Reviewing The Biggest Earnings This Week

Well, we finally did it. We made it through the most important earnings week of the season. The biggest companies in the market reported earnings over the past five days and overall it was OK, but there was definitely some winners and some, well, companies that didn't do quite as well. In this episode, we'll be going over the biggest earnings of the week and giving an earnings week recap. We're going to be taking a look at Amazon. Amazon is up around 7% today.

It's been touching $200 per share. Investors really liked this earnings. We're going to be diving into it. I'm going to be spending some time going over the fundamentals of Amazon, what's changing in the business, Some things that they're doing that I expected them to do, and then some things that they're doing that I did not, I did not expect them to do. So I'll be reviewing Amazon. We also have Meta. Meta's actually trading a little

bit lower following earnings. It's up a little bit today, but it's down from 590 before its earnings report. What did investors see in Meta's report that's causing them to take a bit of a breath? We're going to be looking at it. Booking Holdings is a very large position in my main portfolio. They reported earnings this week and the company's just a rocket ship. This one is out of control. It has gone up so much. It went up 6% the day after earnings, and then it's up another 1% today.

It's up to $4700 per share. It's moving up to $5000 per share. We'll be looking at the simple reality of why Booking Holdings continues to surge. Apple also reported earnings, and despite a revenue and earnings per share beat, the stock is trading slightly lower. Following earnings. We'll be looking at the story of Apple and why I'm not quite as bullish on this company as I

once was. And then finally, we get to Microsoft. They reported earnings and the stock is likewise down a little bit since their earnings report. We're seeing a slight recovery today, but overall investors again are taking a bit of a breather in Microsoft and we'll be looking at why. So we have a number of companies to look at, a lot to get to in this episode. Let's go ahead and start off now. Before we jump into the companies, I first want to just

do a quick mention. We've had a lot of people try out the earnings calendar on qualtrim.com. This is the website that I completely own and that I develop. And this is a new feature that lays out the entire week before you, both the companies reporting earnings before market open and after market close. You can simply look week by week. It loads in all the icons and it just looks really good, really simple. There's also a dark mode, which

again, looks really good. And then you can click on any company. You can see the earnings projections, you can see the revenue estimates. You can see all of this data historically and a nice little calendar. I rolled out that feature on Monday and the response has just been incredible. Hundreds of new people have tried out the feature. They've joined the Patreon, they've been using Qualtrim. The feedback overwhelmingly has been super positive.

The reason I bring it up is, first of all, I appreciate all of you trying it out. I think you're going to love it. But for those of you that are still not convinced, you're on the fence about it, if you join today, you get the entire month of November as a free trial. So now is the time to try it. If you're just interested, want to try it out, you have nothing to lose. Now, let's go ahead and jump in.

The first thing I want to do is I have not done a portfolio update for a while. And this is important because a lot of the companies that I talk about, a lot of the companies that I'm doing coverage of and giving my analysis on are ones that I'm heavily invested in. I'm not someone that's just a commentator of stocks. I don't just give opinions on them. I am an investor and I have nearly all of my money invested in these companies that I talk

about. For example, one of my portfolios is called the Story Fund. This is my secondary portfolio. It's not quite as big as the passive income portfolio, but this one's focused more on explosive growth potential, a little bit more upside focused and less defensive, but it shares a lot of similarities to the passive income portfolio. I invest in highly concentrated positions on world class companies.

Now just to give a performance update on this portfolio, it's done really well and the main driving forces behind it doing so well is the concentration between two companies. Now, at first glance, you might look at this portfolio and you see some big tech names and you think that Joseph is just buying the S&P 500 names. He's just basically investing in the S&P 500 and naming it the Story Fund. And a lot of hedge funds do just that.

They're closet index investing, meaning that they take investors money, they manage their portfolio, they charge a fee, and they basically recreate the S&P 500 so that their performance never looks all that bad. Now that's a thing that exists and a lot of people do that, but this is not the case with My Portfolio. This is not a closet index or anything close to a closet index. First of all, the S&P 500 has 500 companies. This has five companies.

So we're down to one 100th of the amount of companies in the S&P 500. The level of concentration is nowhere close to the S&P 500. The next thing that I'd point out is not only is a concentration level completely different, but also the top two holdings, just Amazon and Netflix make up for a combined 60% of this portfolio. So if we look at the pie here of my total portfolio, this is all of it. This is 100%.

