Apple took to the stage to share all of the operating system (OS) and software innovation it has been working on for the last few quarters. While there were no monumentally groundbreaking announcements, there were some highlights to cover. We’ll explore all of them here.

Apple unveiled the 2nd generation of its Vision Pro “spatial computing” OS. It comes with added hand movement features for easier device control and easy content sharing to reminisce with loved ones across the globe. It also features a spatial photo tool that is compatible with iPhone and Canon's newest cameras. Speaking of iPhone compatibility, you can now shoot spatial video right from your phone to more immersively relive those moments in the future. Society continues to march closer to Black Mirror being more realistic than it seemed a few years ago. Fascinating, fun and spooky. 

Vision Pro offers wireless Macbook compatibility to easily expand your most familiar workspace. Apple is not really innovating at a rapid clip, but it doesn’t really need to when its ecosystem is this dominant and sticky. More hardware interoperability like this will merely support that special formula. As I frequently say, it’s Apple’s blue text bubble world and we’re willfully living in it (myself included).

The company made a batch of new application programming interfaces (APIs) to allow talented developers to build custom apps on top of this software. That should broaden Vision Pro’s overall utility over time if consumer momentum can improve. Developers just want to build for wherever the traffic is. Volumetric APIs allow for multiple 3D apps to be run side-by-side; its Tabletop API makes it easy to build app visuals that appear fixed to flat, physical surfaces. You can imagine how that would be compelling for architects building a blueprint of friends playing Catan. Enterprise APIs are its industry-specific tools to build things such as zero-stakes surgical training exercises. 

While there have been reports about somewhat underwhelming headset sales (just like for Meta in the past), it’s full speed ahead here for Apple as it gears up to launch in 8 more countries this year. And I think that makes a lot of sense… 

Apple dominates the smart-phone industry in North America and, to a lesser extent, across the globe. There is a good chance that this mobile computing wave shifts from screens to something that looks like a pair of Ray Bans in the future. Apple needs to make sure it is insulated from that competitive threat, even if it never actually manifests. The grave mistake would be ignoring this evolution as a potential outcome, and not investing to make sure it will be part of it. It certainly has the money to spend and then some. Accepting some losses here seems like a correct business decision.

Two things are true about Apple in my view. First, its moat is world-class and its ecosystem is a fortress. Second, the innovation engine does seem to have slowed just a bit. Nothing alarming… just some gradual apparent slowing. The deepest moats have a way of training companies to grow complacent when it comes to innovating. Apple has already won the market, so why change anything? 

We can see how that philosophy plays out within areas like utilities, where customer service is frustrating and experiences are often poor. Where else are you going to go for electricity and water?

I think the “why change anything” idea can apply to Apple in this case. The poor customer outcomes idea does not. Apple’s customer satisfaction ratings are nearly 100% across all products. They still make great hardware. But? To drive the next 20+ years of profitable compounding, that great hardware will need constant improvement and some occasional overhauling. So? This focus on Vision Pro should be taken as a great sign to investors that Apple isn’t satisfied by simply resting on its laurels. There will be some other ubiquitous device after the iPhone. Apple wants to be the centerpiece of that transition.

Changes here included an app icon dark mode, home screen customization, scheduled texts, bolded/underlined font, and more emojis for text tapbacks. These were all subtle. The most interesting debuts were as follows. Apple now has a “lock an app” or “hide an app” function to augment iPhone privacy. Not everyone wants the world to know they use Tinder or Hinge. Now, you can pass a phone to your friend knowing they won’t access or even see the app without you wanting them to.

I think the coolest feature announced at the event was satellite messaging for iMessage. With no cell service, users can easily tap into this form of connectivity to send a message on the go. My mind turns to all of the hiking trips I’ve done and how comforting it would’ve been to know I could phone a family member in even the most remote locations. This also works for SMS. Apple Pay added a few minor tweaks to payment sharing. These tweaks included sending cash to a nearby iPhone by hovering yours near it and making Apple Pay rewards more intuitive. More on this in the PayPal section of this article. 

