80% of US Companies Report Surprise Earnings... A Preview of Apple and Amazon Results

Halfway Through the Q2 Earnings Season for S&P 500 Companies

The Q2 earnings season for major U.S. listed companies is halfway through. According to financial information firm FactSet, as of the 28th (local time), 51% of S&P 500 companies have reported their earnings. Among those that have reported so far, 80% of S&P companies recorded earnings surprises that exceeded market expectations. This surpasses the long-term average of 78%. Despite concerns over inflation and recession, companies have successfully defended their earnings. Thanks to strong earnings, the S&P 500 index rose 1.6% (based on the closing price on the 28th) compared to the closing price on the 13th, just before the Q2 earnings season began.

Apple and Amazon to Report Earnings Together on the 3rd

The Q2 earnings surprises were led by large-cap stocks. Google (Alphabet), Meta, and Microsoft (MS), which reported last week, all posted strong earnings that beat market expectations in both net income and revenue. Meta’s revenue grew 11%, marking the first double-digit revenue growth since the COVID-19 pandemic boom, while Alphabet and MS saw sharp increases of 7% and 8%, respectively. Tesla also exceeded expectations in both revenue and net income for Q2 this year, but its gross margin declined to 18.2%, below the market estimate of 18.8%, due to ongoing price cuts since the beginning of the year.

Apple and Amazon will both announce their Q2 earnings on the 3rd. The market expects Apple to report revenue of $81.77 billion, down 1.4% year-over-year, and earnings per share (EPS) of $1.19, down 0.8%. iPhone sales, which account for 50% of Apple’s total revenue, have raised expectations as market share in the U.S. increased during this period.

According to market research firm Counterpoint Research, iPhone market share in the U.S. from April to June was 55%, up 3 percentage points from 52% in Q1. Fueled by earnings expectations, Apple’s stock price has also been on the rise. On the 28th, Apple’s stock closed at $195.83, up 1.35% from the previous session, marking an all-time closing high. Its market capitalization ($3.08 trillion) also surpassed $3 trillion. Apple’s stock has risen more than 50% so far this year.

[Image source=AFP Yonhap News]

Amazon is also expected to have posted strong earnings that beat market expectations for Q2, following its strong Q1 performance. Amazon, which will report earnings on the same day as Apple, is forecasted to have revenue of $131.45 billion, up 3% year-over-year, and EPS of $0.35, up 13%. U.S. economic media Barron’s stated, "Amazon achieved record sales during this year’s discount event ‘Prime Day’," and predicted that "Amazon’s earnings were boosted not only by its cash cow and key growth driver, the cloud business (AWS), but also by continued high growth in its e-commerce segment." According to Adobe Analytics, Adobe’s marketing data analysis solution, online sales in the U.S. during Amazon Prime Day were estimated at $12.7 billion, a 6.1% increase from last year’s $11.9 billion.

Semiconductors Show Strong Performance, Energy Sector Struggles

Semiconductor companies have passed the worst phase thanks to demand recovery. Intel, which reported earnings on the 27th, posted a Q2 net income of $1.5 billion, turning profitable from a net loss of $454 million in the same period last year. This is the first profit turnaround in three quarters. Intel had recorded consecutive net losses of $700 million in Q4 last year and $2.8 billion in Q1 this year.

By business segment, computing revenue drove earnings, confirming a recovery in the PC market, which had been widely regarded as slow to recover. According to market research firm IDC, Q2 PC shipments declined 13.4% year-over-year, a smaller drop compared to the 29% decline in the previous quarter. Q3 net income is also expected to maintain a profitable trend.

Following Intel’s earnings announcement after market close, AMD and Qualcomm shares rose nearly 2-3% on the 28th amid earnings expectations. AMD and Qualcomm, which focus on PC semiconductors, will report earnings consecutively on the 1st and 2nd.

The energy sector is not doing well. The two major oil giants, which had earned huge profits due to soaring oil prices after the Ukraine crisis, saw their Q2 net income sharply decline. ExxonMobil, the largest U.S. oil company, posted Q2 net income of $7.88 billion, down 56% from $17.85 billion in the same period last year. Chevron, another major oil company alongside ExxonMobil, recorded net income of $6.01 billion, a 48% decrease compared to $11.622 billion in the same period last year.

Foreign media reported, "With recession fears spreading, international oil prices have fallen below $80 per barrel (West Texas Intermediate, WTI), stabilizing somewhat and ending the profit bonanza for oil giants," adding, "The focus on the energy industry is shifting from imposing windfall taxes to pressure for achieving carbon neutrality."

This content was produced with the assistance of AI translation services.