Amazon and Apple beat estimates. Will it lift Wall Street higher?

Apple and Amazon released their quarterly reports after the U.S. market close today, and both companies appear to be on track to reach new all-time highs. For several quarters, Amazon had been seen by the market as a laggard, due in part to the narrative of slower revenue growth in Amazon Web Services compared to competitors Google Cloud and Microsoft Azure, as well as sensitivity to a more cautious U.S. consumer. However, the company now expects cloud sales growth to accelerate to 22% year over year and reported seeing positive effects from its artificial intelligence investments.

Amazon’s market capitalization jumped by nearly $240 billion following its Q3 report, driven by a 36% y/y increase in earnings per share (EPS) and a 13% y/y rise in revenue. Quarter over quarter, EPS climbed 16% and revenue 7%. EPS came in at $1.95, exceeding Wall Street estimates of $1.58 by over 25%. Revenue reached $180.17 billion versus the expected $177.82 billion. AWS sales totaled $33 billion, topping analysts’ expectations of $32.39 billion, while the company guided for $213 billion in revenue for the next quarter compared to the expected $208 billion. All this was enough to send the stock up nearly 10% in after-hours trading, as investors positioned for a strong holiday quarter.

Apple: A Mixed Picture Behind the Headline Beat

Apple’s stock initially dropped by almost 5% but quickly recovered, closing about 3% higher in after-market trading. Positive signals were balanced by a few disappointments — sales in the Americas fell short of expectations. Year over year, Apple’s EPS rose 13%, and revenue 8%; quarter over quarter, EPS jumped 18%, and revenue 9%.

The Cupertino giant reported EPS of $1.85, slightly above expectations of $1.77, and revenue of $102.47 billion compared to the expected $102.19 billion — essentially a narrow beat. iPhone revenue rose 6.1% y/y to $49 billion. Product sales totaled $73.72 billion, topping estimates of $73.49 billion, while the company’s high-margin services segment — an increasingly important part of Apple’s business — grew to $28.75 billion, beating projections of $28.18 billion.

iPad revenue slightly missed expectations, but Mac sales outperformed forecasts. However, Apple reported a 4% y/y decline in revenue from China, likely losing market share to domestic competitors. It’s possible that the trade war has influenced Chinese consumers’ sentiment, leading them to consciously choose local brands. This, however, could be a double-edged sword, as Western consumers in Europe and the Americas may in turn prefer Apple’s products — at least offsetting the China effect.

Sales in China came in at $14.49 billion versus expectations of $16.43 billion, while sales in the Americas fell to $44.19 billion compared to the projected $44.45 billion. Operating expenses slightly exceeded forecasts.

CEO Tim Cook stated that the decline in China revenue was due to supply constraints, adding that he could not predict when they would ease. The company expects a return to growth in Q1 2026 in China, driven by iPhone sales. Several iPhone 17 models are reportedly still supply-constrained in that market. Notably, Apple saw a 15% y/y increase in European sales, 12% y/y growth in Japan, and solid overall growth in Asia excluding China.

Valuation Concerns: A Strong Report at a Lofty Price

Despite the strong report, Apple’s valuation appears increasingly stretched. Wall Street now pays nearly 40 times annual earnings for a company whose cumulative TTM Net EPS over the past four quarters has barely changed since 2021 — suggesting some stagnation in profitability. It seems investors are simply willing to overpay for Apple shares, much like consumers’ enduring love for new, expensive iPhones.

In the current market environment, such a premium may still be justified by Apple’s exceptional products, which the world continues to use and eagerly anticipate. Yet to reclaim its place at the very top of Wall Street, Apple may need more than just “solid results.” It could require an entirely new product category — or the integration of refined, user-centric AI systems into its existing lineup. For now, Wall Street has chosen not to wait, pricing in this optimistic scenario ahead of time. The question is — perhaps prematurely?

Eryk Szmyd, Financial Markets Analyst, XTB