Amazon, Apple Were the Mag 7 Losers. Here’s Why That’s About to Change.
Oct 31, 2025 06:50:00 -0400 | #Markets #The Barron's Daily
(JONAS ROOSENS/Belga/AFP via Getty Images)
The A-Team is here to save the day. Amazon and Apple that is, rather than the 80s crack commando unit. The two companies put a gloss on Big Tech earnings season as they reversed the narrative about the risks they faced from slow progress in AI and the impact of tariffs.
Amazon took the starring role, as the market applauded an acceleration in growth in its cloud-computing business to its best rate in three years. That helped put to bed concerns that Microsoft and Google are eating into Amazon Web Services’ market share amid the artificial-intelligence race. Amazon also shrugged off tariff costs, noting it hadn’t seen significant price increases from sellers on its retail platforms.
Apple was a decent supporting actor, with the main action being an expected double-digit increase in iPhone sales in the holiday quarter. After months of debate over Apple being too slow to integrate AI, the strong start for the iPhone 17 suggests concerns that might have dragged on sales look overblown. A $1.1 billion tariff hit for the quarter also looked more than manageable.
Taken together, it’s a reminder that sometimes it pays to bet on overlooked stocks. Amazon and Apple were the two worst-performing members of the Magnificent Seven group of companies this year ahead of their earnings reports and trailed far behind a 16% gain for the wider S&P 500. But with worries mounting about the level of capital expenditure required for the AI boom, Apple’s relatively modest spending and Amazon’s huge revenue from its retail business provide a level of comfort.
With tariff headwinds potentially set to ease amid a U.S.-China trade truce and consumer spending holding up, investors look set to love it as Amazon and Apple’s plans come together.
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Apple Is Betting On a Big Holiday Season For iPhone
Apple beat fourth-quarter sales expectations and set the bar high for the holiday season, forecasting revenue to rise 10% to 12% as consumers upgrade to the new iPhone 17. CFO Kevan Parekh said they see a “double-digit” increase in iPhone sales from a year ago.
- If Apple’s prediction comes true, it would be the best revenue quarter and the best iPhone sales quarter in its history, Parekh said on a call with analysts. For the just ended period, Apple set a new sales milestone of over $400 billion for the full fiscal year.
- Still despite record sales in India, quarterly iPhone sales and sales in China both missed projections. Fourth-quarter iPhone sales of $49 billion were up 5% from the year-ago quarter, but fell short of the $50 billion expected. Overall, fourth-quarter earnings were $1.85 a share and revenue was $102.5 billion.
- Apple’s high-margin services segment, home of its App Stores, AppleCare support, and iCloud+, remains the all-star of its income statement. Revenue of $28.8 billion, up 15% from a year ago, and gross margin of 75.3% both surpassed projections and boosted companywide gross margin to over 47%.
- The number of Apple customers still using their iPhones, iPads, and other devices reached a new all-time high across all product categories and geographic segments, Parekh said. “Nearly half” of Mac users and “over half” of iPad and Watch customers are using new devices.
What’s Next: Tariffs cost Apple $1.1 billion in the fourth quarter, and Apple expects that bill to rise to $1.4 billion in the current quarter. CEO Tim Cook said the current quarter figure would have been higher had tariffs on imports from China not been lowered to 10% from 20%.
— Adam Levine and Janet H. Cho
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Amazon Says Web Services Growing Fastest Since 2022
Like its rivals in the cloud computing business, Amazon reported double digit revenue gains in the third quarter, beating expectations as Amazon Web Services grows at a pace not seen since 2022, according to CEO Andy Jassy. It also has big plans to build out data center capacity.
- For the September quarter, Amazon reported adjusted earnings of $1.95 a share, including investment gains from AI start-up Anthropic. Overall revenue was $180.2 billion, up 13%. Revenue for the AWS division was $33 billion, up 20% and above analyst expectations.
- Jassy told analysts Amazon has doubled AWS capacity measured by power from 2022 and is on track to double capacity again by 2027. It expects capital spending to be $125 billion for the full year, ahead of expectations, and it expects capex to increase again next year.
- UBS analyst Stephen Ju said AWS’s revenue could improve in the fourth quarter and the first half of next year as Amazon adds more data-center capacity. But his checks on spending by AWS customers points to a “less robust” picture than for Microsoft Azure and Google Cloud.
- Advertising sales revenue rose 24% in the quarter. Consumer spending remains resilient despite concerns about the labor market. While many Amazon sellers rely on materials and manufacturing in China, Amazon hasn’t seen “meaningful” price increases on its e-commerce platform.
What’s Next: Amazon forecasts fourth-quarter sales to be between $206 billion and $213 billion, with operating profit in a range of $21 billion and $26 billion, to mark the holiday shopping season.
