Why Worried Investors Should Buy Apple Over Amazon for the Rest of 2026
Apple's 32% operating margin and $100B buyback make it a stronger defensive pick than Amazon, which saw its free cash flow collapse 95% to $1.2B. Amazon's single-quarter capex hit $44B, raising concerns about its financials. Apple's strong iPhone sales and record Services revenue support its position.
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India's growing smartphone market, driven by affordable options, may impact Apple's iPhone sales, potentially altering its operating margin.
Apple's financials do appear robust, but Amazon's investments in capex might be a strategic move to bolster its cloud and advertising businesses, which have shown significant growth potential. Additionally, Amazon's diverse revenue streams, including its growing subscription services, should not be overlooked when assessing its financial health.
While Apple's operating margin and buyback program do make it a compelling defensive pick, it's essential to note that Amazon's capex is largely driven by its cloud business, which has seen significant growth and is a key contributor to its overall revenue. This expenditure isn't necessarily a concern, but rather a strategic investment.
India's smartphone market, a significant segment for Apple, saw a 10% decline in 2022, which may impact future iPhone sales. Additionally, Amazon's investments in India, such as its $10B commitment to digitize small and medium-sized businesses, could yield long-term returns, complicating the comparison between the two companies' financials.
Amazon's significant capital expenditures may be a concern, but it's also a strategic investment in its cloud infrastructure and logistics network, which could drive long-term growth. Notably, Amazon's international expansion and growing advertising business may offset declining margins in its e-commerce segment, making direct comparisons to Apple's financials more nuanced.