Good morning, investors. Our latest round of Big Tech earnings rolled out after hours Thursday. Investors reacted in a counterintuitive way which, in the current market, might just make more sense than not.
Cash to burn
Apple’s most profitable June quarter on record did not impress Wall Street as much as Amazon’s latest cash burn.
The market is no longer rewarding profits because it’s fixated on whether AI spending converts to growth. Investors decided that Amazon meets that bar while Apple, for all its discipline, does not.
Amazon reported negative free cash flow for the second quarter in a row yet its stock jumped shortly after its earnings release.
Revenue: $200.6 billion, +20% year-over-year
AWS sales: $42.2 billion +37% year-over-year
Free cash flow: -$7.6 billion
Notably, AWS sales grew at its fastest pace in 18 quarters thanks in part to the AI boom.
Apple, meanwhile, beat on nearly every metric but still saw an initial reaction of a 4% decline.
Revenue: $109.4 billion, +15% year-over-year
iPhone sales: $54.2 billion, +22% year-over-year
Unlike Amazon and the other hyperscalers, Apple spends a relatively small fraction of revenue on AI infrastructure.
With its global hardware moat, the company has adopted a capital-light approach. But that discipline was not immediately rewarded after its earnings release.
Amazon, by comparison, maintains a capex guidance of $197-$202 billion.
Still, Apple remains the best-performing Magnificent 7 stock of the year, up more than 22%.
Amazon has gained just over 4%.
Market snapshot
Elsewhere
📊 The US economy grew just 1.5% in the second quarter. The advance GDP print undershot the 2.1% consensus as consumer spending cooled and government outlays contracted. (Yahoo Finance)
🚀 Robinhood posted record quarterly revenue of $1.3 billion. The 32% jump came as event-contract revenue soared more than tenfold to $156 million and prediction markets became a growing business line. (Yahoo Finance)
📉 Leopold Aschenbrenner was forced to unwind his “Situational Awareness” hedge fund. His firm had racked up massive gains from the AI boom but was wiped out from its use of leverage in the latest sell-off. Citadel reportedly reached out to buy the portfolio. (CNBC)
🛢 The US struck dozens of Iranian military targets overnight. Brent crude ticked up once again as President Trump vowed to hit Iran "very hard." (NBC News)
Rapid-fire
Reddit stock tumbled even as earnings beat estimates (CNBC)
Chipotle raised full-year same-store sales guidance after a Q2 beat (Yahoo Finance)
This beat-down financial name could rally 45% as the market realizes its tech stack (Best Ideas Club)
Samsung said the AI chip crunch will last until 2028 as quarterly profit soars (CNBC)
The 30-year Treasury yield touched its highest level in nearly 20 years (Yahoo Finance)
The June PCE print showed core inflation running at 3.3% year-over-year (Fox Business)
Kevin Warsh wants investors to stop watching the Fed (Opening Bell Daily)
Full Signal
Todd Sohn is the chief ETF strategist at Strategas Asset Management. We sat down to discuss the semiconductor bear market, his three favorite sectors for the second half of the year, the rise of leveraged products and comparisons to dot-com bubble.
Tune in on Spotify, Apple Podcasts, or YouTube.
On this day
🗓 July 31, 1914: The New York Stock Exchange voted to close its doors just ten minutes before opening as the outbreak of World War I threatened to trigger the worst trading day on record.
Last thing
📩 Want to get in front of 207,000+ investors who get this newsletter and the 350,000 finance professionals who can access it on Bloomberg Terminals? Fill out this form and we will get in touch with you.
💡If you find this newsletter valuable, you can help shape its future by taking our 2-minute reader survey. Your feedback directly influences our content
