This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Here's our initial take on Netflix's (NASDAQ: NFLX) fiscal 2025 second-quarter financial report.

Key Metrics

Netflix Turns In a Solid Performance

Wall Street had high expectations for Netflix heading into its second-quarter report, especially after a significant earnings beat in the first quarter. Analysts were expecting a 15% year-over-year increase in revenue and 45% EPS growth.

Although expectations were lofty, Netflix managed to beat on both the top and bottom lines. Operating margin expanded by 7 percentage points compared to the same period last year, and free cash flow increased by an impressive 87%.

Most of the growth is coming from Netflix's higher prices, as the company increased its membership plan costs in January. Also in the report, Netflix mentioned that the rollout of the Netflix Ads Suite, its proprietary ad tech platform, has been completed. Management says that it expects to roughly double ads revenue in 2025, but it is likely to become a more significant part of the company's top line in 2026 and beyond. Revenue growth was strong in all of the company's regions, especially in the Asia-Pacific region, where revenue increased 24% year over year.

During the second quarter, Netflix spent $1.6 billion on share buybacks, and still had $8.2 billion in cash on the balance sheet.

Looking ahead, Netflix expects 17.3% year-over-year revenue growth in the third quarter, although management expects operating margin to decline significantly. As management said, "Similar to past years, we expect our operating margin in the second half of 2025 will be lower than the first half due to higher content amortization and sales and marketing costs associated with our larger second half slate." The company increased its full-year revenue guidance by $1 billion at the midpoint of the range.

Immediate Market Reaction

Netflix stock was trading slightly lower after hours, but not by much. As of 4:15 p.m. ET, Netflix shares were trading about 1% lower. Although the quarter looked strong and revenue guidance was raised, shareholders may have profitability concerns for the second half of the year. It's worth noting that this reaction was before management's earnings call, which is scheduled for later in the afternoon.

What to Watch

As mentioned, Netflix's ad platform was recently completed, so any insights on ad revenue in the third and fourth quarters of the year will be important to watch.

In addition, Netflix has some highly anticipated content set to be released in the second half of the year, such as the final season of Stranger Things and Happy Gilmore 2 and the live Canelo-Crawford boxing match, so it will be interesting to see if that boosts new subscribers.

Helpful Resources

• Full earnings report
• Investor relations page

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Netflix: Strong sales and wider margins appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Here's our initial take on Amazon's (NASDAQ: AMZN) financial report.

Key Metrics

Some Good, Some Not So Good

Amazon's stock fell after its last earnings report, and the primary reason was weak guidance for the first quarter. At the time, Amazon was calling for revenue of about $153 billion at the midpoint of its range.

Since then, analyst expectations have increased to about $155.1 billion, and the company beat that figure, reporting 9% year-over-year revenue growth to $155.7 billion. On the bottom line, Amazon's $1.59-per-share figure handily beat the consensus.

The two most exciting components of Amazon's business, at least from a future growth perspective, are Amazon Web Services (AWS) and advertising, and these were a bit of a mixed bag. AWS grew by 17% year over year but didn't quite meet expectations. And advertising revenue was the fastest-growing part of the company, up 19% year over year and ahead of expectations.

Online sales revenue was a little sluggish, up 6% year over year, a slowdown from the 7% growth rate in the same quarter last year. Third-party-seller services revenue slowed considerably, to a 7% growth rate, compared to a 16% growth rate a year ago.

In other nonearnings news, Amazon announced the day before it reported that it will spend $4 billion by the end of 2026 to expand its rural delivery capabilities. Investors cheered this news, as faster deliveries generally mean higher order volume.

Looking ahead, Amazon expects revenue between $159 billion and $164 billion in the second quarter. This was somewhat lighter than investors had hoped to see.

Immediate Market Reaction

The initial reaction to Amazon's numbers was modestly negative. As of 4:20 p.m. ET, Amazon stock was down by about 2.5%. The combination of the AWS revenue miss and somewhat light second-quarter guidance seems to be outweighing the top- and bottom-line beats for the first quarter.

What to Watch

There are significant tensions between Amazon and the Trump administration over tariff concerns, so that will be worth keeping an eye on going forward. There were reports that the retail giant was considering displaying tariff costs on its e-commerce listings, but the company denied it, saying it would not happen.

However, this isn't likely to be the last chapter in the tariff story for Amazon, which sells many products that originate from outside the United States.

Helpful Resources

• Full earnings report
• Investor relations page

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon: A good quarter but some concerns appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matt Frankel has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

All of the major stock market indices were sharply lower on Monday, with the Dow Jones Industrial Average, S&P 500, and Nasdaq-100 all down by about 3% for the day, adding to recent declines.

