Episode 68 | Q3 Earnings Digest on Apple, Amazon, and Tesla

In Episode 68 of “Market News with Rodney Lake,” Professor Lake, director of the GW Investment Institute, recaps the 2025 Q3 earnings for Apple, Amazon, and Tesla, and their business performance is reflected in the market. He highlights Apple’s strong Q3 results driven by iPhone 17 demand, record service revenue, solid margins, and a calculated approach to AI. Amazon impressed with 20% growth in AWS, rising advertising revenue, and progress on their in-house Trainium chip design, maintaining a strong balance sheet and free cash flow. Tesla reported 12% revenue growth, record cash levels, and a 50% surge in its energy business, underscoring opportunities in battery storage, autonomous driving, and robotics. The episode offers educational market insight on how these tech leaders are navigating innovation, growth, and valuation in a dynamic market environment.

Chapters

• 0:00 Introduction
• 2:16 Apple
• 9:07 Amazon
• 17:13 Tesla
• 21:47 Conclusion

Transcript

Thank you for joining Market News with Rodney Lake. This is a regular program for the GW Investment Institute where we talk about timely market topics. I'm Rodney Lake, the director of the GW Investment Institute. Let's get started. Welcome back to Market News with Rodney Lake. I'm your host, Rodney Lake. Today we're going to mix it up. The episode is going to be a little bit different. We want to try a new format, not dramatically different. We're gonna keep it 

about 20 minutes. And welcome from the George Washington University School of Business, the GW Investment Institute podcast coming to you from Duquès Hall, and the Duquès Family studio. Thanks again from that right here in the heart of Foggy Bottom, Washington, D.C. Lots going on, but not the government still shut down. We'll see if that opens. Hopefully very soon. All right, the format today's episode is going to take, what we're going to do is we're going to use the framework BMPB: business, management, price valuation, and balance sheet. But we're going to 

talk very quickly, let's say more quickly than we typically do. We talk about one company for a whole episode. But we're going to go over a couple of, you know, three companies actually, that we own and some of our portfolios, again, not investment advice, educational entertainment purposes only. But that just announced earnings and we're going to go to these companies more not rapid fire but certainly fashion than we typically do. So we're going to try this new format. Love to hear feedback. Do you like this new format? As we, you know, progress it out here. And 

as we talk about, you know, the, you know, kind of a wrap up of earnings and a review of earnings, but through the lens of the BMPB framework, business, management, price/valuation, and balance sheet, for companies that you know, are topical to us and things that we care about and things that are in our portfolios for the most part, you know, obviously sometimes, well, we'll cover companies that are not in our portfolios, but for these companies they are. And so. The drum roll there was to heighten the attention here for what companies 

we're going to cover. The three companies we're going to cover are Apple, Amazon, and Tesla on this episode. So they all three just announced earnings. So we're going to go through the companies, go through the business, go through the management, go to the price/valuation, go through the balance sheet and talk about what’s happening around the earnings. So we're not going to have a full 20 minute episode on all of these. So we'll have to move a little more quickly than we typically do, but enough time to talk about each one of these. So let's first start out with Apple. Apple, you know the business right. What is the business of Apple obviously selling 

iPhones. Here is one, again not investment advice, but I do own Apple products. And, you know, for my family we're typically Apple products family, no androids and no, you know, threats to switch as of the moment, don't have an iPhone 17, which a lot of people have been upgrading. And we did do a little bit, talk about that in a few episodes ago, but it seems to be way more popular than people had anticipated. And so if you look at, okay, well, what's happening on the earnings side of Apple. So let's talk about the Q4, fiscal year 2025 earnings that goes through 

September 27th, 2025. And so if you look at revenue, $100 billion, right, over $100 billion, that's up 8% year over year, EPS 185 there it beat, you know, 177 was the estimate, gross margins, you know, nearly 50%, 47.2% up 100 basis points. That's in line, net income of about 27.5 billion. So look, these are great numbers. These are fantastic. You know, services have improved. And so if you look at, you know, let's go back to the iPhone, iPhone 17 and the Pro here have been pretty big hits. And I think the expectation was that, you know, it was going to be kind of a meh, you know, reception. And that was really the iPhone 16. You know, people expected more out of that. And it didn't really happen. It didn't materialize. Excuse me. Drinking 

out of my George Washington University School of Business mug. Buy some merch, subscribe to the channel of course. So iPhone 17 seems to be better, you know, reception, from the consumer than people had anticipated and certainly much better than the 16. The 17 and the 17 Pro demand is strong, demand is stronger in the US, and demand is stronger in China than people had anticipated. Those are good things. And then you also now, a big part of the business now for Apple is services. And you look at, you know, services all time record 28.75 billion. That's up 15% right. Accelerating growth here. That is very good news. Those are high margin 