Just this portion right here, right here all the way to right here is Amazon and Netflix. You see that it makes up over 50% of the portfolio. Just these two companies have a massive waiting. Netflix is not 32% of the S&P 500 or the QQQ. Amazon is not 33% of the S&P 500 or the QQQ. So even though I think the S&P 500 is great and the NASDAQ is great, don't be mistaken, this portfolio does not resemble them.

It's nothing like them. The limited amount of holdings and the extreme concentration make for a very differentiated portfolio. And also when we look at the results, the results are very different. For example, Netflix this year is currently outperforming both the S&P 500 and the QQQ by a very large extent. It's up currently 62% year to date. That's around double the S&P 500 and QQQ.

Amazon likewise is outperforming both the S&P 500 and the QQQ by a wide extent this year, currently up 33% year to date. When we compare that with the S&P 500, the S&P 500 is up 21%, the QQQ is up 21%. So both of these are having around 21% returns. Both of my main holdings are outperforming that which overall leads to a wide range of outperformance this year. When I look year to date on a money weighted return, this portfolio is up 32%.

Since I haven't made any significant contributions to the portfolio this year, the money weighted return is the same as time weighted return. So I have 32% returns this year, while both the S&P 500 and QQQ are at 21%. Even when we zoom out a little bit further, we can zoom out to the one year period. This portfolio is up 50% over the trailing year. If we compare that again to the S&P 500, that is 35% to the QQQ that is 36%.

So this portfolio is outperforming both of them by a decent margin over the past year and over the year to date since inception. We're also doing really well beating out both the S&P 500 and the QQQ. When I chart this out against the S&P 500, this is what it looks like. The ticker symbol SPY, which is the S&P 500 is in red and the story fund is in blue. Now there's a big long story behind this. During this time period in 2022 and 2023, it was a mess.

I I made a couple mistakes as well as a lot of my core holdings like Netflix and Amazon sold off dramatically. So I was underperforming during those time periods. But with some good investments, especially buying more Netflix, this portfolio has been roaring back with a vengeance. And now we have a firm lead by a decent margin. The story funds total returns is 59.34%. If we benchmark that against the S&P 500, it's at 45 point 2%. So we're now above the index by around 14%.

Now again, I've said many times in this portfolio that the returns and the outperformance are linked to Netflix and Amazon. The waiting in those two companies are determining the outcome of this portfolio and whether I meet my goal of outperforming the S&P 500 by the end of 2025. The goal since the very beginning, when I started this a couple years ago, was to outperform the benchmark index, the S&P 500, from from the start point to the end of 2025. Since then, so far, it's above

the S&P 500 and the QQQ when I calculate the returns overall. It hasn't been the case the entire time. In 2022, we were behind by a huge degree, but with Netflix and Amazon both having the epic recovery that they've had, the returns have soared since 2022. I've said for a while that I'm willing to hitch my performance on these two companies because I think they offer a great deal of asymmetric risk.

They had ample upside, limited downside, and I believe they're highly predictable companies that aren't getting the credit they deserve. By Wall Street, by analyst. Netflix was basically left for dead. It was a company that nobody wanted anything to do with a couple years ago, and if you bought that company at the Lowe's, the returns have been astronomical since those lows. I wish I bought more of it, but I bought enough to make a big difference. With Amazon, we saw the same

thing. It wasn't long ago that Amazon was trading below $100 per share. We look at the chart here, just over the past five years, it was down to $93.00. In 2023. Not even two years ago, this company was worth less than half it is today. And investors that bought it during this time created a lot of alpha for their portfolios.

So as we look at these companies reporting earnings, many of them I've already built large positions in, I'm benefiting from the rise in the stock price, but I still have the question of whether or not there's more to go or whether or not these reports were good, whether it's time to sell or to buy more. When I look at Amazon, we can

take a look at what happened over the past. First of all, Wall Street likes to report stock is up around 6 to 7%. It's bouncing around just below $200 per share. It's seen a lot of resistance there, but I think eventually it's going to surpass $200. There's a couple driving factors with Amazon that will continue to lift the stock higher and higher. Let's go ahead and just take a look at the report and see those driving factors. First of all, the total revenue

growth of the company. Looking at this over a long term basis, you can see that it's really consistent. It's had times where it's gone up a little bit more than usual, but the revenue growth was 11% overall. We see it right there. That green 11 percent is the compounded annual growth rate over the past year. They simply grew 11%. Now, that doesn't really share what's actually going on with Amazon because Amazon is a vast, complex company. It's it's just a behemoth.