— Tae Kim and Liz Moyer
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Netflix Weighs Up Warner Bros. Bid, Report Says
Netflix may be about to own the Harry Potter and Batman franchises. The video streamer is weighing up making a bid for Warner Bros. Discovery streaming and studios business, according to a report.
- Netflix is retaining the investment bank Moelis & Co. as a financial advisor and has been granted access to key financial information, Reuters reported, citing three people familiar with the matter. Moelis, Netflix, and Warner Bros. didn’t immediately respond to a request for comment from Barron’s.
- The deal would give Netflix control over the rival HBO Max streaming service, as well as intellectual property like DC Comics and Harry Potter. That would feed the tech giant’s flywheel model, a self-sustaining cycle of growth in which more subscribers means more money to spend on content, which in turn attracts even more users.
- Netflix announced a 10-for-1 stock split late Thursday, which it said would help reset shares to a range that would make it easier for employees taking part in an options program to buy in. The stock has climbed 22% this year, although third-quarter earnings took some of the shine off a bigger rally, as a continuing dispute with Brazilian tax authorities led to the company missing Wall Street’s profit target.
What’s Next: The news could kick-start a bidding war. Paramount Skydance has already made three offers for Warner Bros. that have all been rejected, The Wall Street Journal reported earlier this month, citing people familiar with the matter. Its last offer was for $23.50 a share, the people said, which is still way below the $40 a share level that Warner Bros. CEO David Zaslav is reportedly aiming for.
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Pfizer and Novo Nordisk Find Themselves In a Bidding War
Pfizer has found itself in a bidding war with Danish rival drugmaker Novo Nordisk over the weight-loss drugmaker Metsera, with just three days left to strike a better deal. Novo Nordisk made the dramatic $6 billion cash bid for Metsera after it already accepted Pfizer’s $4.9 billion cash offer.
- Metsera’s main drug is similar to Novo Nordisk’s blockbuster weight-loss injectable Wegovy, but it is administered monthly rather than weekly. Pfizer called Novo’s bid an attempt by a dominant market leader to “suppress competition in violation of law by taking over an emerging American challenger.”
- Novo has picked this fight as the Trump administration pressures the industry to lower drug prices. Pfizer CEO Albert Bourla has touted his friendship with President Donald Trump, who wants to cut prices of branded weight-loss drugs to “about $150,” a fraction of Wegovy’s current list price.
- Novo’s bid could reflect a new level of aggression at the company, or perhaps desperation, during a tumultuous year that has seen the ouster of its CEO, the resignation of all its independent board directors, and a 60% drop in its share price since the middle of 2024.
- Novo likely was already a bidder for Metsera. Securities filings by the smaller drugmaker show that it discussed a potential acquisition with seven companies, including Pfizer, and at least three made offers. The filings do not name the other companies aside from Pfizer.
What’s Next: Metsera said Novo’s offer is better than Pfizer’s, and is giving Pfizer four days from Thursday to negotiate a superior offer. Pfizer called Novo’s offer “illusory” and said it shouldn’t trigger a renegotiation of its existing agreement.
— Josh Nathan-Kazis and Janet H. Cho
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Berkshire Hathaway’s Earnings Are Coming. What’s In Store.
Berkshire Hathaway is likely to post stellar third-quarter results when it reports earnings on Saturday, with expectations for a 20%-plus gain in operating profit. But investors have a long list of other things they are watching in the report, including its cash pile, investment activity, and any stock repurchases.
- Berkshire hasn’t repurchased any stock since May 2024. Any repurchases would be viewed favorably as a sign that CEO Warren Buffett views the stock as inexpensively valued. Buffett is set to retire from that role later this year, so this is his last earnings report as CEO.
- Total cash reached $344 billion on June 30. Investors are wondering if that number rose in the third quarter, and the current betting is yes. Berkshire discloses its top five equity holdings in its quarterly filing but not the dollar values. Its biggest holding by value has been Apple.
- Operating earnings are expected to rise 22%, to around $12 billion, boosted by strength in its insurance operations. There was relatively little hurricane activity in the period, so catastrophe losses likely will be low. Auto insurer Geico also rolled out big price increases over the past two years.
- Good news can be bad news for Berkshire in insurance. High profitability industrywide leaves insurers with ample capital, so they tend to cut prices of coverage to put that cash to work. Insurance stocks have been weak recently and that likely has weighed on Berkshire as well.
What’s Next: KBW analyst Meyer Shields recently downgraded Berkshire shares to Underperform, citing the insurance outlook and the risk to the company as it transitions to a time when Buffett is no longer CEO. He sees 2026 earnings unchanged from 2025.
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—Newsletter edited by Liz Moyer, Rupert Steiner