Apple and Amazon delivered earnings after the close of regular trading. Apple shares this morning they're down one percent and Amazon Amazon shares right now six percent higher in pre market trading. Let's break it down for you now with Gene Monster, managing partner at Deepwater Asset Management. Gene, good morning, Thanks for being with us this morning. Thank you hey for Apple. What are the immediate pressure points that investors are looking at?
You nailed that.
The first is that the guidance for the December quarter was a little bit muted. They basically guide it to around five to six percent year every year growth. The street was at six percent. And I think what it speaks to is this acceleration around Apple intelligence still is not impacting the business. We're not seen it in the
December quarter. I'm a believer that these tools, adding AI to twenty percent of the world's population is going to have a meaningful impact on iPhone growth, but we're just not seeing it in the Sember guidance. And part of the reason is that, of course these features really don't have the substance that they will have fast forwarding to the March quarter. They're pretty subtle. The improvements in your
phone right now with AI, but they will improve. There's going to be another update in December, and then a couple other significant ones in the months of February and March, and so I think the big picture here, John, is that for optimistic investors in Apple, they kind of this lift off of growth isn't going to happen in the December quarter. But still the setup is positive that we're going to see that acceleration into next year. And I just want to put one final point on this. What
is acceleration and growth? Is that the streets at five percent iPhone growth for this year.
For fiscal twenty five, which just kicked off, I think it's going to be closer to ten percent.
Well, what are the what are the features? And are they to resonate with customers if I'm upgrading? Do I have to have this?
I think today the answers know.
I think that most people who have done the beta present Company included find the features nice but not like must have. But I think they will be must have within the next six months. And just to kind of frame in a couple of them. They have the built in writing tools that many of you use for with GPT, but that's within text messages and email. They have a photo editing app that uses artificial intelligence. They also have
this is available today. They have the ability to essentially read your email and notify which ones that are most important. And I've found that feature particularly helpful, especially with spam and trying to sift through all that. But as we fast forward into next year, essentially you get into what is referred to is a gentic ai, which is the ability for third party developers to build smart apps that run on your phone.
So I think one example could be an app.
That helps to figure out if you have a dispute with your cable company, for example, and would be able to reach out to the cable company actually get any work that's done on a phone or a computer can automate that. And that's when things really start getting exciting and these features become must have.
Is when a gentic ai kicks in.
It sounds like you're saying the rollout is a little too slow for your taste.
Well, it's slow. I would say that it's what they had projected. But from my perspective, I can't wait. I can't wait for these features. I mean, this is something that I think is going to have a profound impact on how we use our devices, and so it's slow, It's as expected, and I think this is going to be a case where Apple investors just need to be patient. I think this acceleration ultimately is going to be coming real quick.
Just finally on Apple, you believe in a super cycle for Apple? Is that still on track?
It is. I mentioned that kind of ten percent growth.
I think the streets at five percent of the next year, but in twenty twenty six, so investors will be quickly thinking about this. I think that they can grow at fifteen to twenty percent in the streets at seven, So I think you really get to a year and a half two years of elevated growth, which I believe is going to be positive for shares.
What is standing out for Amazon this morning? For you?
It was a there's two factors that drove they're driving the stock higher. The first is the operating income guidance for the December quarter. Typically they guide down versus the street. They did something rare here as they actually guided up slightly versus the street for December, and so the profitability
piece is getting better for Amazon. So that was kind of the first leg up the stack was up around three percent on that news, and then it kind of moved another three percent Hired following a comment on the earnings call where they said that AWS they were constrained. Essentially, they could have done had more growth if they had
better capacity. It was up nineteen percent and they basically said that the growth is going to continue to accelerate and they're going to be able to do that more profitably. And so I think those were the two factors that drove Amazon shares higher.
The cost cutting there, that's I guess, an effort to reallocate. It's not just standard cost cutting. They're reallocating resources.
Right they are.
They've been pulling away from things like Alexa more recently and some of a lot of these devices, these different hardware devices that probably many of your listeners have never even knew that Amazon was doing. But they've canceled those projects and are kind of reallocating them, of course to things related to anything AI.
AWS is a big factor.
There also more automation tools that improve a profitability, and last is better tools for consumers to understand or get better shopping tools. So this rufous feature that they rolled out a few months ago, they're continuing to invest.
In that twenty seconds impressions of Microsoft at failed six percent.
Surprised at that. I think bottom line is that Microsoft, I think needs to inspire investors that they can have some measurable acceleration and revenue growth, not just keeping it flat at fourteen percent. They failed to do that, and I think that that's what's up for them for the next three months is to convince investors.
Gene always a pleasure. Thanks very much for doing this this morning. Gene Monster, managing partner at Deepwater Asset Management,