There's so many different parts to it that you want to dig down a little bit more to see what this 11% growth actually entails. When we do that, we have the Amazon revenue by segment, which is a KPI where I look at the earnings report and then I break out all the segments of Amazon and chart it on a stacked bar chart. This just gives it a better visualization than the actual earnings report. If we go to the earnings report, we can look at the same data right at the end.

It's right around. Let's take a look right here. So these are the exact same numbers. This is where I get it from. But we have them charted out right here in visual format. And again, when we look at this, we have the 11% combined growth with all of the bars, every

segment of the company. But if we start crossing out the low margin parts of the business, if I was just to say I want to cross out all the low margin parts and only focus on the high margin parts, we cross out first party online sales. That is the products that Amazon list. It's like toilet paper, toothpaste and batteries. These are very low margin items. There's fierce competition. They're not making a lot of money and profits from their

first party sales. They're not making I think any money from physical stores, at least not enough to to really pay attention to physical stores like Whole Foods have profit margins of around 2%, maybe 4% of its Whole Foods and a bit more expensive, but overall very, very slim razor slim profit margins. So we cross that out. Then we look at the other segment which is experimental and actually loses money in most cases. And that leaves us with the high profit margin portions of the

business. Third party seller services. This is where you can store stuff in Amazon's warehouses and they charge you by the amount of items you're storing. This is where they pick items for you. They do. They deal with customer service for you. They fulfill by Amazon Prime, meaning they're running the entire logistics for you, selling your product. That's high margin. They get to charge the sellers for all these services. They don't make money just by the the price of the sale.

We have advertising super high margins. I estimate it's above 50% margins. We don't know for sure because they're not disclosing it, but come on, advertising is high margin across the board. If you look at YouTube, you look at Google, you look at Meta, and we have reason to believe that Amazon actually has higher margins than all those other companies because Amazon's are direct listing items in a sales website. There's nothing that could get higher margin than that.

You're paying for direct sales conversions there, extremely trackable. We have reason to believe that Amazon has very, very high margins with their advertising. Now, this also includes other things like Amazon Prime Video. They simply threw ads on everyone and everyone just accepted it. That was amazing. Netflix can't do that. Netflix can't say all of our subscribers are going to have ads or they'd all throw a fit. Amazon Prime Video is just included as part of your overall

membership. We have subscription services, stuff like Audible and Twitch subscriptions, all the different subscriptions they sell. And then we have Amazon Web Services, which they do disclose the margins of. We'll get to that, but they're also very high. Now the moral of the story here is when we just filter by the higher margin portions of the business, the growth rate of Amazon increases. It goes from 11% overall to 14%.

The importance of this is that it means that the high margin portions of the business are taking total market share over the business's revenue. Amazon is becoming a higher margin business over and over and over again. Every quarter margins are stepping up. When I'm investing in a company, I'm looking for three different things. I'm looking for long term stable revenue growth. I'm looking for long term stable margin expansion and I'm looking for an entry point that I can

get in at a good price. Amazon has presented all three of those. They have a long term stable revenue growth. They have long term stable margin expansion. And of course, if you bought the company over the past two years, you had a decent price to get in. So this company has a great story going forward and with this most recent quarter, that story continues to play out. But then we get into advertising, which is arguably much higher margin than even the

third party seller services. So the 3P seller services is a great business. Advertising is a way Better Business, and this is growing at 18%. Huge growth from advertising. The run rate for this is going to be above $60 billion soon. And then we get to the crown jewel of Amazon, the biggest, most important part of this company by far, which is Amazon's web services. When we look at this, it grew 19%.

Now some people will point out that Amazon Web Services is growing a little bit slower than Google Cloud and Azure. In fact, Google Cloud is growing really fast at 35%. AWS is only growing at 19%. Isn't that concerning? Isn't Amazon's web services losing market share to Google Cloud and Azure? While it's true they are losing market share, we need to look at the total size of these businesses. Google Cloud is nowhere close to Amazon's web service in size or scale.

