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In both the lambda calculus ($\lambda$-calculus) and Combinatory Logic (CL), we have the notion of function application. For example:

\begin{array} & \left( \lambda x . x \right) y = y & \text{(function application) } \\ ([ x ] . x) y = y & \text{(function application) } \\ \end{array}

Fair enough. But, in each of these respective systems, how to interpret the following?

\begin{array} \left( \lambda x . \underbrace{xy}_{\text{?}}) \\ ([ x ] . \underbrace{xy}_{\text{?}})\\ \end{array}

Is $xy$ inside these scopes also just function application?

EDIT: To be clear, I know $xy$ doesn't further reduce to anything within these expressions, but I am still curious as to how this term should be interpreted by a human.

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