Shares of the large lender Capital One (NYSE: COF) were trading nearly 5% higher at noon today. The company reported its first-quarter earnings results after the market closed yesterday, delivering an earnings beat but a slight miss on revenue.

Solid earnings and merger approval

Capital One reported adjusted earnings per share of $4.06, well ahead of analyst estimates. However, revenue of $10 billion came up slightly short of estimates. Meanwhile, credit metrics held up well, with expected loan losses and 30-plus-day delinquencies falling from the previous quarter.

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Furthermore, Capital One recently received regulatory approval for its pending acquisition of Discover Financial Services. The acquisition will add a highly coveted payments arm to Capital One's repertoire while also bringing over a large consumer lending portfolio that will pair nicely with Capital One's current business.

On the earnings call, Capital One's CEO Richard Fairbank said the company expects to achieve the $2.7 billion of network and cost synergies it laid out when initially announcing the acquisition, which is now expected to close on May 18.

Gaining a significant moat

Overall, Capital One's earnings came in solid. While the company is certainly vulnerable to an economic downturn, management is experienced and knows how to navigate choppy waters.

Closing the Discover deal and adding a global payments network is a significant achievement for Capital One. It also makes the company that much more of a compelling buy because there aren't that many companies that can run a payments business at global scale, and this performance won't be easy for competitors to replicate.

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Shares of Apple (NASDAQ: AAPL) are currently 26% below their peak from December last year (as of April 10), a drop that has been spurred by ongoing tariff announcements. As of this writing, there is a huge 145% tariff that's implemented on goods leaving China for the U.S. If this remains in place, it could harm Apple, because 80% of its production is still based in China, according to estimates from Evercore.

For consumers, the result could be much higher prices. If the increased costs are eaten by Apple, on the other hand, its profitability will definitely take a hit. There remains a lot of uncertainty about how things will play out.

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Despite the potential effects, which are commanding all the attention these days, Apple has proven to be successful in another area that highlights growing diversification in the business model. Here's what investors need to know.

Apple's push into financial services

In fiscal 2024 (ended Sept. 28, 2024), Apple generated $391 billion in revenue, of which 75% came from the sale of products. This includes its popular iPhone, Mac, and iPad lineups.

But the company's services division is an up-and-coming money-maker, growing revenue 13% in the latest fiscal year, much faster than the overall business. It represents the other 25% of Apple's total sales.

Within services, Apple is making a bigger push into the financial services realm, where it appears to have developed a strong foothold.

In 2014, the company launched Apple Pay, its digital wallet solution that lets users connect credit and debit cards to use for transactions in-store and online. More than 90% of retailers in the U.S. accept Apple Pay, which has more than 600 million global users and handles trillions of dollars in payment volume. This is undoubtedly becoming a widely used checkout option.

Apple Card was launched in 2019. This is a credit card that gives consumers up to 3% cash back with no fees whatsoever. Apple partnered with Goldman Sachs to handle the program. The credit card portfolio has 12 million customers (data from early 2024) and $20 billion in balances.

Valuable for partners

It was reported that Visa offered the tech titan a cool $100 million to end its relationship with Mastercard, the current card network for Apple Card. American Express is also in the mix. What's more, issuers like JPMorgan Chase, Capital One, Synchrony Financial, and others are reaching out to Goldman Sachs, offering to take over the $20 billion in balances and to handle the program.

It makes sense why these heavyweights in the financial services industry would be trying so hard to be Apple's partner. Apple generates enormous amounts of revenue, and its customers are generally known to be more affluent than average. Consequently, there is a lot of buying power here, which can lead to revenue opportunities for banks and payment networks.

Apple might be facing some headaches due to tariffs and how they can affect its device sales. But its payment and credit card offerings continue to shine brightly. Partners are jockeying for position.

Should you buy Apple stock on the dip?

This gets to the discussion of whether or not Apple shares are a smart buy right now, especially since they are 26% below their record high. The price-to-earnings ratio is better than it was in December -- it's now at a 30.2 multiple.

However, I'm not convinced the tech stock can produce a return over the next five years that can outperform the broader market. Not only is the valuation still elevated, Apple's growth prospects aren't that robust. Plus, there is the unfortunate overhang of the tariff situation.

This is a fantastic business. But investors should pass on buying shares.

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American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Synchrony Financial is an advertising partner of Motley Fool Money. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Goldman Sachs Group, JPMorgan Chase, Mastercard, and Visa. The Motley Fool has a disclosure policy.

The financial market made a quick recovery this week with some of the more volatile names in the industry leading the way. Wenesday's news that tariffs (outside of China) would be delayed by 90 days led to some optimism and even weak economic data late in the week didn't put a damper on the market.

According to data provided by S&P Global Market Intelligence, shares of SoFi Technologies (NASDAQ: SOFI) jumped as much as 11.3% this week, KKR (NYSE: KKR) was up 9.2% at its peak, and Capital One Financial (NYSE: COF) rose 7.4%. The stocks are up 10.6%, 7.5%, and 6%, respectively, as of 2:30 p.m. ET.

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Bouncing off a low

To be fair, the moves this week are compared to last week's market collapse. Shares are still down from the beginning of April, only 11 days ago, and have all fallen so far in 2025.

SOFI data by YCharts

With that perspective, it's hard to call this a durable rally. But investors were betting this week that a delay in some tariffs and potential deals on others would reduce the risk of a recession and therefore defaults on the debt companies like SoFi and Capital One have on their balance sheets. KKR's rise was clearly because asset values are up, and that's a big part of their fee structure.

While the short-term risk may be seen as lower than a few days ago, there are still more risks today than early this year as economists ramp up their expectations for a recession. And making matters worse is the rise in interest rates this week that could make it more costly for companies, consumers, and even the government to refinance debt. Oh, and the dollar is dropping, too.

Taking a step back

Long-term investors will want to take this opportunity to look at the long-term trends in the market and economy. So far in 2025 consumer confidence is down, tariffs and expectations for inflation are up, and interest rates are rising.

Those factors don't bode well for the economy or financial firms, so it'll be a matter of who will survive and thrive through upcoming market turbulence. I don't think we're in for major losses on loans at this point, but the risks for financial companies are leveraged compared to most stocks based on their business models, so earnings and guidance will be worth watching closely.

Ignore the volatility

As these stocks rise and fall rapidly, it's important for investors to keep in mind the long-term goal, which is to buy opportunistically when the market is thinking short-term. I think these companies will be able to manage risks better than what the market saw during the financial crisis and while the recovery may not be smooth I'm starting to dollar-cost average at lower prices. Long-term, any big dips are opportunities for investors.

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Travis Hoium has positions in SoFi Technologies. The Motley Fool has positions in and recommends KKR. The Motley Fool has a disclosure policy.