80% of US Companies Surprise with Earnings... A Preview of Apple and Nvidia Results (Comprehensive)

S&P 500 Companies' Q2 Earnings Surpass Long-Term Average
Apple, Amazon, Nvidia to Announce Earnings This Month

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, which are centered on large-cap U.S. stocks, have reported their earnings. Among the S&P 500 companies that have reported so far, 80% recorded earnings surprises that exceeded market expectations. This surpasses the long-term average of 78%. Despite inflation and recession concerns weighing on the global economy, companies have successfully defended their earnings. The concentration phenomenon in the U.S. stock market, centered on some tech stocks, did not apply to earnings. Thanks to strong earnings, the S&P 500 index rose more than 5% (based on the closing price on the 31st) compared to the closing price on the 13th, just before the Q2 earnings season began. Chris Zaccarelli, an analyst at Independent Advisor Alliance, said, "Earnings are not as bad as feared. This is definitely good for the market," predicting further rallies.

Apple and Amazon to Report Earnings Together on the 3rd

Last week, the big three tech companies?Google (Alphabet), Meta, and Microsoft (MS)?reported earnings that exceeded market expectations in both net profit and revenue. Meta's revenue grew by 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 Q2 revenue and net profit, but its gross margin declined to 18.2%, below the market estimate of 18.8%, due to a price reduction policy that has continued since the beginning of the year.

The Q2 earnings reports of the big five tech companies will conclude with Apple and Amazon's announcements on the 3rd. The market expects Apple to report Q2 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. The stock price has also risen on earnings expectations. 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 exceeded $3 trillion, reaching $3.08 trillion. Apple’s stock price has risen more than 50% this year alone.

Amazon is also expected to have posted strong earnings exceeding market expectations in Q2, following Q1. Amazon, which reports 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 main 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 $11.9 billion last year.

Semiconductors Advance, Energy Sector Struggles

Semiconductor companies are showing signs that the worst phase is over due to demand recovery. Intel, which reported earnings on the 27th, posted a Q2 net profit of $1.5 billion, turning profitable from a net loss of $454 million in the same period last year. This is the first profit in three quarters, following consecutive net losses of $700 million in Q4 last year and $2.8 billion in Q1 this year. Computing revenue led the earnings, confirming a recovery in the PC market, which had been considered slow to recover. According to market research firm IDC, Q2 PC shipments decreased by 13.4% year-over-year, but this decline was less severe than the 29% drop in the previous quarter. Q3 net profit is also expected to maintain a positive trend.

AMD and Qualcomm, which focus on PC semiconductors, will report earnings consecutively on the 1st and 2nd. Following Intel’s after-market earnings announcement, AMD and Qualcomm shares rose nearly 2-3% on the 28th amid earnings expectations. Nvidia, the biggest beneficiary of the artificial intelligence (AI) boom, will release its quarterly earnings on the 23rd. Nvidia’s strong earnings streak, driven by dominating corporate AI investments, is expected to continue in Q2. Nvidia’s estimated Q2 revenue and net profit are $11.079 billion and $5.092 billion, respectively, representing increases of 65.3% and 294.2% year-over-year.

The energy sector is not doing well. The two major oil giants, which earned huge profits from soaring oil prices after the Ukraine crisis, saw their Q2 net profits sharply decline. U.S. oil majors ExxonMobil and Chevron reported Q2 EPS of $1.94 and $3.20, respectively, falling short of market expectations. Foreign media reported, "International oil prices, which surged above $120 per barrel (West Texas Intermediate, WTI) in June last year, fell to around $60 in May due to recession fears and other factors, leading to a halt in the oil giants’ profit bonanza," adding, "The focus on the energy industry is shifting from imposing windfall taxes to pressure for achieving carbon neutrality." Roger Read, Wells Fargo’s chief energy analyst, interpreted, "Energy companies are operating in a much more constrained environment," and said, "The profit decline of ExxonMobil and Chevron signals stabilization in the global energy market."

Strong Earnings Boost Indexes... Will the Rally Continue?

The New York stock market cheered strong earnings. On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,559.53, up 0.28% from the previous session. The S&P 500 rose 0.15% to 4,588.96, and the Nasdaq Composite gained 0.21% to close at 14,346.02. The Dow rose about 3.4% this month, while the S&P 500 and Nasdaq increased approximately 3.1% and 4.1%, respectively. The S&P 500 and Nasdaq have risen for five consecutive months and two consecutive months, respectively. The S&P 500’s five-month streak is the first since August 2021, and the Nasdaq’s five-month streak is the first since April 2021. The market expects the summer rally to continue in August. Citigroup raised its year-end target for the S&P 500 from 4,000 to 4,600, citing corporate earnings improvements supporting the stock price rebound. It also raised its mid-next-year target from 4,400 to 5,000.

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