Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, summarizes this week’s financial headlines and provides context for Canadian investors.
Amazon primes the profit pump
Big tech wrapped up a busy earnings season this week, led by a standout report from Amazon that far exceeded expectations. Apple, PayPal, and Airbnb also released quarterly results that were generally positive, though more muted. All figures below are in U.S. dollars.
Tech earnings highlights this week
- Amazon (AMZN/NASDAQ): Reported earnings per share of $0.65 versus $0.35 predicted, and revenue of $134.4 billion versus $131.5 billion expected. Shares jumped more than 10% in after-hours trading following the release. While Prime Day promotions attracted headlines, Amazon Web Services (AWS) drove the majority of operating profit for the quarter, contributing roughly 70% of operating income.
- Apple (AAPL/NYSE): Posted earnings per share of $1.26 versus $1.19 expected, and revenue of $81.80 billion versus $81.69 billion predicted. The initial market reaction was modest, with shares drifting lower after hours. Services revenue grew about 8% year-over-year, but iPad and Mac revenues each declined roughly 20%, and iPhone revenue slipped about 2% compared to the same quarter last year. Apple also reported cash on hand of approximately $166.54 billion—an unusually large cash balance for a single company.
- PayPal (PYPL/NASDAQ): Produced earnings per share of $1.18 versus $1.16 expected and revenue of $7.29 billion versus $7.27 billion forecast. Despite the slight beat, the stock moved lower in after-hours trading.
- Airbnb (ABNB/NASDAQ): Delivered earnings per share of $0.98 compared with $0.78 expected, and revenue of $2.48 billion versus $2.42 billion anticipated. Nights booked and revenue both rose year-over-year, but the company faced elevated expectations, and shares fell in extended trading.
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Canadian REITs weather the interest-rate storm
Two major Canadian real estate investment trusts reported quarterly results this week, showing resilience amid a higher-rate environment and ongoing concerns about smaller retail tenants.
REIT highlights this week
- RioCan (REI-UN/TSX): Announced committed occupancy climbed to 97.4% and second-quarter net income increased from $78.5 million a year ago to $112 million. The stock moved slightly lower, reflecting expectations that were broadly met and no major surprises in the quarter.
- Canadian Apartment REIT (CAR-UN/TSX): Reported strong operational results, with near 99% occupancy across its Canadian residential portfolio and healthy margins. Management noted active asset-management activity: roughly $293 million of non-strategic buildings were sold year-to-date, and $208 million of net proceeds have been reinvested in newly built rental properties located in high-demand Canadian markets. New, modern buildings now account for about 10% of the Canadian portfolio’s value, and the REIT plans to expand that allocation to support rental supply in dense, fast-growing cities.
RioCan’s management is keeping a close eye on its small-business tenants for signs of rate-induced strain. While some small businesses may face pressure, the REIT’s mix—anchored by grocers, pharmacies, discount stores, and liquor retailers—appears relatively stable for now. For investors evaluating Canadian REITs, attention to tenant mix, occupancy trends, and reinvestment strategies remains essential.
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Shopify bets on AI while trimming costs
Shopify released mixed results this week. The company reported earnings per share of $0.14 versus $0.05 expected, and revenue of $1.69 billion against $1.63 billion anticipated. Despite year-over-year improvements across several metrics, the stock fell after the announcement.
Shopify has been streamlining operations, including the sale of Deliverr Inc. and workforce reductions totaling about 30% over the past two years. The company cited sizable charges—severance and a loss on the Deliverr disposition—that contributed to an operating loss for the quarter of roughly $1.6 billion, even as gross merchandise volume rose about 17% year-over-year and subscription-related revenue increased about 21%.
Management emphasized investment in artificial intelligence and new merchant tools, including automated messaging and an AI-based assistant called Sidekick. While AI features could improve merchant experiences and operational efficiency, Shopify has not provided a clear timeline for when those initiatives will materially boost profitability. Company leadership framed the changes as enabling faster decision-making and better adaptation to technological shifts, positioning Shopify to capture future growth opportunities.
Also this week, Thomson Reuters posted a modest beat, with earnings per share of $0.84 versus $0.76 expected and revenue roughly in line with forecasts. Despite the positive results, its shares moved lower in the immediate market reaction.
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U.S. debt downgrade shakes markets
Fitch Ratings downgraded the United States’ long-term credit rating one notch, from AAA to AA+, citing repeated debt-limit standoffs and recurring last-minute resolutions that have eroded confidence in fiscal management. This action was clearly a response to political brinkmanship rather than a judgment that the U.S. lacks the economic capacity to repay its obligations.
The downgrade rattled markets: the S&P 500 fell following the announcement. Fitch warned that persistent political dysfunction could raise borrowing costs over the long term for the federal government, even if the short-term economic impact appears limited.
Notable investors and analysts offered differing views on the immediate consequences. Some argued the downgrade would not meaningfully alter the dollar’s status or the broad market dynamics in the near term. Others noted the downgrade serves as a warning to policymakers about the long-term costs of repeated fiscal brinkmanship and the potential economic consequences of chronic political dysfunction.
Despite a high proportion of S&P 500 companies beating earnings expectations this quarter, the index experienced volatility in the days around the downgrade. For investors, the episode underscores how political risk can translate into market risk, even for the world’s largest economy.
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