The main reason for the declines is President Donald Trump's intensifying pressure on Federal Reserve Chairman Jerome Power to lower interest rates. In a social media post, Trump warned that the U.S. economy could slow down unless interest rates were to fall right away and called on Powell to do just that.

To be sure, Trump's criticism of the Fed, and Powell in particular, is nothing new. Although Trump himself appointed Powell during his first term, he frequently criticized Powell in the years leading up to the COVID-19 pandemic for raising interest rates despite a lack of inflation.

What's different this time?

The major difference this time is that Trump has openly mentioned Powell's "termination," even though the president doesn't (at least under most interpretations) have the legal authority to fire the Federal Reserve chair. Even Congress cannot dismiss a Fed chair before the end of their term, under current law. Not only is Trump making comments like this on social media, but Trump's legal team is reportedly investigating whether he can legally remove Powell.

For context, Powell's term as Fed chair officially expires in May 2026. And Powell has made it very clear he intends to finish his term, and that Trump cannot legally remove him.

Powell has also discussed Trump's trade war as a potential reason rates could stay elevated, saying that tariffs could fuel inflation while also limiting economic growth. He recently said that "For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance." In other words, despite Trump's criticism, he's in no rush to lower rates.

Should investors worry?

The reason investors seem to be on edge is that the independence of the Federal Reserve has been a key part of the U.S. financial system for many years.

Several financial experts and notable politicians have warned investors about what could happen if Trump actually attempts to fire Powell. Senator Elizabeth Warren, D-Mass., who has herself openly questioned the Fed's decision to keep interest rates relatively high, warned that the stock market could crash if Trump attempts to fire Powell. Evercore ISI Vice Chairman Krishna Guha said the market would likely sell off. CNBC senior analyst Ron Insana said that such a move would hurt global confidence in the United States.

Are investors already losing confidence?

There are some signs that investors are already getting concerned. In addition to the stock market plunge, the U.S. dollar has weakened dramatically and is at its lowest level since the 2022 bear market. Meanwhile, "safe" assets have been soaring, such as gold, which hit a record high on Monday.

One big principle to keep in mind is that the stock market doesn't like uncertainty, and that's a lot of what you're seeing in the recent market action. The CBOE Volatility Index (VOLATILITYINDICES: ^VIX) -- often referred to as simply as the "VIX" -- is generally thought of as the best gauge of investor fear in the stock market. While it isn't quite where it was immediately after Trump's tariff announcement a couple of weeks ago, the VIX sits at more than double the level immediately after the November presidential election.

Should investors worry, or look for bargains?

This is the million-dollar question. First off, if you're a long-term investor, there's no need to panic and sell investments you plan to hold for the long run, as long as the original reasons you bought them still apply. As a personal example, I'm in my mid-40s, and absolutely will not sell anything in my retirement accounts over this.

Having said that, it could be a smart time to take a cautious approach to investing, especially when it comes to putting new money to work in fast-growing or somewhat speculative companies. While none of us have a crystal ball that can predict the future, it would be wise to expect that we haven't seen the last of the 2025 market volatility. This is an unprecedented situation, and all any investor (or any expert) can really do is make educated guesses about what might happen in certain scenarios.

This is the type of situation where it can be beneficial to use strategies like dollar-cost averaging to gradually build positions in stocks or ETFs you want to own for the long term. Historically, when the S&P 500 pulls back by more than 15% from its recent high, like it has in 2025, it's a good time to invest from a long-term perspective. But that doesn't mean stocks can't fall even further, so keep this in mind as you navigate this turbulent market environment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Trump's feud with the Fed: Should investors be worried? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 3 ASX dividend shares to buy for 5.8%, 7%, and 10% yields
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) joined the exclusive club of trillion-dollar stocks on Wednesday, topping $1 trillion in market cap during the day's trading session and closing above that level at 4 p.m. ET.

In fact, Berkshire is the only U.S. company to reach this milestone that isn't a technology company. Quite the opposite, really -- Berkshire managed to grow to a trillion-dollar valuation with a collection of businesses that many investors consider to be "boring."

With the stock now approximately 40% above its 52-week low, and up by about 135% over the past five years, it might seem as if Berkshire is getting a little too expensive. So, let's take a close look to see if this is indeed the case.

A difficult stock to value

Admittedly, Berkshire is a tough stock to value. Not only is it a collection of more than 60 subsidiary businesses, but it has a massive stock portfolio and a bunch of cash on the balance sheet. These latter two components make the company look deceptively expensive by most valuation metrics.