We're measuring like two different things. They're not even in the same vicinity at this point. Let's go ahead and just take a look here. If we look at AWS, again, we look at the total revenue of this business. We can look at it over the past quarter, it was $27.4 billion. That is a run rate of $110 billion per year. We type in Google, we go to Google Cloud and we look at the scale of the Google Cloud

business. Google Cloud did $11 billion in revenue, the total run rate of which is $44 billion. So it is true that Google Cloud is chipping away. They're building a good business. They're gaining market share technically, but we also need to keep in mind that Google Cloud is around 1/3 the size of AWS. So it has a long ways to go before it becomes anywhere

comparable to AWS. Now I want to go to a couple parts of the report that I thought were very strong and some parts of the report that I thought were a little bit weaker. Just looking at the numbers here, The strong part of the report is the earnings growth over 100% per year. So explosive upside earnings per share growth, and they beat on their earnings per share and their revenue estimate. They also gave very good

guidance for next quarter. But where we get into the story where it looks a little bit weaker is the free cash flow. I've been predicting this year that Amazon will have explosive free cash flow growth. But when we look at it, it did explode from 2022, going down all the way to $30 billion in the negative on a trailing basis all the way up until last quarter. It was $48.34 billion over the trailing 12 months. But now we see the free cash flow taking a break. The free cash flow number was

not great this quarter. In fact, when we just look at this quarter in and of itself, they only posted $3.35 billion in free cash flow. This was below where it was one year ago. So we had a natural decline in free cash flow this quarter year over year. What gives? What's going on with Amazon? This is the year of explosive growth with margin expansion, with free cash flow is hitting numbers of $75 billion. So what's going on? What's going on is AIAI this

year is out of control. It's very real. It's changing companies inside and out in very meaningful ways. Over 25% of the code written at Google is written by AI. That's meaningful. That's not fake. That's not buzz. That is a meaningful change to a company. And I have to believe that Amazon's finding a lot of ways to integrate AI as well as serve it to other customers because of AI and how important this is. They've identified it as a key area of investment to grow.

And of course, they need the server capacity and GPU capacity to serve themselves and all their various customers. And as we look at the CapEx, the CapEx from Amazon, there was once a time where I thought the CapEx of Amazon would go down a bit. I thought that it would actually cool down and and flatten out a little bit. And that's just not the case. It's just not the case anymore.

When we look at the CapEx over time, they hit their highs in 2021 as they're expanding their huge fulfillment network, building out all these buildings and buying more trucks and everything that they have to buy for employees. Those are CapEx investments. And then it started to go down as they were unwinding that investment cycle, but then AI came along. Jassy believes that this is a core area of investment for the future of Amazon. I agree with him and they're aggressively investing.

Look at this step up in CapEx every single quarter. Last quarter it was 22.62 billion dollars, 22 billion in a single quarter. That number's astronomical. What company spending $22 billion in CAPAX in 1/4 except for Amazon? I had to double check this number. I went into the earnings report, we get to the statement of cash flows, hair.

We look at the most recent quarter, the past three months in 2024 and there it is. It's the correct number, $22.62 billion in CapEx. So even though Amazon is having a huge step up in their operating income, operating income year over year went from 21 billion to 26 billion, their CapEx went up even more causing their free cash flow to go down.

So while we look at these numbers and provide some context here underneath this rather disappointing free cash flow number and the free cash flow seem like they're taking a break. We have better context here knowing that there is a very healthy business underneath this. Their income from operations continues to rise dramatically year over year, lockstep. They're generating more cash from their current operations

running their business. So the only reason that Amazon's free cash flow has taken a breather this quarter and is down a little bit year over year is because of a deliberate decision to invest directly in AI. This is a choice. This is something that they're choosing to do. Amazon management could easily generate $10 billion of free cash flow this quarter and deliver that to investors via dividend and buybacks. They could do it every single quarter of their choosing, but

they're not doing that. They believe the key areas of investment in artificial intelligence back into CapEx. Buying GPU's from from Jensen Wong, buying it from NVIDIA is a better route to go. Amazon has a great track record of investing in the future and getting a high return on their CapEx investment. And I have no reason to believe that artificial intelligence will give them a low return.

