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Let's get more now on the big tech story. We could say it's two very different stories when it comes to the earnings overnight from Amazon and Apple. Joining us now, someone who follows these companies very closely, Gene Munster, the managing partner at Deepwater Asset Management. Gene, great to speak with you. As always, Let's start with what we can say is the good news based on the reaction to
the results from Apple. The shares are up nearly two percent pre market, the fastest quarterly revenue growth for this company in more than three years. In your note, you're saying that this reaction should be a little bit better.
Why yeah, Nathan, I guess if you'd put me in some sort of a stock lab, I would say the stock should be of five percent or seven percent today. This is the best quarter they've had and the best guide in the last three and a half years, and so revenue grew at nine percent and excluding that impact of terrorists, the street was looking for four percent, I mean, just at the most basic level. They guided revenue in the September quarter to be up about eight percent. Street
was looking for up three percent. They guided margins up and the stock's up two percent. I think it really underscores this gap that we've seen really over the past six months with Apple, and that gap is that regardless of what's happening with the fundamentals, there's this concern that tariffs, that changes in regulatory environments and how it impacts their services growth and just a slowest start to AI is somehow going to cause this company to hit the wall.
And I've been following Apple for a long time and I've never seen I think the reaction tonight to the stock and this morning relative to the guidance and the results, I think is as big of a gap as that I've seen, and so it is noteworthy, and I think it just begs the questions a very simple question, what's
Apple going to grow at next year? In fiscal twenty six, the streets at five and a half percent growth, and my sense is it's probably going to be well above seven percent just based on what they have coming down on the pipeline, and so I'm in the camp that they are going to continue to grow well. But that is this really surprising gap that we have picked up on Apple.
Just to play devil's advocate, is that gap warranted given the big strides that we've seen from a lot of Apple's competitors when it comes to the AI race In this sense that you mentioned from a lot of analysts watching this company, that Apple has more to do when it comes to showing that they're keeping up in the AI race.
Well, at the service level, it would, but the substances is that there is no feature in consumer tech consumer tech hardware it's powered by AI that has changed people's behavior. And so Apple basically, even though the headlines are that they have been losing ground, they're not in the business of making a chatbot. And so I think that the results of the iPhone iPhone up thirteen percent that had a benefit from pull forward. You back that out, it
would have been up eleven percent. You know, you don't. The reason why you have that kind of growth is because consumers are seeing that there's no other alternative out there, and so the narrative is warranted. They have to do more. They need to infuse AI into their products, There's no doubt about that. But I think that this concept that the fact that they're slow out of the gate is going to cause some sort of irreparable damage to the growth rate I think is misplaced.
Well, they might not be in the business of making chatbots, but of course they are in the business of making products. And it has been quite a while since we've seen not only a really significant update to the iPhone line, but also something besides the Vision Pro that's been slow to take off as well. Does Apple need to do more when it comes to coming out with some kind of they can get investors excited.
I mean they do. In the world of consumer tache, you always have to, and that's a fair criticism. This fall, we're likely going to see a new form factor, a new hardware on the iPhone, a much slimmer think of this as iPhone Air. It's probably going to be the biggest hardware redesign we've seen in the past four years. Now, that's that's incremental. It's something that will be good for
the iPhone growth. But to your bigger questions, they knew, they knew something like a new category and it came up in a kind of a roundup houtway on the call last night. Is this conversation related to Johnny ive
and moving to open AI. That, of course is the long time great at Apple who left a few years ago, but now with he's working on like this a screen list device that is AI powered, and Cook said they would work with the device, but I think the ringing between the lines, they probably want to compete with that device, and so that's probably a few years away, but that's something that's on the horizon.
Speaking with Gene Munster, managing partner Deep Asset Management, who covers the tech space, let's move on from Apple to Amazon getting hammered pre market right now down seven and a half percent. Is that kind of reaction warranted to the results that we saw, particularly when it comes to the miss I guess on operating income from Amazon.
That level of the reaction is not warranted. So what happened was AWS was up seventeen and a half percent. The whisper that was that it was going to be up twenty percent, and of course Azure grew at thirty nine percent. It accelerated almost six percentage points from March to from March to June, so you have a similar kind of acceleration from Google Cloud. So you have this
big accelerations. Amazon did not do that on the call. Notably, they did say that backlog accelerated to twenty five percent, up from twenty percent three months ago. That's a good lead indicator. So reading between the lines, I mean, aws US is supply constrained. They've got more demand than they have capacity, but that investors don't want to hear kind of the explanation. They just want to see the results.
And I think that if you look at what their guidance is, they got it revenue to thirteen percent growth for September the street was at nine percent. They guide it operating income up. So I think that, yeah, the stock should be down. I would have guessed that have been down a few percent, not down seven.
A lot of attention as well on the record amount of spending, not just Amazon there and you know so many other of these companies that have been reporting this season thirty one point four billion dollars in cap x man was on ninety percent more than this time last year. Is that justified? Can Apple justify that kind of spending based on the results that they've put out there on.
AI, I mean they can. And I think that you're getting to what really is the big story here over the last last two days, which is that the capex the expectations for Amazon is that it's going to grow now about forty seven percent this year. Before the call, the expectations that it was going to grow at twenty five percent. That's a similar step up that we saw at Meta for next year in terms of their CAPEX. We're seeing this across the board, and why that's so
important is the capax results. On top of we are seeing real benefits in Amazon's business related to AI and their margins. Of course, in Meta and their growth rate, Microsoft and their growth rate, Google and what's happening and Search. All of this really points back to that this massive investment that these companies have had in infrastructure is paying off. And I think that this narrative that AI doesn't have an ROI has really been proven wrong. And I think
that this was a turning moment. I feel very optimistic, more optimistic about these companies today than I did three days ago.
So we are at the near the tail end of magnet in seven earning season. We're going to hear from Nvidia, I guess in a little while from now, But based on what we've seen Gene, is it still mag seven?
Well, I think MAG seven is a good place to be. I don't think all mag seven's created equal. My bigger sense is that there's an opportunity, and with the bigger opportunities with some of these smaller cap companies. Some of the companies like Verted, for example, had a great quarter.
They do power and cool management. So my sense is that you will still see a good performance in the MAG seven, but I think the outperformance is going to come with these companies that are sub five hundred billion in market cap, and just simply because they're not not as well that the valuations are more attractive.
And in terms of which of the MAG seven have done better, which have done worse? How do you how do you see things going forward? Got about thirty seconds.
Left going forward? I think you're gonna If I was going to pick a couple of top performers, I think Apple is actually going to be a top performer. The MAG seven. I think they're going to prove people wrong over the next nine months. Very low Ai bar and I think in Video is going to just keep cranking at least in the for all this hardware spend and
benefits them. And finally, don't forget about Tesla. Yes, it's going to take them longer, but what they're doing around physical AI at scale is something that is unique amongst any company.
Really appreciate your thoughts as always, Gene, thank you for this. Gene Munster is managing partner at Deepwater Asset Management and following the latest MAGS seven earnings