Apple, Amazon, and Reddit Q2 Earnings Highlight Storage Cost Pressures and Growth

Author: Claude, Deep潮 TechFlow

Shenchao Digest: After-hours trading on July 30 saw a wave of earnings reports from U.S. stocks. Apple’s Q3 revenue reached $109.4 billion, up 16% year-over-year; iPhone sales hit $54.2 billion, marking the third consecutive quarter with over 20% growth. However, revenue from Greater China and services fell short of expectations. Tim Cook described the storage price hike as a “once-in-a-century” event, sending shares down about 6% after hours. Amazon’s Q2 revenue came in at $200.6 billion, exceeding forecasts, with AWS revenue surging 37% year-over-year to $42.2 billion—the fastest growth since 2021—and backlog reaching $496 billion. CEO Jassy stated that AWS will become a trillion-dollar business, but raised capital expenditure to $220 billion, calling it “still not enough,” sending shares up over 10% after hours. Reddit’s revenue rose 61% year-over-year to $805 million, surpassing all estimates and raising guidance, but shares dropped over 10% after hours due to “unstable” traffic from search and recommendations.

Apple reported revenue of $109.4 billion for Q3 FY2026 (the quarter ended June 27), a 16% year-over-year increase, and EPS of $2.02, up 29% year-over-year. Both revenue and earnings exceeded analyst expectations of $108.8 billion and $1.89, respectively.

iPhone revenue reached $54.25 billion, a 22% year-over-year increase, surpassing the expected $53.86 billion and marking the third consecutive quarter of over 20% growth, setting a new all-time high for the June quarter. Mac revenue was $10.35 billion, up 29% year-over-year, driven by the MacBook Air and MacBook Pro.

However, two key metrics fell short of expectations. Service revenue was $30.74 billion, below the analyst consensus of $31.22 billion. Revenue in Greater China was $18.8 billion, below Bloomberg’s forecast of $19.6 billion.

The stock fell about 6% after hours. CNBC noted that although revenue exceeded expectations, the impact of storage costs has already materialized this quarter and will become a greater headwind in the future.

This is Tim Cook’s final earnings call as CEO (effective September 1, John Ternus, head of hardware engineering, will succeed him). Cook’s farewell remarks included a sobering cost warning. He stated on the call: “We reluctantly raised prices. I would describe the trajectory of storage prices as a ‘hundred-year flood’—storage costs have risen exponentially.”

Apple raised prices for Mac and iPad in June, and management warned that storage costs will further increase in the September quarter. Revenue guidance for the next quarter is forecasted at a year-over-year growth of 9%-11%, with a gross margin expected at 47%-48% (approximately 46.5% excluding tariff rebates). The slowdown in growth is primarily due to approximately 2.5 percentage points of headwind from exchange rates and significantly intensified supply chain constraints.

Structural issues in Greater China warrant attention. Although IDC data shows Apple’s smartphone market share in China rose from 13.9% to 18.1%, reaching $18.86 billion—a 22.4% year-over-year increase—some of this growth stems from consumers making early purchases, as Apple has hinted at price hikes in the second half of the year, triggering a buying surge. This suggests that China’s second-half figures may face a risk of demand exhaustion.

Amazon's Q2 total revenue was $200.6 billion, a 20% year-over-year increase, surpassing analysts' expectations of $196.5 billion. EPS was $5.75, significantly exceeding the expected $1.82, but this included $53.4 billion in non-operating pre-tax income, primarily from investment gains in Anthropic.

AWS is the core of this earnings report. AWS quarterly revenue reached $42.2 billion, a 36.7% year-over-year increase—the fastest growth since 2021—significantly exceeding analysts’ expectations of $40.5 billion. AWS’s annualized revenue has now reached $169 billion; if standalone, it would rank 24th on the Fortune 500. AWS operating profit was $16.6 billion, up 64% year-over-year, with an operating margin of 39.4%.