businesses. So that's the App Store, that is the Apple Music and iCloud. All these things all the services. So the platform is the phone, you know, over a billion users on that. And then through that platform you're selling services. Very good. And then wearables, doing fairly well. That's the watch and AirPods, for example, on the Mac and the iPad. Not doing that either. Excuse me. So pretty good here, you know, certainly, in China. Better than expected, U.S better than expected. And we'll have we'll have to see here. You know Tim Cook, we're heading into the holiday 

season here excited about, you know, all the things that are Apple. And we'll have to see how that that ends up the cash pile here, $133 billion. So not necessarily worried about that. So we talk about the business and we talked about, those things in there. Management here, Tim Cook, you know, lots of people were concerned about, you know, maybe, Apple has lost a step and Tim Cook has lost his step. Not the case. Has shown his ability to be nimble and agile and maneuver this company, which is a huge company, you know, one of the largest cap companies 

in the world, and, and really much more nimble than I think people expected. You know, the market cap right now, $4 trillion, for Apple as of November 4th here when recording this episode. So look, overall business, fantastic services, growing iPhone 17 better than expected management Tim Cook and company doing a great job. Certainly has been more nimble than I think people have expected here. And one I think, you know, one of the criticisms rather, for Apple on the management side is capital allocation and lack thereof on the side of AI. For 

example, if you use Siri and it's still terrible, well, join the crowd. We all are waiting for Siri to get better. They keep talking about it. What's the real AI playing here for Apple? And the other side of that is people saying, well, Apple is being careful, they're being considerate. They're being thoughtful. And their consideration for you know, let's decide, you know, who we want to partner with after the winners emerge. And so if you talk about, the 20 billion dollar deal that they have 

with Google, they got upheld in the courts, for the top position for search, on Apple devices, maybe there's a similar deal coming for AI and so that's something to think about. That's something to consider. And that's something that I think as an analyst business person, you have to really consider for yourself and think, you know, is Apple really sitting in pull position even though it looks like it's not, maybe it's going to let all these people spend all this money. And then no problem. They'll come swoop and set up their own stuff and be good to go there. So that is something to think about for Apple. All right. So that is the management piece. Now 

we'll move on to the price valuation and quickly hit the balance sheet. Look at you. Look at the valuation here for Apple. You know 32 times forward earnings nearly 33 times. This is a great company. Great business great moat you know certainly durable competitive advantages set that way. You know has a huge network effect around its products and services. And so that's very good. And that is fantastic. And so is the valuation justified? You could say it's a it's a little expensive for what it is. And it doesn't have a big AI plan. But also it's a very sticky product. The services business continues to grow and they keep pushing higher margin products through the 

platform. That's very good. And by the way, on the chip side, they keep improving their, their own designs and are producing very competitive chips in the market. Next up on the balance sheet side here, when you talk about, okay, what's the balance sheet look like? Well, it's pretty strong. As we talked about, really good earnings, really good free cash flow. And a really strong balance sheet, you know, 132 billion of cash, through September 27, 112 billion of, of debt. So net cash on the balance sheet. And, you know, not necessarily concerned, not not a cash neutral here. But also generating, by the way, free cash flow of $98 billion. And so really, you know, when we talk about, okay, can you sleep at night sleeping like a baby at night, with the 

the net cash from the balance sheet, with the free cash flow. And if you look at the ratios here, you know, not, you know, you're not worried about, you know, interest coverage ratio, right? You know, the net cash plus the free cash flow. Apple's in great shape. So again sleeping like a baby at night with Apple's balance sheet. So overall going through the earnings going through the BMPB, Apple’s in a great spot. Maybe the valuation is a little bit high. We got to really watch what's happening on the AI. Tim Cook and company really delivered this quarter. And we'll be watching 

for the holiday shopping season. So thank you Tim Cook. All right. Next we're going to talk about Amazon. So again three companies this episode BMPB for each one. But really the lens is is the earnings of a catalyst to talk about these companies is the earnings. But we also own all three of these companies. Remember not investment advice entertainment purposes only, and educational. All right. So we talk about Amazon. So what's happening on on the front of Amazon. If you look at the earnings okay, well what happened on the earnings. You know 

people were concerned you know the last set of earnings. Hey by the way AWS not growing fast enough. Microsoft Azure growing faster. Google Cloud going faster. We're you know they're sitting at, you know, a third of the market share for cloud. So they're still the big player. But they were like 17.5%, last quarter, people really worried about what's happening at Amazon. And you get to this and you say, well, what happened this quarter? Well, by the way, AWS grew by 20%. And that, you know, hasn't seen that growth, you know, since 2022. Andy Jassy, who’s CEO, 

talked about that, you know, going very well. And so let's take a look at what's happening on the overall numbers. Net sales talking about 180 billion, you know, beat consensus up, you know, 13%, EPS 195 beat, you know, $0.38. So, you know, look, things are going well. Operating income 17.4 billion. Basically flat adjusted operating income up 25%. Net income up 39% to 21 billion. So look what are the key drivers there? The key driver there is a AWS. And so up 20% backlog here. $200 billion. Andy Jassy and company I think surprised some people. Right. But 