Plus, thanks to an accounting rule, Berkshire has to include unrealized losses and gains from its stock portfolio in its earnings calculations, essentially rendering the traditional price-to-earnings (P/E) ratio useless. What's more, CEO Warren Buffett himself has gradually placed less emphasis on the company's book value, which had long been his gauge of the business' valuation.

Fortunately, two of the three components are rather easy to assess individually. We'll start with Berkshire's overall market cap, which is almost exactly $1 trillion as of this writing, so we'll use that figure.

First, Berkshire has $277 billion in cash and equivalents on its balance sheet. This gives the company unparalleled financial flexibility to take advantage of opportunities that arise but is generating billions in interest income for Berkshire in the meantime. Backing this out takes the market value down to $723 billion.

Next, Berkshire's stock portfolio has a collective market value of approximately $318 billion. Removing this from the equation shows that the market is valuing Berkshire's operating businesses at $405 billion.

Is Berkshire Hathaway too expensive?

So, we have a business that commands a market value of a little over $400 billion. Over the past four quarters, Berkshire has produced operating earnings of $42.1 billion from its subsidiaries.

This implies that if we back out Berkshire's stock portfolio and cash -- both of which have straightforward market values -- Berkshire's actual businesses are collectively trading for about 9.5 times trailing-12-month earnings.

Even if we back out investment income -- which is included in operating earnings, since the interest on Berkshire's cash technically is mostly held in Berkshire's insurance business -- the company still generated $30.9 billion in profit. This would translate to a price-to-earnings multiple of about 13. And this is for a collection of largely recession-resistant businesses that have grown operating earnings by 26% year over year so far in 2024.

I'm not sure that this would qualify as "expensive" by virtually any definition.

The bottom line is that while Berkshire's stock has performed well over the past year, that doesn't make it an expensive stock. This is still a reasonably priced collection of businesses, assets, and cash, and there's no reason to believe Berkshire cannot continue to deliver strong returns for years to come.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Berkshire Hathaway just hit a $1 trillion valuation — Is it too expensive to invest in? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Matt Frankel has positions in Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

We recently got a look at Berkshire Hathaway Inc's (NYSE: BRK.A)(NYSE: BRK.B) massive stock portfolio, as it stood at the end of the second quarter. And the biggest move was one we already knew about: Berkshire's quarterly report indicated that the conglomerate had sold nearly half of its 12-figure Apple Inc (NASDAQ: AAPL) investment.

In addition to Apple, Berkshire sold quite a few other stocks, such as its entire position in software company Snowflake Inc (NYSE: SNOW) and about one-fourth of its investment in Capital One Financial (NYSE: COF).

However, there was one other stock-related move Berkshire made during the quarter, and it isn't anywhere to be found in the company's closely watched portfolio.

Berkshire's buyback slowed dramatically in Q2

In the first quarter of 2024, Berkshire Hathaway spent about $2.6 billion on share repurchases, or buybacks. In the second quarter, the company spent just $0.3 billion. That's a big slowdown.

Berkshire breaks down its buyback activity month by month in its quarterly reports, so here are the details of this year's repurchases.

Data source: Berkshire Hathaway quarterly reports. The average share price is calculated as one class A share equals 1,500 class B shares.

Does Buffett think Berkshire is too expensive?

First, Berkshire's buyback plan has two main conditions that must be met before any share repurchases can take place.

• The company cannot be left with less than $30 billion in cash and short-term investments after the buybacks occur. Berkshire has $277 billion on its balance sheet, and has had a 12-figure sum for a long time, so this has yet to be an obstacle.
• Warren Buffett must believe that Berkshire trades for less than its intrinsic value, using a conservative analysis. It used to require him and vice chairman Charlie Munger, who passed away last year, to agree.

So, to be perfectly clear, if Berkshire is buying back any stock at all, it means that Buffett thinks it's still cheap. With the exception of June, when no buybacks occurred whatsoever, Buffett clearly believed Berkshire was trading for less than the true value of the company.

Interestingly, for much of June, Berkshire's stock price was lower than the average price it paid to buy back shares in May, and even in February, which was by far the most active month of the year for buybacks. But if Berkshire's other stock market moves, such as the massive Apple sale, are any indication, Buffett may be taking a more cautious approach to capital allocation for the time being.

However, as of this writing, Berkshire Hathaway trades for about $444 per share, which is significantly higher than any price Buffett and his team have paid to buy back shares throughout its history. In other words, Berkshire has never traded at a price this high, other than in the past few weeks, so we won't know if Buffett thinks the current price is a good value until we see Berkshire's buyback activity, or lack thereof, for the third quarter.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post It isn't just Apple: Warren Buffett could be souring on this other megacap stock appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Matt Frankel has positions in Berkshire Hathaway.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, and Snowflake. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.