For Watch OS, Apple created a new vitals app for denser health metric tracking. It also introduced pregnancy cycle tracking and turn-by-turn directions for hikes across national parks. 

For iPad OS 18, Apple introduced the long awaited calculator app that has been on the iPhone for over a decade. It did go a bit deeper within math applications. The magic pencil + the new math app can solve expressions and tweak answers as those expressions are altered. This isn’t just for basic arithmetic, but more complex problems such as measuring a ping pong ball’s trajectory based on speed and loft of contact.

The new notes app now automatically improves the appearance of handwriting. Need to frantically take notes as you listen to an earnings conference (or just let me do it for you)? Apple will make sure they’re legible. Simply cross out that text to have it erased.

The focus for Mac OS was on driving even better product interoperability to nurture the fortress ecosystem. It introduced iPhone mirroring to see what’s on an iPhone screen from your laptop. It teased use cases like getting a notification to complete a Duolingo lesson and finishing it right from your laptop. You can also easily export content from one device to another with a simple drag and drop. It now offers Keychain Password Management to help organize and store logins (tough day to be One Password).

AI was a large focus area for this year’s event. Apple, in their own quirky and often ingenious way, is calling Artificial Intelligence “Apple Intelligence” and/or “Personal Intelligence.” Cheesy… but they can get away with Cheesy.

Apple doesn’t build the most powerful and accurate models and doesn’t seem to be interested in participating in the arms race to get there. The firm is going about this in a different way than Meta, Amazon or Microsoft/OpenAI. Apple is taking advantage of the unmatched customer data profile it has on all of us… across all of our apps and interactions… to craft more localized models specific to our own identities. Models become valuable when they’re trained on larger sums of highly relevant data. It doesn’t get much more relevant than these granularly-trained models… hence the term personal intelligence. Some basic use cases include:

While Apple rolled out the original chat bot (Siri), its chatbot today is far behind others on the market. A lot of its work on localized models and Apple Silicon (high performance compute chips) is addressing this gap. It’s also partnering with OpenAI’s ChatGPT to augment and deepen Siri’s use cases. This should be a massive shot in the arm for what that conversational app can do – including a boatload of actionable task completion options. Task completion is augmented by a “semantic index” function that can organize and connect data dots across a user’s apps.

For better security, the GenAI models within its new operating systems will process queries on devices. This is facilitated by Apple's newest chips (like the A17 Pro). To Apple, on-device processing means the models will be “aware of your personal data, without collecting it,” storing it and using it like many others do. The models only access the needed context to deliver a specific answer. Data is not stored by Apple.

As the team explained, some queries require more computation power than can be jammed into a small iPhone today. To tap into more flexible capacity, without sacrificing data security, Apple created a Private Cloud. This hosts queries, fields them and resolves them without the same impermissible data storage and usage routinely done by others. The code is open for inspection from 3rd party experts to ensure Apple is keeping its word here.

EPS actually fell a bit Y/Y. This isn’t concerning. It’s related to a 20% tax rate vs. a 9% rate Y/Y. Pre-tax income rose by 14% Y/Y. With stable tax rates, EPS would have risen by 12% Y/Y.

“Looking forward, as we continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also expand operating margin.”

CEO Safra Catz

Oracle guided to 10%+ revenue growth for fiscal year 2025 compared to 8.6% Y/Y growth expected. This is excellent. It sees growth ramping all year. The pipeline expansion is outpacing bookings growth and win rates are rising. Finally, capital expenditures (CapEx) are expected to rise by 100% Y/Y next year.

Its 6% Y/Y Q1 growth guide missed 7.5% Y/Y estimates. Its Q1 GAAP EPS guidance handsomely beat and its non-GAAP EPS guidance met.

Oracle trades for 22x earnings, with earnings expected to grow by 9% Y/Y.

