82 billion. Apple also gained four percentage points of market share over the past year, reaching 18% of the Chinese smartphone market, largely because it kept iPhone prices stable while competitors such as Samsung, Xiaomi, Vivo, and Oppo raised theirs.
Gross margin reached 50.1%.
Subscriptions climbed to 1.5 billion.
The dividend was set at $0.27 per share.
Outstanding numbers across the board, right?
Yet the stock fell 2.5% in after-hours trading and at one point was down as much as 3.69%.
Why?
There were several reasons.
First, two segments missed expectations. iPad revenue came in at $6.19 billion versus expectations of $6.89 billion. Services revenue, Apple's high-margin business, reached $30.74 billion instead of the expected $31.36 billion. The company attributed part of that shortfall to currency fluctuations.
Second, and more importantly, not all of that 50.1% margin was purely operational. Roughly two percentage points came from tariff refunds, and about 11 cents of earnings per share were boosted by the same factor.
Third, and this was the biggest concern, Apple faces what Cook described as a "once-in-a-century flood" in the form of a global shortage of memory and chip manufacturing capacity.
The company already raised prices on Macs and iPads at the end of June. It has not announced price increases for the iPhone, but many analysts expect them later this year.
Add to that the fact that this was Tim Cook's final quarter before handing leadership over to John Ternus, and remember that the stock had already gained about 20% over the previous three months, briefly approaching a $5 trillion market capitalization earlier in the week.
AMAZON THREW A PARTY
Now let's move to Amazon, where the picture was completely different.
Revenue reached $200.61 billion, up 19.6%.
Net income came in at $62.6 billion, compared with $18.2 billion a year earlier.
Yes, you read that correctly.
To be fair, about $53.4 billion of pre-tax gains came largely from Amazon's investment in Anthropic.
But the number investors were really watching was AWS.
Amazon's cloud business grew 37%, far above analyst expectations of 31%.
It was the fastest growth rate in 18 quarters.
Andy Jassy summed it up in one word: "booming."
He also noted that artificial intelligence services and Amazon's custom AI chips each surpassed a $25 billion annual revenue run rate.
Operating income reached $27.5 billion, while the company had guided for only $20 billion to $24 billion.
AWS alone generated $16.6 billion in operating income, up from $10.2 billion a year ago.
Advertising revenue rose 26%.
Of course, not everything was perfect.
Free cash flow turned negative at minus $7.6 billion because capital expenditures jumped by $66.1 billion, almost entirely driven by AI infrastructure investments.
The company's guidance for the third quarter came in at $197 billion to $202 billion, below the consensus estimate of $204 billion.
The explanation was straightforward.
This year's Prime Day took place in June instead of July. Without that calendar shift, growth would have been nearly four percentage points higher.
Investors understood the reasoning and sent the stock up more than 9%.
THE LESSON OF THE DAY
The market does not pay for what happened.
It pays for what comes next.
Apple delivered a fantastic quarter, but it also delivered uncertainty.
How much will costs rise?
Will iPhone prices increase?
How successful will the new Siri be when it launches in September with Google technology behind it?
How will the new CEO perform?
Amazon, on the other hand, delivered exactly the number investors were focused on.
And it did so at a time when expectations were already high. Google Cloud had just reported 82% growth the previous week, while Microsoft's Azure posted 43% growth.
Amazon did not fall behind.
Most importantly, it is funding its AI ambitions through the strength of its own cloud business.
