U.S. stock futures pointed higher on Friday, buoyed by a strong earnings report from Amazon.com Inc. (NASDAQ:AMZN), whose cloud computing division delivered a standout performance. The Nasdaq 100 futures advanced 1.15%, while S&P 500 futures gained 0.40%, signaling a positive open for the main session at 9:30 a.m. EDT.
Amazon's shares surged 11% in premarket trading after the company reported that AWS, its cloud segment, grew revenue by 37% and contributed significantly to operating income. In contrast, Apple Inc. (NASDAQ:AAPL) dropped 7.8% after its quarterly results and guidance disappointed investors.
Investors are increasingly differentiating between companies that are successfully monetizing artificial intelligence investments and those that are not. This week, Microsoft Corp. (NASDAQ:MSFT) met expectations with a 43% increase in Azure revenue, while Meta Platforms Inc. (NASDAQ:META) fell short, causing its shares to drop 8%.
The market's reaction underscores a broader trend: tech investors are rewarding firms with clear AI-driven growth, while penalizing those with heavy spending but weaker returns. Amazon's AWS operating margin of 39.3% was nearly three times the company's overall margin, highlighting the profitability of its cloud business.
U.S. labor costs rose 0.9% in the second quarter, exceeding the expected 0.8% increase, according to the Employment Cost Index. This data, coupled with a 3.2% year-over-year wage growth, could influence the Federal Reserve's rate decisions. Despite this, equity futures remained higher, suggesting that earnings optimism outweighed inflation concerns.
Amazon's Chief Executive Andy Jassy noted that "AWS is booming," even as the company reported a $7.6 billion outflow in trailing free cash flow. Investors embraced the company's $220 billion capital spending plan, which is aimed at expanding its cloud and AI infrastructure. The AWS backlog reached $496 billion, indicating strong future demand.
Apple's performance stood in stark contrast. Revenue grew 16.4% and iPhone sales rose 21.7%, but services revenue fell short of expectations, and the company's September guidance was below analyst forecasts. Chief Executive Tim Cook cited "very significant supply constraints" as a factor.
The divergence in market moves was notable: Amazon's premarket gain of $282 billion was offset by Apple's $383 billion decline, resulting in a net loss of $101 billion for the two combined. However, Nasdaq futures still advanced, suggesting that investors saw the cloud strength as more significant than the overall spending concerns.
Looking ahead, the market faces a key test next week with the July payrolls report, expected to show 91,000 new jobs, and earnings from over a quarter of S&P 500 companies. As John Plassard at Cité Gestion noted, "Companies must also reassure investors about the drivers of future growth."
Risks remain, including the possibility that premarket gains may not hold, and that accelerating wage growth could renew rate hike expectations. Amazon's cash burn and Apple's supply issues are also ongoing concerns.
