Amazon, Apple earnings to provide look at consumer habits

Consumer habits will come to the fore again in next week’s earnings deluge, when Amazon.com Inc., Shopify Inc. and PayPal Holdings Inc. are expected to talk about online spending trends and Apple Inc. may comment on the outlook for iPhone sales.

The logo of Amazon is seen at the company logistics center in Lauwin-Planque, northern France. (REUTERS)

Consumer habits will come to the fore again in next week's earnings deluge, when Amazon.com Inc., Shopify Inc. and PayPal Holdings Inc. are expected to talk about online spending trends and Apple Inc. may comment on the outlook for iPhone sales.

It follows a packed week that showed the US economy and consumer spending growing at a faster clip than expected, while corporate earnings delivered a few surprises of their own. Intel Corp. surged post-market after the chipmaker signaled its long-awaited comeback may be just around the corner; McDonald's Corp. and Mastercard Inc. also topped estimates. Thus far, US companies have registered the most earnings beats in almost two years, according to data tracked by Bloomberg Intelligence, and companies selling non-essential products and services have delivered more surprises than others.

In the semiconductor sector, Qualcomm Inc., Western Digital Corp. and Advanced Micro Devices Inc. are expected to report sales declines amid prevailing uncertainty. Results from pharmaceutical giants Pfizer Ltd. and Merck & Co. will be scrutinized for advances in oncology and human papillomavirus vaccines as the Covid-19 windfall subsides and sales of older medicines slow.

• To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS
• Click to see the highlights to watch this week from earnings reports in Europe and Asia

Monday: Western Digital (WDC US) may have approached a trough in demand for flash and hard-disk drives in the fiscal fourth quarter, paving the way toward a slow recovery, Bloomberg Intelligence said. Still, a fifth consecutive quarter of sales declines is likely, with a projected year-over-year drop of 44%. Investors will be keen for an update on the merger with Kioxia Holdings, but expect those questions to be deflected, BI said.

Tuesday: Evaporating uptake of Pfizer's (PFE US) Covid vaccine is the biggest reason for a projected 51% plunge in quarterly sales. As sales from newer therapies including the company's respiratory syncytial virus vaccine are unlikely to kick in before the second half, chances of an upgrade to full-year guidance at this point are thin, according to BI's John Murphy. Questions also remain on its proposed $43 billion acquisition of cancer-treatment company Seagen.

• Merck (MRK US) may have room to raise guidance even as sales for lead drug Keytruda slow, with HPV vaccine Gardasil gaining momentum, BI said.
• Electronic Arts (EA US) may re-appear on the M&A radar as Microsoft's bid to acquire Activision Blizzard clears regulatory hurdles, according to BI, which touted companies including Amazon, Apple and Comcast as potential suitors. Beyond the deal speculation that's likely to persist for the foreseeable future, EA could deliver a beat driven by Star Wars Jedi: Survivor and live services strength, Wedbush analysts said.
• Advanced Micro Devices' (AMD US) second-quarter sales probably fell 18.8% from a year ago, accelerating from the 9.1% decline of the prior three months, consensus shows. At the same time, the company stands to benefit from the recent surge in demand for generative artificial intelligence products, BI said.

Wednesday: Qualcomm's (QCOM US) sales are expected to fall for a third consecutive quarter as consensus calls for a decline of 22% year-over-year. Apple, Samsung and Xiaomi — Qualcomm's three largest customers, accounting for about 50% of revenue — are also seeing sales weaken. On the plus side, the automotive segment may offer some relief with projected growth of 28%. Results are due after the bell.

• Shopify (SHOP CN) may have picked up market share in the US in the second quarter after engagement with its online offerings increased, Citi said. That leaves scope for the company to upgrade its guidance of 25% revenue growth in the period, although clarity on the demand outlook for the remainder of the year is key, the broker said. Shopify reports post-market.
• PayPal's (PYPL US) post-market report may show a 25% jump in earnings after a 19% decline in the same period a year ago as e-commerce spending picked up in the quarter. Total payment volume is expected to grow by around 9% again in the quarter. Jefferies noted accelerated online spending from last year.

Thursday: Apple (AAPL US) asked its suppliers to keep iPhone shipments flat year-over-year as it contends with waning demand for electronics. That may not stop it from raising prices for its Pro models. The company will probably order more shipments after it launches the iPhone 15, BI said. Apple's reliance on Chinese manufacturing is also of major concern as relations between Beijing and Washington become more tense.

• Amazon's (AMZN US) strength in streaming and advertising could be offset by slowing consumer and enterprise spending, BI said. Looking ahead to the second half of the year, online sales should return to growth and accelerate as shopping trends normalize, while the company likely enjoyed “strong revenue momentum” from Prime Day. Amazon's push into pharmacy and grocery will also be closely monitored.
• Gilead (GILD US), like Pfizer, is also expanding in oncology though the failure of a trial has removed a near-term source of new revenue, BI said. The prospects for cancer drugs Trodelvy and Yescarta are expected to be the focus of its second-quarter earnings.
• Warner Bros Discovery's (WBD US) second-quarter revenue is seen declining 3.4%, reversing growth of at least 200% in the preceding four quarters. The muted quarter is owed to the underperformance of The Flash, lower advertising revenue and the Max streaming platform's rollout in May, BI said. Heavy marketing expenses for Barbie will also be a drain, costs probably well spent as the movie had the year's biggest opening. Mattel also renewed its licensing partnership with Warner Bros. ahead of 14 other films.
• Airbnb's (ABNB US) second-quarter top-line growth is projected to slow to 15%, amid tougher year-on-year comparisons and slowing host and average daily rate growth, BI said. Ebitda growth could also trail revenue on stiffening competition and higher spending on generative AI tools.