While Oracle took a little longer to roll out high performance infrastructure and apps to take its piece of the GenAI wave, it has now arrived. Q4 netted its largest contract wins ever as it successfully transitions from one-time licensing fees, to larger, multi-year cloud subscriptions. Its cloud infrastructure segment continues to thrive while its cloud services segment does too. For evidence, it now has 30 signed AI contracts worth $12.5 billion vs. just $4.5 billion sequentially. So how is it winning and guiding to such impressive FY 2025 numbers?

This is mainly being facilitated by “huge demand” to train large language models (LLMs) and its highly flexible Oracle Cloud Infrastructure (OCI) architecture. OCI allows for multi, private, sovereign & dedicated cloud deployments across all major providers. Its cloud services are also highly autonomous and cheap to implement, which is highly popular in today’s cost-conscious world. You can see that strong demand in its 14% Y/Y Fusion Cloud growth. Fusion is its suite of cloud apps. 

To build on this cost advantage, per Founder/Chairman Larry Ellison, OCI can move data faster than anyone else, thanks to its superior cross-cloud interoperability. And “when you charge by the minute,” time is money. It thinks it’s several times faster and cheaper when it comes to training models. This formula is why Nvidia, Microsoft, Google, XAI, OpenAI, Cohere and many more are using Oracle cloud services and data centers. More on Microsoft and Google shortly.

Total cloud revenue growth ex-Cerner M&A was 23% Y/Y vs. 20% Y/Y overall. Cerner is the electronic record provider (ERP) it purchased to bolster presence within healthcare information technology (IT). Cerner is transitioning from one-time license purchases (with large initial revenue recognition) to recurring subscriptions over time. This weighed on growth throughout fiscal year 2024. Growth will be positive in 2025.

The explosive RPO growth (and the guide) is proof of Oracle’s cloud transition going well and momentum merely building into 2025. RPO growth will directly lead to revenue growth as Oracle gets more infrastructure online and resolves current capacity bottlenecks. That should play out over the next 12 months while it rapidly builds new data centers.

“We are trading one time, non-recurring licensing revenue in return for much bigger, strategic customer commitments for multiyear cloud revenue.”

CEO Safra Katz

Oracle and Azure have been deepening their partnership in recent months. Oracle is building 23 OCI data centers to support Open AI and ChatGPT deep learning workloads. This will “turbocharge database growth” and allow customers to run any Oracle database product with Azure. That should be very valuable to shared customers and the two providers as well. Knowing the world is embracing a multi-cloud approach, Oracle just struck an agreement with Google Cloud to build 12 data centers to support them. This will go live in September. Both of these agreements should be quite needle-moving to financial results, but haven’t begun to show up in its numbers just yet. The uplift to growth from these relationships is entirely ahead of Oracle. It wants to do a similar deal with AWS. 

It also talked up a $600 million contract to help a “very large” enterprise technology firm transform their operations. It displaced many of its toughest competitors in the process of winning this bid.

This is the kind of quarter that can morph a dinosaur back into a darling in a hurry. Leading AI players are lining up to tap into Oracle’s cheaper and more flexible high performance assets. The forward growth guide for the full year is excellent (bit soft for Q1) and the commentary surrounding AI contract growth and the pipeline is heartening to say the least. Fantastic quarter for a legacy tech firm that looks to be waking back up. Welcome back, Oracle.

Apple announced a new form factor for Apple Pay. With it, a user can hover their phone over another iPhone to send money. Aside from security concerns, I have a few thoughts on this and how it could impact Venmo, Cash App (Block) and PayPal peer-to-peer volume. First, this is not really new. It’s a slightly tweaked and updated version of what has already existed for years. This is simply a different (and admittedly cooler) interface for conducting the same in-person payment flows. Next, this only works if you’re standing right next to someone. For all other payment types, this will not work. 

