The barrage of quarterly earnings for portfolio holdings continues after today's close with both Apple (AAPL) and Amazon (AMZN) on deck. Let's walk through the consensus expectations for both and share why members should stay on the sidelines ahead of both reports.
Apple
Consensus expectations for Apple's September quarter call for EPS of $1.27 on $88.9 billion in revenue and $2.14 on revenue of $128.4 billion for its December quarter. In recent weeks there has been much said about potential shifts in iPhone production toward higher priced models, a positive mix shift for the company revenue. The earlier drop this year for its new iPhone models compared to last year should also modestly help as well. We've also seen third party reports pointing to share gains not only for iPhone but also for Mac. More recently, the company announced forthcoming price hikes for several of its service offerings.
All of that suggests a solid September quarter, but the larger question is the guidance given the 44% sequential revenue improvement needed to hit the December consensus revenue forecast. On the positive, Apple will have a full quarter of new products across its iPhone, Mac, and iPad line up and the benefit of higher prices.
And while to us there is little question the company offers products and services that delight its user base, and the major wireless carriers are actively enticing smartphone upgrades to 5G, consumers currently seemed to more focused on experiential spending than physical goods. At least that's what's been indicated by Visa (V) , Mastercard (MA) , and American Express (AXP) .
Following reports from Alphabet (GOOGL) and Meta Platforms (META) , we'll also be curious to hear what Apple has to say about cost cutting measures and prospects for its headcount. While we would expect more restrained spending given concerns about the economy, with speculation it will introduce its AR/VR headset/glasses in 2023, Apple's comments on expenses could prove somewhat insightful. Historically Apple has remained tight lipped about these things, and if it does again the market may misread its expense comments, putting it in the META camp.
Amazon
Turning to Amazon, the expectation is it will earning $0.21 per share for the September quarter on revenue of $127.45 billion and guide its December quarter in the range of $0.11-$0.55 on revenue of $155.15 billion. As members can see, the range for December quarter EPS is wide enough to drive the proverbial truck through it. We've seen Amazon start cost cutting measures, including slowing hiring in several areas, but it will also have to staff up for peak demand this holiday season.
Several times in the past, one of the bigger wild cards associated with Amazon's quarterly results has been its expense guidance for the upcoming quarters. That was been especially tricky during the pandemic and when Amazon was more aggressively expanding its warehouse location footprint.
In early September, it was announced the company would close or abandon plans for dozens of new warehouses given slowing sales growth and to better match expected customer demand. To us that sounds like a more disciplined Amazon. To the extent management communicates newfound discipline and pro-active efforts given the prospects of slowing demand ahead, those comments are likely to be welcomed by investors and the market.
And once we have the results for Amazon Web Services as well as its burgeoning advertising business, we'll have a far better sense of which companies between Amazon, Meta, Google, and Microsoft (MSFT) are taking share in cloud and advertising spending.
Heading into both reports, given the issues we've raised with each earnings report, we would suggest members stay on the sidelines with both AAPL and AMZN shares.