So I had a thought going into this year that Amazon's free cash flows would explode, and they have exploded. They've caught up a lot. I mean, look at the difference between this year and last year. But my expectations were a little bit higher than what they're probably going to do. I thought on a trailing basis, for the full year of 2024, they would deliver around $75 billion of free cash flow. And it looks like they're not really on track to do that.

If I was to give an estimate, I think it's probably going to be a little bit lower. Fifty, $60 billion, not quite up to that $75 billion mark. So on a free cash flow yield basis, Amazon may look more expensive when you factor in what they're doing, the investments they're making, their operating income and the health of the business. This doesn't make me feel any worse about the company.

I think this one is on track to take a breather with their free cash flow, make these big investments in AI before the next leg up. And I believe strongly, once we see the returns of the investments they're making this quarter, over the next year or two, we're going to have another seismic step up in free cash flow like we've had this year. At this point, I think it's eventually inevitable for Amazon

to surge above $200 per share. The company has strong earnings growth, a consistent track record of earnings. The free cash flow is growing year over year and they're doing key investments for the future. They're well positioned with many service portions of the business and they trade again at a decent valuation. Today. Most people believe that they're undervalued, and I'm one of those. I still think that Amazon has

ample upside. I believe the company is going to be like Google, worth 220 or above. When we look at what the banks did, what the analysts did after this report, basically all of them upped their price targets. We have JP Morgan moving their price target from Amazon from 2:30 up to 250. Goldman Sachs moved it from 2:30 up to 240. Bank of America raised it from 2:10 up to 230. Telsey raised it from 2:15 to 2:35, and same with Jeffries and Baird and TD Cohen, all of them

raising it up 10 or $15. They already had a price target around 220. Now every analyst is raising it to around 2:40. And this is what analysts do after the price already moves, after Amazon already jumped 7%, after the company will report great earnings, they're going to move their price targets up more and more. But I think we're going to see more continuation of this

overtime. Now moving on, we get to Meta. They reported earnings this week as well, one of the key companies too, and they actually fell a little bit after earnings around 3 or 4% in the red. The stock went from around 590 to around 57. And if you're a Meta investor and you're looking at this report, I would not be upset. If I had held Meta for the past couple of years and I was way in the green and I saw this report, I would think it's no biggie.

After all, Meta is one of the better performing companies. This year it's up 64%, so if it goes down a few percentage points, come on, you're not going to be upset about that. When I look at the earnings report from Meta, it was also strong across the board. I thought it was a great report. The only weakness and the reason that Meta traded down was for two reasons. First of all, the family daily

active people. This is the KPI that we track in Qualtrum because it's really an important metric for Meta. It's basically just how many people use their apps, one of their family apps everyday. So daily active users. If you log on to Facebook, if you log on to Instagram, if you log on to Reels at least once a day, then you're going to end up

in this number. On a year over year basis, they had an increase of 4.78%, which is impressive to me because I look at these numbers and the most recent quarter they had 3.29 billion people use their apps every day. That's insane. That's just insane. There's no other way to say it. That's like half the world using their apps and they're still growing. How do they do it? I don't know.

They're just there's more people spawning everyday that use their apps like it's like a video game or it's like Orcs and Lord of the Rings just spawning out of the ground that sign up for Meta apps. I don't know any other way to say it there. There is 3 billion people plus using their apps and they're still growing the daily users. Now, the most recent quarter, it only grew by a couple 100 million. That's what investors are a little bit disappointed on. To me, that's ridiculous.

Meta has half the world using their apps. To expect it to grow much from here I think is unreasonable. But either way, they continue to grow it, which is incredible. The other part of this report where investors were a little bit concerned just slightly, was that Meta hired more employees. They recently just did a big year of efficiency. They really cut down on their employee count. Mark Zuckerberg laid off a bunch of people. He did it in a nice way. He found them new jobs.

He paid a huge severance for them, so they're taken care of. But he really got rid of a lot of employees. And after it went down, they hired like 9000 new employees this most recent quarter. So that's a little bit of an interesting decision. They basically fired a ton of people and now they're starting to hire them back. I think investors are a bit confused about that.