The most important takeaway here, however, is that competition is not new. It is inevitable that large players will want a piece of this pie and that they’ll innovate. While I don’t see this new product as groundbreaking, I do see Apple as PayPal’s largest threat in North America (Google elsewhere due to different Smartphone adoption patterns). Apple has a pristine brand, a massive consumer network and as much money as it needs to invest into this opportunity. 

PayPal must innovate faster and must bring its mobile checkout up to par with other players. It must stop seemingly trying to cede its leading e-commerce checkout share position. Apple will keep rolling out new products. It is up to PayPal to deliver enough consumer and merchant value to enable it to compete. That innovation delivery hasn’t happened in a long time. I see that clearly happening with the new team.

I think in a few years this PayPal vs. Apple/Google debate will turn out to be similar to the PayPal vs. card network debates from a decade ago. Visa and Mastercard were going to kill PayPal… until they all partnered and played nice. Last year, PayPal integrated right into the Apple Wallet as the two companies began to show signs of warming up to one another. After all, PayPal represents hundreds of millions of consumers and a massive, industry leading merchant adoption rate. Visa and Mastercard, despite their oligopoly-like market dynamic, saw the value in this scale. Apple, without this same market power in payments, will too. That’s my view.

This should become increasingly true as PayPal revs the product cadence engine and takes advantage of its unmatched data moat. And if I’m wrong? E-commerce is a massive market. Guest checkout is still the largest part of this massive market. Apple will likely take its fair share. That does not at all mean PayPal can’t.

CFO Jamie Miller echoed CEO Alex Chriss’s excitement from last week on the new team working well together. She cited a lot of “self-help” opportunities to fix, which is her way of saying the old team did not perform as well as they needed to. The company under-invested in key growth areas like mobile checkout, spread bets too thinly across random assets and moved too slowly. She sees all of these issues as being addressed and, when paired with the very lower stock valuation, thinks “she can really have an impact.”

The old architecture of PayPal was jumbled together, poorly-integrated and unorganized. It’s very hard to rapidly deliver innovation for specific use cases when that is your foundation. It’s like attempting to run with your feet tied to 8 other people… who all speak a different language. The end result? Constant, self-inflicted stumbles. But that old team’s failures are this team’s easy opportunities to devour low hanging fruit.

There are two compelling examples from the disaggregation and reorganizing of PayPal. First is simply its reclassification of revenue into enterprise, small business and consumer buckets. The second item is new to me and investors. PayPal is reshuffling its financing division to cater to these three categories in a more focused manner. Consumers have different financing needs than small businesses; small businesses have different financing needs than billion dollar brands. PayPal’s go-to-market approach now reflects this. 

The branded checkout resilience that endured through Q1 has lasted into Q2. Miller was asked about Chriss’s quote last week saying EPS is running ahead of guidance. She reiterated this with some vital context. The EPS growth is being powered by transaction margin strength within branded checkout and early pricing actions within Braintree. Other transitory factors like lower credit losses, marketing delays and higher net interest income on balances helped transaction margin too. But branded was a key factor in this positive surprise; that is still the case as of today (June 11th).

EPS growth can only compound for so long from non-transactional OpEx cuts. As I’ve said countless times, transaction margin needs to stabilize and ideally expand from here for this to be a profit grower in the years ahead. That seems to be happening… and new initiatives like Fastlane (as well as the bulk of Braintree price hikes still to come) have not yet even begun to kick-in. 

“Conversations around Braintree pricing are really healthy. When you look at how we have priced compared to peers, we haven’t always priced to value. We’ve given a lot away for free. We’re in a different position now, which is exciting.”

CFO Jamie Miller

“The Braintree product has the highest authorization, performance and availability rates. It’s best-in-class compared to our peers (Stripe and Adyen).”

CFO Jamie Miller

Still, there are more non-transactional OpEx cuts to make. PayPal is re-visiting every flow, team and function to incorporate automation wherever possible. There’s a lot to do here and progress will “not be linear but is being made.”

