Retail monster Amazon.com reported much stronger June quarter revenue Thursday and raised guidance for Q3 sending the shares sharply higher. It was Amazon’s biggest earnings beat since Q4 2020 with the ongoing cost-cutting improving margins. Amazon was the last of the mega-cap tech companies to report, following Netflix, Microsoft, Apple, Intel, Meta and Alphabet. AMZN reported net income of $6.7 billion, or 65 cents a share, after recording a loss of $2 billion, or 20 cents a share, a year earlier. The year-ago loss was the result of a markdown on the company’s investment in electric vehicle company Rivian.
Amazon.com Inc. (NASDAQ: $AMZN) Reported After Close Thursday
Earnings release: 4:01 p.m.; conference call: 5:30 p.m.
Amazon Q2 23 Earnings:
Here are the key numbers:
- EPS: 65 cents vs. 35 cents expected, according to analysts surveyed by Refinitiv
- Revenue: $134.4 billion vs. $131.5 billion expected, according to analysts surveyed by Refinitiv
- Amazon Web Services: $22.1 billion vs. $21.8 billion in revenue, according to StreetAccount
- Advertising: $10.7 billion vs. $10.4 billion in revenue, according to StreetAccount
AMZN: Stock Market Reaction
- $139.57 +10.66 (8.27%) Close
- $139.57 +0.16 (0.11%) past year
- $139.57 +47.183 (51.07%) past 5 years
- 52wk High $146.57
- 52wk Low $81.43
Advertising
Advertising quarterly revenue jumped 22% in the period to $10.7 billion. Google’s ad revenue rose just 3.2% in the second quarter and Facebook’s rose 12%.
Prime
Amazon 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.
- U.S. online sales rose 6.1% to $12.7 billion during Amazon’s Prime Day promotion, according to Adobe Analytics.
- Amazon said shoppers purchased more than 375 million items during this year’s Prime Day, up from 300 million last year.
- Home goods, fashion and beauty were among the top categories during the discount bonanza.
Amazon said Prime members don’t appear to be ditching their memberships to cut costs in the face of inflation.
Customers spent less on discretionary categories and shifted to lower-priced items and value brands in categories like electronics. However, they continued to spend on everyday essentials such as consumables, beauty and soft lines.
Amazon earlier this year 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)
- Sales at AWS climbed 12% in the second quarter to $22.1 billion, above the $21.8 billion projected by Wall Street.
- It is a deceleration from the prior quarter, when sales expanded 16%, and the slowest growth since 2015, when Amazon began breaking out cloud revenue.
- AWS accounted for 70% of Amazon’s $7.7 billion in operating profit.
Starting back in the middle of Q3, Amazon saw its AWS growth rate slow as enterprises of all sizes evaluated ways to optimize their cloud spending. As expected, these optimization efforts continued into Q4 and the company expects they will continue to be a headwind to AWS growth in at least the next couple of quarters.
In January, AWS revenue growth was in the mid-teens. The weakness is across all industries, with particular weakness seen from mortgage companies that are seeing lower volumes. Companies involved in crypto and advertising are also spending less. The silver lining here is that its new customer pipeline remains healthy.
During the fourth quarter AWS launched its second cloud data center region in the United Arab Emirates, and it announced the availability of “serverless” services that help developers deploy data-analytics tools with minimal server-management work.
American Web Services (AWS) Background
Amazon launched AWS in 2006 and controlled about 39% of the cloud infrastructure market in 2021, down from 41% in 2020, according to estimates from technology industry researcher Gartner. Google
, Huawei and Microsoft all gained share last year, Gartner said. The industry has seen steady growth as businesses continue to offload their computing and storage to the cloud.
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. Microsoft and Google are currently expanding much faster and picking up share.
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
For the third quarter,
- Amazon expects sales of between $138 billion and $143 billion, or growth of between 9% and 13%. Analysts were expecting revenue of $138.25 billion, according to Refinitiv.
- The guidance reflects the strength of Amazon’s 48-hour Prime Day discount event, held in July, which the company touted as its “biggest ever.”
Amazon has returned to double-digit growth after expansion was mired in the single digits for five of the past six quarters. Jassy, attributed some of the improvement to AWS, which had previously been seeing clients slow their spending due to economic uncertainty.
“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment,” Jassy said in a statement.
From The TradersCommunity News Desk