And then the other thing they mentioned on the call that was a bit concerning to Meta investors is that they mentioned CapEx is going up a lot, but they're not going to disclose specifically how much. So they kind of gave us a big question mark saying we're going to be spending a lot of money on CapEx. We're not going to tell you

exactly what it was. The combination of hiring more employees, increasing the amount of CapEx to an unknown number, and a little bit of a slowdown in the daily active people caused Meta investors to take a little bit of a breather. But again, these are like these aren't a big deal to me. Meta overall is super strong. The free cash flows are incredible. They continue to grow year over year. The company is getting the stock based comp under control as well.

I looked at this report and I didn't see much wrong about it trading down a couple percentage. When they're up this much, it's not a big deal and the company remains at a decent valuation now.

Next up, we have Booking Holdings, which also reported their earnings this week and they were great. The stock was up 7% after hours on the day and then another 1% today so booking has just been a rocket This company has really taken off it's exceeded my highest expectations. This is a company that I bought this year I just bought it a couple months ago right here around 34135 hundred.

I believe my average price cost is around there and now the stock trades at 4700. So it's gone up $1000 just over the past few months. And I believe that's a combination of a couple different things. First of all, I believe it was just undervalued here. So starting off with a great company that's undervalued is a good starting point. But they've also posted great earnings. The company continues to execute and even deliver. When people think that things

are going to slow down. People are concerned about vacationing, they're concerned about restaurants, they're concerned that the consumer is going to slow down. But when I look at things, I don't see that at all. I don't see the consumer slowing down. I see them going on vacation, booking out trips to Europe over and over again. People want to have experiences. People are inheriting a lot of wealth. They want to spend that money on experiences.

They're sick of COVID, they're sick of staying inside, they're sick of doing the same thing. People want to see things. This company makes money as the largest online travel agency. They have a basic monopoly in Europe. So there is somewhat of a tollbooth gateway from US to

Europe and vacations. And that's a very profitable situation to be in. In fact, the European Union has defined them as one of the only monopolistic companies in all of Europe. Now there's a lot of metrics we can look at with booking holdings. For example, if we look at the 12 months, we can look at the gross bookings, it looks strong. Nice growth path overall. We look at the room nights sold. This is the amount of bookings that they get, and you can see the trends here.

We had the COVID dip. A lot of people stopped going on vacation. Ever since then, it's steadily reclaimed where it was headed before. So overall, the business is healthy. People are booking rooms now literally more than ever. This is an efficient business that's highly profitable. It's cheap to run and makes a ton of money. For example, when we compare the free cash flow against the stock based comp, the stock based comp is a fraction of the free cash

flow. That's a wonderful thing to have a company that generates this much profit and it doesn't get diluted away. That amount of free cash flow generation means that they can deliver that money to the investors in a very efficient manner. They can deliver it through buybacks and dividends. This shows you the capital that they're returning to the investor every quarter. In the most recent quarter, they returned a total of $2 billion back to the investor, 1.7 by

buyback, .3 by dividend. And this wasn't a unique quarter. Almost every quarter they're returning around 2 plus billion dollars back to the shareholder and they're using most of that to buy back shares. The share count declined by 6% year over year. That's a massive decline. Most companies that try to do buybacks can only decline the share count by 1 to 2%, lucky if they get up to 3% because most of them dilute a lot with stock based comps. So they're buying back that

dilution. In the case of Booking Holdings, they don't do a lot of dilution, they're only doing buybacks. So when we look at the total share count, the numbers here are wild. We look at this overall and you see the constant decline in share count.

They're buying back stock hand over fist and that's all this story is. A company that's highly efficient, generates a lot of free cash flow, uses that free cash flow to buy back their shares, and I think they're going to continue doing it. The valuation is not nearly as attractive now is when I first bought in because of the stock price rise over the past few months, the yield has gone down from an 8% yield to around a 5% yield now.

I still think it's attractive. I still don't think this company's overvalued, but it's no longer a still. Now moving on, we get to Apple. They also reported their

earnings this week and they did beat on the top and bottom line, but the stock still fell a couple percentage points. This is one that I was a little bit on the fence of as well.

