Amazon Shares Higher on Revenue Beat and Strong Guidance

Retail monster Amazon.com reported stronger June quarter revenue Thursday.  $AMZN stock traded up more than 13% after hours as they guided higher than expected.  Amazon recorded a $3.9 billion loss on its Rivian investment which led to a reported a loss of 20 cents per share on revenue of $121.23 billion vs. $119.09 billion expected. Amazon was the last of the mega-cap tech companies to report. Netflix kicked it off. Microsoft, Apple, Intel, Meta and Alphabet followed.

Amazon new CEO Jassy

Amazon.com Inc. (NASDAQ: $AMZN) Reported After Close Thursday

-($0.20) Missed $0.14 EPS Forecast and $121.2 billion Beat $119.53 Billion Forecast in Revenue 

Earnings release: 4:01 p.m.; conference call: 5:30 p.m.

Amazon Q2 22 Earnings:

Operating income, which excludes the investment-related loss, shrank to $3.3 billion from $7.7 billion a year earlier. AWS generated operating income of $5.7 billion, accounting for all of Amazon’s profit in the period.

Here are the key numbers:

  • Revenue: $121.2 billion (est $119.53billion)
  • Earnings per share (adjusted): -$0.20 (est $0.14)
  • Amazon Web Services: $19.7 billion vs. $19.56 billion expected, according to StreetAccount
  • Advertising: $8.76 billion vs. $8.65 billion expected, according to StreetAccount
  • Amazon recorded a $3.9 billion loss on its Rivian investment
  • Online stores segment declined 4% year over year.
  • Physical store sales continued to rebound from the year-ago period, growing 12%.
  • Amazon cut its headcount by 99,000 people to 1.52 million employees as of the end of the second quarter after almost doubling in size during the pandemic.

Amazon shares popped as much as 13% in extended trading. Should the stock sustain this rally on Friday, it would be the second biggest one-day gain since 2012.

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” CEO Andy Jassy said in a statement.

Advertising

Advertising: $8.76 billion vs. $8.65 billion expected, according to StreetAccount

While advertising has always been viewed as a tangential business for Amazon, the company has had so much success attracting ad dollars that it’s now third in the U.S. market, behind Google and Facebook. Ad revenue climbed 18% in the period. Facebook recorded its first ever drop in revenue and forecast another decline for the third quarter. At Alphabet, advertising growth slowed to 12%, and YouTube showed a dramatic deceleration to 4.8% from 84% a year earlier.

Rivian

Amazon recorded a $3.9 billion loss on its Rivian investment after shares of the electric vehicle maker plunged 49% in the second quarter. That brings its total loss on the investment this year to $11.5 billion.

The Rivian write down saw an Amazon had an overall loss of $2 billion in the quarter. Analysts’ EPS estimates varied dramatically, making it difficult to compare actual results to a consensus number.

The Rivian IPO priced at $78 a share, valuing the company at $66.5 billion. The stock climbed past $172 at its peak, but has since fallen back to about $30. Amazon invested more than $1.3 billion into Rivian, owned 22.4% of the company’s Class A shares prior to the IPO.

Prime

Amazon also has a built-in consumer base of more than 200 million members that is primed to buy more. Members of Amazon’s Prime discount club tend to spend more and order more frequently than non-Prime members, according to market research firm Consumer Intelligence Research Partners.

Amazon said Prime members don’t appear to be ditching their memberships to cut costs in the face of inflation.

“We continue to be pleased with the membership levels and retention in our Prime program,” Olsavsky said. “It was as good or better than we had expected.”

Amazon last quarter hiked the price of its Prime membership for the first time in four years. The company raised the price of its annual Prime membership to $139 from $119. The cost of the monthly Prime membership increased to $14.99 from $12.99. The price change went into effect for new members on Feb. 18, and for current members after March 25.

American Web Services (AWS)

Amazon Web Services: $19.74 billion vs. $19.56 billion expected, according to StreetAccount up 33% from a year earlier.

In cloud-computing infrastructure, Amazon has a substantial market share lead over Microsoft Azure, Google’s Cloud platform and IBM, as well as other players like Alibaba and Oracle. While AWS has maintained growth above 40 percent, Microsoft and Google are currently expanding much faster and picking up share. AWS accounts for around 73 percent of Amazon’s operating income in Q1 and continues to grow.

AWS architecture

AWS is the envy of Apple, Oracle, Google, IBM and every other niche cloud provider. AWS is the leading platform in this growth market.  Amazon Web Services., Amazon’s cloud business in just ten years has become the fifth-largest business software provider in the world.

Amazon has proven that it can diversify beyond e-commerce whilst at the same time Microsoft, Google, IBM and others are all chasing AWS in the cloud.

AWS is almost twice as big as Salesforce

Outlook

Amazon gave an optimistic view of the months ahead.

For the current quarter, Amazon said it expects sales to come in between $125 billion and $130 billion, representing growth of 13% to 17%. Analysts forecast sales of $126.4 billion, according to Refinitiv.

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