Jassy shared several major figures during the earnings call. AWS’s backlog (contracted but not yet recognized revenue) reached $496 billion. Jassy stated that AWS is “very likely to become a $1 trillion annual revenue business in the future.” Both the AI and in-house chip businesses (Trainium and Graviton) have each surpassed $25 billion in annualized revenue, with year-over-year growth rates in triple digits.

Capital expenditures continue to rise. Jassy raised the full-year 2026 capital expenditure forecast from $200 billion to $220 billion, primarily due to rising costs of memory chips. Even so, he stated, “$220 billion still isn’t enough to meet all of 2026’s demand. I believe the same will be true for 2027.”

Jassy elaborated to analysts on the capital return logic: servers have a minimum lifespan of 5–6 years, the majority of AI compute capacity is contracted for at least five years, and servers and networking equipment generate substantial free cash flow within 2–3 years after reaching breakeven. “Over time, revenue growth will outpace the growth in incremental capital expenditures.”

For Q3 guidance, Amazon expects revenue of $197–202 billion, below the LSEG analyst consensus of $204.1 billion. However, the company explained that this year’s Prime Day was moved from July to June, distorting the year-over-year comparison; excluding this factor, growth would be approximately 400 basis points higher.

After-hours stock price rose over 10%. The market’s judgment is clear: in the AI infrastructure arms race, Amazon is currently the leader in securing the most orders and experiencing the fastest growth.

Reddit's Q2 revenue reached $805 million, a 61% year-over-year increase, significantly surpassing LSEG's expectation of $730 million. EPS was $1.25, well above the expected $0.95. Net profit amounted to $253 million, nearly doubling year-over-year. This marks Reddit's eighth consecutive quarter of revenue growth exceeding 60%.

Q3 guidance remains strong: Revenue is expected at $860–870 million (midpoint of $865 million), exceeding analyst expectations of $828 million. Adjusted EBITDA is forecast at $385–395 million, also surpassing the expected $368 million.

Advertising revenue increased 64% year-over-year to $762 million, with international revenue up 84%. Global daily active users (DAUq) rose 18% year-over-year to 130.3 million, while U.S. DAUq increased 6% to 53.2 million. Free cash flow doubled to $261 million.

All key metrics exceeded expectations, but the stock dropped over 10% after hours.

In its letter to investors, Reddit cited "choppy search referrals," striking a nerve with investors, as a significant portion of its new users come from Google search results, and any algorithmic changes by Google—such as replacing traditional results with AI summaries—could impact Reddit’s user acquisition costs and growth potential.

Another factor is valuation. Reddit’s year-to-date rally has been substantial, and against the backdrop of multiple consecutive quarters of over 60% growth, the market’s tolerance for “beating expectations” has risen. In the past, a 10% revenue beat and a 4% guidance beat might have triggered a significant price surge; now, they’re barely enough to prevent a decline—and any hint of concern becomes a reason to sell.

Looking at the three financial reports together, the price increase of memory chips is the central variable running through them all.

Apple directly felt the impact on the consumer side: a "once-in-a-century flood" in storage costs forced the company to raise prices for Mac and iPad, lower its gross margin guidance, and face even greater pressure in the second half of the year. Amazon, meanwhile, felt pressure on the infrastructure side: the increase in storage costs was the primary reason for raising its $200 billion capital expenditure target to $220 billion.

The global DRAM market is dominated by only three major suppliers: Samsung, SK Hynix, and Micron. The demand for high-bandwidth memory (HBM) driven by AI has completely disrupted the traditional supply-demand balance in the memory market. Cook stated on the earnings call that Apple is “evaluating all supply flexibility options.” Compounding the challenge, on July 30, U.S. senators demanded that Apple cease procurement from Chinese memory manufacturers YMTC and CXMT by August 21, further narrowing Apple’s supply options.

For investors, memory chips are a key cost variable in the technology sector for the second half of this year. They impact both the gross margins of consumer electronics and the capital expenditure efficiency of cloud providers, with no signs of supply-side relief in the near term.