Economic Insights Newsletter

Update on FAAMG stocks’ recent financial results

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It is expected that AMZN will continue to accelerate revenue growth in the back half on more favorable comps and focused execution in both Retail and Amazon Web Services (AWS).

Amazon (AMZN) -- posted revenues for 3Q22 of $127.10 Bn +14.7%. During the 2Q22 results, AMZN’s 3Q Revenue guidance was better than expected, with a forecast of $125 Bn - $130 Bn, suggesting nearly 17% - 21% FXN growth. During the 2Q22 results, AMZN’s 3Q Revenue guidance was better than expected, with a forecast of $125 Bn - $130 Bn, suggesting nearly 17% - 21% FXN growth. Despite potential macro pressures, it is expected that AMZN will continue to accelerate revenue growth in the back half on more favorable comps and focused execution in both Retail and Amazon Web Services (AWS). AMZN has come through the challenging operational period during the pandemic with the subsequent overbuild/overstaffing issues to right-sizing the model to current demand. During 2Q22, AMZN’s power growth driver AWS reported strong revenue growth of $19.7 Bn vs. an estimate of $19.56 Bn + 33% YoY. AWS posted revenues of $20.53 Bn, + 27.5% for 3Q22 and is now on an annualized run rate of nearly $79 Bn. Data Center in the enterprise and public sector areas, is in the early adoption phase as the cloud remains in the early stage of investment and innovation. AWS backlog of $100 Bn grew 65% YoY—faster than Google Cloud's 45% growth on a much smaller base.

Apple (AAPL) -- posted revenues for 4Q22 of as $90.146 Bn +8.1%. Concerns are high from investors, as Apple’s share price has managed to outperform both the broader technology stocks, as well as the S&P 500 index year to date, despite a consumer spending pullback across various product segments, including smartphones, which has been expected since the start of the year. Apple is reported to be telling assemblers to make 90 Mn of its newest iPhones on par with last year. While Apple’s soft 3Q growth in unit volumes for iPhone (+3%), iPads (-2%), Macs (-10%) and wearables (-8%) suggest that the consumer electronics industry is headed for a period of slow growth. Inventory trackers are now targeting 48-51 Mn iPhone units for the upcoming September quarter. For the 4Q22, iPhone revenues increased to $42.26 Bn +9.67% and Service revenues to $19.188 Bn +4.98%. These metrics were outshined by solid beats in both Wearables and Mac’s, that posted revenue increases of 9.85% and 25.4%, respectively. As we look closer at the impact of the iPhone 14 product cycle, which has reflected lackluster demand in base models, but strong demand in high-end and legacy models. We are still in the early days in the iPhone 14 product cycle, expect the weaker consumer spending environment to impact the earnings trajectory, and it could drive softer than consensus earnings in some of the later quarters in FY23.

Daniel Morgan, Senior Portfolio Manager, Synovus Trust Company

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