We’ve covered how this product unleashes PayPal’s data moat to recognize a larger percentage of guest checkout (60% of total checkout). That creates a best-in-class, auto-populated checkout experience for non-digital wallet users. We got a few more notes on this product:

She did say they will “incentivize usage” for Fastlane early, which mirrors Chriss’s prior comments on pricing it more aggressively out of the gate. They want to maximize early adoption heading into the holidays. Still, she also added that PayPal will “price to value.” They are not abandoning the new profitable growth focus for this debut.

“Merchants are just excited to see us innovating again (shots fired at the old team).”

CFO Jamie Miller

The re-designed PayPal app, with more intuitive and actionable shopper rewards, is delivering needed benefits. Miller wouldn’t quantity much, but she did tell us that weekly logins since the launch are rising.

On the Venmo side, it was more of the same. Its consumers are fiercely loyal, affluent and craving more products from Venmo the verb. The primary goal is to provide better services so the $18 billion in monthly volume doesn’t immediately leave the ecosystem. There is a miles-long runway to successfully cross-sell more compelling products to these passionate fans. And as it does, stickier deposits should bolster net interest income too.

“The consumer has been very resilient. The environment feels like it did last year.”

CFO Jamie Miller

Celsius leadership sat down with Evercore ISI for an interview today. The timing was pretty perfect, given the stock’s recent volatility and some negative headlines. The chat was highly valuable and we’ll cover it here.

The team was immediately asked about weak energy drink scanner data from the month of May and leading into June. They explicitly called the growth “disappointing” and “below expectations” while offering some uncertainty on where it was coming from. Again, this is for the category as a whole and not just Celsius. Some potential sources of weakness include weather and general macro anxiety. There were also delays to resets from convenience stores and grocery chains, with “no clear direction on why.” It thinks this is due to labor shortages. Considering how much incremental shelf space CELH is winning annually, delays hold back its growth more than anyone else in the space. Despite the delays, it got a “lot of new space and better placement” with key distribution partners, and it thinks this should help scanner data improve in the coming months. It wouldn’t commit to that, but did say this “was the plan.”

Notably, growth for the category is still positive, but negative when excluding Celsius. While Celsius growth is still firmly positive, it has slowed from 50% to just below 40% as of mid-May. Building on those concerns was the fact that mid-May Nielsen data pointed to its market share dipping from 10.8% to 10.5%. That data is for a single week, and full month data (which is far less noisy) still points to 11.5% market share and strong Y/Y gains per the team.

In my outsider opinion, slowing growth is somewhat inevitable when you’re lapping the explosive expansion enjoyed last year, when Pepsi is still optimizing inventory on hand and while the macro-backdrop is worsening. Energy drinks are insulated from macro cycles, but they’re not immune. I would think the Pepsi issue is the most pressing one, and also should be very temporary. Continued optimizations this quarter will weigh on revenue by $20 million to $30 million, but the sell-side was already expecting a hit. Celsius also added that optimizations are likely wrapping up and depletion rates with Pepsi remain very strong to point to resilient demand. It doesn’t see Pepsi headwinds persisting in the second half of the year.

Between the successful (albeit delayed) inventory reset season and several new product launches coming, the opportunity for this company remains massive in the eyes of the team. Its non-carbonated beverage line is performing very well out of the gate, while its larger 16 ounce can is resonating in convenience stores as well. These are both looking to be mostly incremental to overall sales. The non-carbonated product specifically is also helping it take more market share from cold coffee options, as people who just don’t like bubbly drinks can now enjoy this one.

The team hinted at contemplating some price hikes for some products in the near future. It sees significant opportunity for continued operating leverage in the coming quarters and years.

Products are flying off the shelves in Canada early on. It’s also enjoying a nice base of brand awareness in Australia, despite not having launched there just yet. This is the power of its global influencer network and the Formula 1 deal.

