Amazon and Apple: CapEx Spending and Revenue Growth

Amazon's substantial increase in CapEx spending raises questions about its long-term profitability and the potential impact on future revenue and margin expansion.

### Tech Giants' CapEx and Growth Strategies: Amazon and Apple Insights
* 💰  Amazon is significantly increasing its CapEx spend, with **30.5 billion in the first half of 2024** compared to **40.8 billion for the entire previous year**.
* 🤖  They justify this by citing **strong AI growth** and signals of **high future demand**, but it requires patience from investors as the pay off may be **long term**.
* 🏬  Amazon's AWS segment is seen as a potential margin booster, with **high operating margins** compared to their retail business.
* 🍎  Apple's recent earnings beat expectations, but faced challenges in **China** and a **muted iPhone upgrade cycle**.
* 📱  The upcoming iPhone 6th generation launch is not expected to provide a **significant boost in 2024**, with a potential impact more likely in **2025**.
* 🇨🇳  Apple's China performance was not great, with **domestic competition and the need for discounts to compete** cited as key factors.
* 💻  Apple's services and iPad segments are performing well, but the iPhone segment is expected to **remain flat or perform more poorly** in the next quarter.
* 📈  Overall, both companies are investing heavily in growth, with Amazon focusing on **infrastructure and AI**, while Apple is looking towards **future iPhone upgrades and its services business**.

There's a micro focus on us, how much
money is being put into investment, and then how much money is coming out.
In the story, what did you make of it, Helena?
Well, I think the hot topic for the last few weeks has been the huge CapEx spend,
whether it's justifiable. I mean, Amazon has guided exceptional
increase in CapEx since the last quarter in the first half of 2024.
Their cap was 30.5 billion. They're guiding even higher month for
the second half of the year. Just to put in comparison, their CapEx
for the entire year last year was only 40.8 billion.
So that is definitely a very significant increase.
So like all the other big tech companies, they're selling their story
of strong AI growth, very comforting. They will like to have more capacity
than they already have today, and they're claiming that they're seeing
strong signals of high future demand.

I guess also, if you're in the air, it's almost impossible for you to stop investing because in a short period you would be obsolete with no means to catch up. But to investors, it really requires a lot of patience. Everyone is telling the same story of your last day, so it's hard to see whether in the short term was investment would pay off in the long run. Helena just focused on WAC. We've hardly discussed the retail business or even advertising. Did you see anything in those segments of the business that interested you? For us, it has been accelerating nicely and 19% year on year. So what we especially like about IWC is there are a high operating margin compared to retailers because our operating margin is 36% compared to retailers, which is only single digit. So items right now only contribute to 18% of the total revenue. So we do believe was ADA worth skilling up.

So for us, it is going to take up a bigger portion of the entire revenue. So we think the real kicker for Amazon in the future would be the margin expansion brought by this. Let's talk about Apple. I look at the numbers. It was basically a beat across the board, apart from China. How much emphasis do you put on that China number? Well, I was the Apple is saying they still see it already as an improvement compared to the first half of the year. By the numbers, definitely not great. Usually when their particular work is not doing well, Apple specifically point out, is not really the iPhone, but actually the other product category that dragged the sales was. They have not commented in like that for this particular time, so we can take it that Apple is actually iPhone is actually part of the reason why, in fact, one major reason for the decline. So domestic competition from local brand is still playing a big part. Apple was giving out huge discount in

order to fight the competition, they
were. That will also be a factor that hurts the
revenue. Tim Cook and Luca Maestri got a lot of
questions about how Apple intelligence will impact an upgrade cycle.
In October, probably when the sixth
generation comes. Have you done the math on that?
Yes, I did. So I will still remain pretty
muted. They're down 1% year on year for this
quarter. So if we actually do the math there,
guiding for a 5% growth rate in the next quarter.
So factoring service sector, which is continually growing double digits and
iPad, which grew pretty well, also double digits in this quarter.
So we're probably not going to give so much in the next quarter in terms of
iPhone. It's probably going to remain flat or actually perform more poorly.
So we're thinking that Apple intelligence boost for the last cycle
that everyone's been waiting for is probably unlikely to be seen in 2024.
It's more of a 2025 story.

Amazon’s Shares Slide as AI Spending Spooks Investors

Welcome to the Bloomberg Technology YouTube channel. Subscribe for original series and mini-docs on game-changing technologies, profiles on innovators, live conversations with experts, and breaking technology news & analysis from Bloomberg TV.

Bloomberg Technology

Amazon's Significant Increase in CapEx Spending

Amazon has seen a substantial increase in CapEx spending, with a projected amount of 30.

5 billion for the first half of 2024, much higher than the previous year's total.

This surge is driven by the company's strong AI growth and anticipation of high future demand.

The focus on CapEx spending raises questions about its short-term payoff and the need for investor patience, while also highlighting the company's high operating margin compared to retailers.

The Impact of Housing Revenue on Amazon's Future

Amazon is expecting a significant increase in revenue from housing, which could drive margin expansion in the future.

Meanwhile, Apple's strong performance, except in China, is likely impacted by iPhone sales, with domestic competition still playing a major role.

The company's lack of comment on the performance of other product categories suggests that the iPhone is a key factor in the sales decline.

Apple's Projected Revenue and Upgrade Impact

Apple is expecting a 5% growth rate in the next quarter, with the service sector and iPad showing strong double-digit growth.

However, iPhone sales are projected to remain flat or perform poorly, with the anticipated intelligence boost unlikely to be seen until 2025.

Tim Cook and Luca Maestri faced numerous questions about how Apple's intelligence will impact the upgrade cycle, with the sixth generation expected to launch in October.