Apple has some challenges. Again, the biggest thing I look for when buying new positions in new companies, when I'm trying to make extra returns, alpha returns, I'm looking for companies that can grow revenue steadily above inflation, above the market for a long period of time, as well as ones that can expand margins predictably for a long period of time. Then I'm looking for good entry points on those companies. With Apple, we have a company, the revenue growth is looking a

little sluggish. I'll be honest here, it looks a little slow when we look at it on a trailing basis, this is what it looks like. 2% growth is not really growth given the inflation we've had. So the revenue's flat, but it's starting to pick back up a little bit. The revenue by segment looks like this getting very flattish. For the past number of quarters, 7 to 10 quarters, it's been mostly flattish. When we break this down, there's different segments of the company that's growing.

The most important part is the services. This is the Apple insurance, the App Store, their tollbooth. They have the 30% tax that they take and this is growing, but it's only growing by around 12 to 13%. So even the most important service part of the company's not posting the strongest growth anymore. That's concerning for me as an investor in this company because if you have slow revenue growth, that's a concerning thing for a

stock. Stocks don't tend to move up a lot revenue and the company overall stays relatively flat. The other thing that we can look at though is maybe the margin expansion story. In the case of Apple, this is a story that's non existent. Apple has right now around 31% operating margins and they're just not growing. The operating margins are staying the same. They're not improving. And year over year we see them go a little bit up, maybe like 1/2 percentage point, but just

not enough to be meaningful. The operating margins are likely where they're going to be for a long period of time. How is Apple expecting to grow the operating margins? The services business, their highest operating margin business, is facing a lot of headwinds. There's pressure to price lower, to not charge 30%, but to

instead charge 15 or 10%. So they have pressure on their most highest margin portion of their business, as well as they have pressure from Google to stop paying Apple the $20 billion or $25 billion a year to be the default search engine. If they lose that agreement, that could be another thing that pressures the margins of Apple. So overall, I look at this company and I just see a story of flattish operating margins and flattish growth. Now, the Moat is still

resilient. Apple's still making the best products. They're buying a lot of shares back, so they increase their free cash flow by share to a small extent. But again, when you have slow revenue growth and you have no margin expansion, there's only so much you can do. Amazon's growing revenue much faster while growing their margins much faster. They're exercising far more operating leverage. They're a more immature company in their growth arc.

Apple still trades at a rather high PE ratio, a 34 PE, a 3% free cash flow yield. This is at the higher end of where this company has traded over the past decade. So it's a company that's both being priced with a lot of expectations and right now I just don't see the growth profile. This is why I've been trimming Apple over the past year, why I've been continually selling more and more of this company. I've made a lot of money with the stock. I love Apple products, I'm a fan

of the company. I've made around $35,000 in the stock so far. But paying attention to the story of a company is important, and I personally don't believe that AI advancements in the iPhone are going to be enough to drive substantial growth in this company. Now finally we get to Microsoft. They also reported earnings this

week. My thoughts going into this one were pretty simple. Fundamentally, Microsoft is an incredible company, but it's trading out of lofty valuation. So we have the combination of great fundamentals, lofty valuation that typically means that the stock can beat on their earnings and revenue, but still trade flat or down. And that's exactly what this company did. They beat it on the top and bottom line like Microsoft

almost always does. They beat by a decent margin, but the stock still traded down 20-30 bucks. Not an unexpected outcome. Overall, the report was excellent. Microsoft did everything they said they're going to do and more. There's no problems with the past three months. The reason that Microsoft traded down 4% is a combination of the price being rather high and their expectations they gave of next quarter being a little soft, being a little bit weaker

than expected. The numbers are slightly on the low end of what the analysts were expecting. Fundamentally, this doesn't change the business, doesn't change the Moat, doesn't change the qualities or the fact that this company will continue to grow lockstep year after year after year. There's just slight ebbs and flows in the growth rate, but overall we have a very healthy Microsoft trading a range that I consider to be around fair value. Now that's the recap for this

week. Once again, if you haven't tried out Qualtrim and you haven't tried out the earnings calendar, it's a brand new feature. A lot of people are trying it out. They love it. If you join today, you get the entire month for free. You've got nothing to lose with the free trial. In addition to Qualtrim in the entire suite, you also get a Discord. You get exclusive content, a lot of fun things, so try it out if you haven't. Other than that, I'll see you in the next episode.