Insights 
VT 
Apple and Amazon are poised to report their Q2 earnings after today’s market closure. Following positive results from Microsoft and Meta, Wall Street remains optimistic despite potential end-of-July market fluctuations.
Apple has faced challenges in 2025, particularly due to tariffs introduced by Trump. This has affected iPhone demand, with sales potentially dropping 18% year-on-year in June. Apple anticipates tariffs-related costs up to $900 million for Q2 2025. The firm is focusing on innovation in AI and existing product lines to boost revenue.
Amazon Earnings Outlook
Amazon’s earnings outlook is more positive, with strong retail and cloud services performance, though its AI progress lags behind competitors. AWS and advertising are pivotal profit drivers, though Microsoft and Google’s cloud advancements present challenges. AI-related capital expenditure remains a priority for Amazon, with Q2 spending expected at $25 billion and the year’s total surpassing $100 billion.
Amazon’s e-commerce may benefit from recent tariff changes, ending the ‘de minimis’ exemption, impacting imported goods valued below $800. Overall, expectations suggest a possible disappointment from Apple and a positive result from Amazon. The upcoming US labour market report on Friday will further influence market direction.
Given that today is July 31, 2025, we are positioned for significant volatility after the bell. With Apple and Amazon reporting, traders should consider strategies that capitalize on the high implied volatility typical of major earnings events. The market’s positive reaction to Microsoft and Meta sets a hopeful tone, but the individual company stories differ greatly.
For Apple, the widespread expectation of a disappointing report means much of the bad news may already be priced into its stock, which is down over 16% this year. Buying put options now could be risky, as even a slightly less-terrible report might cause a relief rally. A more neutral strategy, like selling an iron condor, could be better to profit from the expected post-earnings drop in volatility, assuming the stock doesn’t make an extreme move.
Recent supply chain data from Asia has already indicated a slowdown, aligning with analyst estimates for an 18% year-over-year drop in June iPhone shipments. The market has digested this, along with the potential $900 million hit from tariffs. The key surprise will be in the company’s forward guidance and its plan to manage costs and innovate beyond existing products.
Amazon Sentiment and Strategy
With Amazon, sentiment is more optimistic, so buying call options seems logical, but it carries risk as a simple earnings beat might not be enough. Given the high expectations, the company needs to deliver strong results and guidance, particularly for its AWS and advertising segments. Any sign of weakness here could disappoint the bulls and deflate the stock price.
While AWS is still the leader, its market share has seen a slight erosion, dipping to 31% in the first quarter of 2025 from 33% a year prior, as Microsoft’s Azure and Google Cloud gain ground. We will be watching the AWS growth rate closely to see if it can defend its position. Advertising revenue growth will also be critical to see if it can offset any cloud weakness.
The massive capital expenditure on AI needs to start showing a return, a situation we haven’t seen on this scale since the dot-com buildout of the late 1990s. Amazon’s expected $25 billion in Q2 capex must be justified by new AI-driven product announcements or significant efficiency gains. Without a clear AI story, investors may lose patience compared to its Magnificent Seven peers.
A pair trade could be an effective way to navigate this divergence, involving going long on Amazon call options while simultaneously buying Apple put options. This strategy isolates the performance of the two companies from broader market movements. It directly plays on the prevailing narrative of Amazon’s strength against Apple’s current struggles.
Finally, we must not forget the US labor market report due this Friday, August 1st. Economists are forecasting a slight cooling, with around 190,000 new jobs added in July, down from the 225,000 we saw in June. A surprise in either direction could easily overshadow earnings news, so holding some cheap, short-dated puts on the QQQ or SPY index as a hedge through the end of the week is a prudent measure.