Half of Coin’s assets under management are now held by institutions rather than retail. Market makers and professional traders continue to flock to the platform. Now, especially with Bitcoin ETFs and Ethereum ETF momentum, asset managers, pensions, endowments and general corporate clients are starting to deliver more volume and demand. 

The most popular product for Coinbase Prime (its platform for institutions) is custody or the secure handling of digital assets on behalf of a client. Coinbase Prime offers even more secure handling vs. its secure storage offering through digital wallets.

To the team, Coinbase’s differentiation is helped by its combination of custody services and liquid trading as well. Newer products, such as ETFs, futures, derivatives and spot market offerings, should help. The spot market product specifically should continue to bolster institutional trading volume with better support for larger trades and enhanced liquidity to diminish price volatility associated with making these trades. 

Coinbase leadership is pleased that spot market regulatory authority was granted to the Commodity Futures Trading Commission (CFTC). It has long argued that crypto assets are all commodities and has advocated for this entity controlling rules. The “FIT21” bill is what delegated authority to CFTC.

The ETFs are also opening the floodgate for more hedge fund activity to build on the 33% of top 100 U.S. hedge funds actively using Coinbase. It’s allowing the big boys to clear larger trades and make playing in this category more worth their time. Tusar is “pleasantly surprised” with early Bitcoin ETF volume and even more pleasantly surprised with Ethereum ETF approval.

“Bitcoin ETFs have really taken the institutional category up several notches.”

VP of Institutional Products Greg Tusar

To continue positive product adoption momentum, Coinbase Prime is also now leaning more heavily into various lending and financing products. Bilateral lending allows for borrowing of dollars or assets with those proceeds secured by crypto assets. Trade financing involves Coinbase financing the float between the trade and settlement date to improve liquidity reliability. Its margin product works like any other prime brokerage in terms of borrowing from Coinbase to bolster balances. Coinbase is using its balance sheet for the first two products mentioned and thinks the margin product can become self-funded through fees. That would be great news in terms of overall credit risk.

Credit and liquidity for crypto are highly important. The sector benefits from things like a lack of card networks to fetch a hefty take rate, but this lack of central credit facilitator means transitions must be prefunded. Whatever Coinbase can do to responsibly make prefunding transactions easier will likely be a positive. Doing more in financing and showing a willingness to take balance sheet risk can help a lot here. I usually prefer a lack of balance sheet risk, but in this case, I view it as a strategic use of cash to entrench COIN more deeply as the de-facto crypto platform. That's my outsider perspective.

The rounding out of Coin’s process menu for transacting crypto is making it a central candidate for more asset management opportunity and volume. This is why it purchased One River Digital Asset Management. Coin’s ability to lump together more services, liquidity and flexibility than anyone else means it can “appeal to asset owners wanting all of these services tied together in a fiduciary wrapper.”

“We have custody competitors and trading competitors. We think we're alone in having a platform that actually connects all of these things together so that an issuer can go from one to the other quite easily.”

VP of Institutional Products Greg Tusar

Coinbase is basically the lone major survivor from the pandemic boom and bust cycle. It had the balance sheet strength and the reputation and actually followed rules while other platforms readily broke them. This shakeout led to some powerful industry consolidation that Coinbase has fully taken advantage of. Institutional demand for crypto did not go away as FTX, Binance and others went away and as leaders went to prison. It just flocked even more strongly to COIN.

Coinbase knows how uncomfortable crypto is for many seasoned professionals in finance. To counteract this, it has fixated on making trading processes similar to stocks, other commodities and anything else of that nature. For example, within its BlackRock Aladdin platform (investment platform) partnership, Coin displays the ability to transact crypto currency in the exact same way a professional buys or sells anything else. It’s these small comfort factors that can potentially add up to inspire more adoption. This willingness to guide legacy institutions like Blackrock through their digital asset journeys is partially how this partnership came to be. And that partnership proved instrumental in Coinbase dominating the custodian landscape for Bitcoin ETF creation.