Andy Jassy ran AWS and so and helped build AWS and so not maybe shouldn't be a huge surprise that there's an emphasis on really growing that they just announced a deal with OpenAI to make Nvidia chips available immediately. Look, then they have their own Trainium chips. And so I think that's something to watch. The Trainium sales up 150%. So that's something that I think you'd be, you know, we've talked about before, but I want to put a special emphasis on the Trainium chips and their ability to deliver those. And look, as an investor in Nvidia, do we worry about Trainium? Maybe not in the short term, but certainly, you know, as their chips get better, then it's price performance, right?

It's not just about like high performance. It's price for performance. And the Trainium chips are a good value and people are finding good value there. And they're launching a big A system for Anthropic. And so the Trainium chips – something to watch at AWS in general. And the Trainium piece, of their own chips, they design a TSMC, Taiwan Semiconductor, manufacturers 
Those chips did just in an episode on TSM ticker. So all good. The other piece that I think is interesting and worth watching on on the business side. So that's the the cloud is obviously the B here we're talking about that again through the lens of earnings on the earnings side business advertising up 24%. You see you’re really talking about you know, it's a competitor now, with Google, with Meta.
And I think it's an interesting part of the business that I think people should be paying attention to. And so I do think, that is absolutely worth watching, online sales up, as well here. So overall, really good here. At AWS earning big enterprise margins, 20% growth. You know, fantastic here. There was some layoffs there.
And so some people are attributing those, they were, you know, financial, they were AI, and they're saying that they're cultural. So we'll have to see, what's happening there. But certainly, if you're getting, more efficient here, it makes Amazon more efficient overall as a company. I think they're absolutely one of the leaders in AI.
And they have a platform to deploy it across the board here. AWS Trainium, you know, all the robotics that they have already in their warehouses and how they can deploy AI throughout that. They have a scale advantage versus everyone else. So I do think there's some really interesting things to watch here, for Amazon. And, you know, click and pick up, at your front door.
That's what people do, for a lot of stuff. So the convenience is fantastic. And they're even doing that on the on the AWS side or continued rather to do that on the AWS side as well. So business overall, obviously, doing super well. Andy Jassy now moving on to management here talking about, you know, people concerned about growth at AWS.
It surprises a little bit to the upside. 20% stock obviously moved up big if you were watching, you know over 10% on the day. And another you know, 5% the day after that. Really fantastic. Earnings and beat and guide up. And so fantastic job by Andy Jassy and company and people I think doubted okay. Well maybe AWS is slowing down.
They're losing market share to Microsoft Azure. They're losing market share to Google Cloud. And they they both reported and we'll talk about those maybe on another episode. But the you know, the big player, a third of the market is AWS. And they came through. They delivered 20% growth. Really fantastic. Great job of Andy Jassy and company.
And they continue to deliver, on multiple fronts and opening, or announcing a deal with OpenAI as well. The Trainium chips again, 150% increase there. Pay attention to what's happening with their own chips in that world. I think it's really important. You know, kudos to the management team for being forward thinking and thinking about and investing resources and building out their own designs.
Again, TSM manufactures those chips for them, but I do think it's a tip of the cap to them to be forward thinking that how they can also try to, you know, have, you know, another competitor of their own that they control, to help them on the pricing. Obviously, they're still deploying, you know, chips that are the GPUs from Nvidia and OpenAI ideal.
Makes the point about that. So they still have lots of GPUs from Nvidia, but they're also, deploying their own as well. And so, again, very important to watch. So management, excellent job. If you look at the what's on the price/valuation. Now moving on to where Amazon is, you know not super expensive 29 times forward earnings again.
You wouldn't call that ridiculously expensive. Certainly not for a company that sits at this, you know, I think sits at the center of AI, for multiple different fronts. Or has a, has a position at the table. I don't know if you want to call it the center. Maybe that's Nvidia, right now. But certainly is a company that sits in a very, very unique position for AI.
And, you know, for other things as well, all the convenience that people use, Amazon for, 29 times, you know, I would think that that's, not an enormous, multiple, for a company, like this. Next up is on the balance sheet side. So if you look at what's happening, for Amazon, on the balance sheet side, we are talking about 94 billion in cash, a little bit of net debt, not necessarily worried in generating 10 billion in free cash flow.
And if you look at what's happening in the free cash flow side, a really big move, on the upside there. So if you look at so not really worried here. Again, generating lots of free cash flow, you know, 2021 free cash flow, -15 billion. And it was -16 billion in 22. And then you go to 23, 32 billion plus 32 billion plus in 24, you know, through the 9/30, last 12 months, ten and looking at 15 nearly for the full year 25.
And by the way, that's after that's after, expecting to invest 122 billion in CapEx this year. So these are enormous numbers. These are big numbers. And so deploying lots of money and that's, principally for that AI trade. So even after that, producing lots of free cash flow relative to its debt service. Excuse me. And so not necessarily worried about the balance sheet.
You know, we'd love it to be a little bit better here, on Amazon but certainly not concerned giving the strength of the business, the strength of the free cash flow and the strength of its position on AI. So overall, again, Amazon, down on the day today, but certainly up big after it announced earnings.
Excuse me.
Drinking for my GW School of Business mug here. Next up is Tesla. So what's happening on the Tesla side. They also announced earnings. We'll go through BMPB here for Tesla business, management, price/valuation, and balance sheet very quickly here. The last, the company that we're going to cover in this episode. So let's go through it and we're going to kind of speed through this one a little bit faster than the other ones.
To keep our episode sort of around 20 minutes here. So when you talk about Tesla, obviously people are very worried. The tax credit came off. And so you're going to have a bump up probably, you know, in deliveries and in next quarter might not be quite as good. But let's let's look at the numbers. So total revenue 20 billion up 12% year over year.
That's a beat. The automotive revenue up 9%. You know, so generally good here. And let's get down to free cash flow 2.7 billion, up considerably 95%. And the cash and cash equivalents all time high, 41.6 billion, up 8 billion. That is really fantastic news. The year over year change. And so the these are, stellar numbers, for, for Tesla.
And something that I want to call out and on the business side, when the, the B part right now in going through the earnings is a, you know, record 12.5% gigawatts deployed, and revenue up 50% year over year for the energy segment. And so energy storage, and the energy business is growing. And if you think about and if you listen to the call, Musk said something that I think is important to consider is that if you look at, you know, there's, you know, whatever, a terawatt of deployed, you know, a potentially deployed, you know, production, but at any one time you're only using, you know,
500MW of that, or gigawatts, I guess, of that, terawatts, gigawatts. So you have, you know, half of that, that maybe, without having any additional, production be put online if you could add battery storage to the grid at large here, and, and capture all that you can double, the, the productivity of the current grid without adding, you know, any nuke or gas or solar or wind or anything else.
So without that, just by adding batteries to all of these things and having systems to back up, you know, 100% of that, that gets you to, doubling the capacity. So I do think, you know, they're selling these things as quickly as they can effectively. And you have 50% year over year growth. And it's becoming a meaningful part of the business.
And so I do think, it I do think it's important, to watch I do think it's a very important business to watch. And they also have a software, that's, that's in here. That's called Autobidder. And I encourage you to check that out on the business side. Basically electricity trading software. Not a ton, a ton of time to deep dive on this, but I think that's super important.
And also think about the services and supercharging. That's up, 20% year over year. So if you look at the supercharging fleet continues to get built out. So all good there. But again, on the business side, you get the tax credit coming off. We'll have to see how this all plays out, you know, but the big things to watch out for autonomous driving, version 14 came out, you know, widely, regarded as as, positive upgrade here, you know, got a smooth the edges as Musk said.
But the future really is in the autonomous driving business and the Optimus robot, which I think, we do need to pay attention to, but I think also pay attention to the energy side and what's happening, on the energy business. So that's the business, management Musk continues to deliver. If you haven't voted your shares, make sure you do, whatever it is, the pay packages coming up, you know, I think exceptional good capital allocation here and really focus on the future building at scale, on things that are important and things that will really move the needle.
So tip of the cap there, on the price/valuation, let's just take a quick look there. This is, oftentimes where, you know, people also get critical on Tesla here. You know, the forward, you know, PE is 272 times. So, you know, I think, Palantir is in that same category right now. And so these are big numbers.
But if they are full self-driving, if they have this Optimus robot, lots of people are putting some bets into that. And, you know, we're betting that some of those things will materialize and maybe that would justify that multiple, at this moment, because it would make Tesla a much bigger company. And then on the balance sheet side, you know, they we talked about this record 40, you know, billion in cash, on the balance sheet.
So not necessarily worried, on the balance sheet. So overall, you know, all good metrics, let's say maybe not all good metrics, good metrics overall. Rather, for Tesla going through the BMPB. All good. Let's say, you know, overall, we'll have to continue to watch all these companies. So we're going to keep an eye on Apple.
We're going to keep an eye on Amazon. We're gonna keep an eye on Tesla. Our stock pitch days are coming up. And we'll hear from our students how they're doing and what they're thinking. And we'll see what comes into the portfolio. That is it, for this episode covering Apple, Amazon and Tesla. And we'll see you back on the next episode of Market News with
Rodney Lake. Thank you.
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