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Retail monster Amazon.com reported mixed second quarter earnings Thursday, beating on revenue but missing on EPS. The growth in AWS sales fell from 41% in Q1 to first sub-40% growth in five years. $AMZN guided 3Q revenue higher from $66 billion to $70 billion

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CEO Jeff Bezos Adding To His 'World's Richest Man Stats

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

$5.22 Missed $5.57 EPS Forecast and $63.4 Beat $62.5 Billion Forecast in Revenue 

Earnings

Amazon.com Inc. (NASDAQ: AMZN) reported second-quarter results after the close on Thursday. Operating income rose modestly to $3.1 billion compared to $3 billion reported last year. The modest growth was primarily due to 21% increase in operating expenses primarily related to fulfilment, marketing and technology related investments.

EPS was $5.22 missing $5.57 according to analysts surveyed by Refinitiv and revenue of $63.4 billion vs. $62.5 billion, according to Refinitiv. The cloud business, AWS reported $8.38 billion vs. $8.5 billion, according to analysts surveyed by FactSet

 

Amazon.com Inc NASDAQ: AMZN

Market  Reaction: After hours 1,924.50 −49.32 (2.50%)

Earnings Highlights

  • “Other” category, which includes Amazon’s fast-growing ad business, revenue climbed 37% to $3 billion.
  • International sales grew 12% to $16.4 billion.
  • Physical stores, which includes Whole Foods, remained flat, recording $4.3 billion in sales
  • Meanwhile, the company is facing heightened regulatory scrutiny, with antitrust officials in the U.S. and EU launching investigations into the company’s business practices.
  • Earlier this month Amazon Prime Day set another sales record during the two-day sales promotion,
  • During the second-quarter, Amazon rolled out a new round of discounts across hundreds of products at its Whole Foods stores, while expanding the grocery store’s delivery footprint to more regions in the U.S.
  • It also announced a partnership with Rite Aid that allows customers to pick up their Amazon packages in-store.
  • In June, Amazon’s first re: Mars conference took place, where CEO Jeff Bezos share more details on Project Kuiper, its plan to launch over 3,200 satellites to improve broadband connection.

Amazon.com Q2 2019 earnings

Commenting on the Prime Day event and one-day shipping program, CEO Jeff Bezos said, “Customers are responding to Prime’s move to one-day delivery — we’ve received a lot of positive feedback and seen accelerating sales growth. Free one-day delivery is now available to Prime members on more than ten million items, and we’re just getting started.”

Outlook

Amazon’s raised third-quarter revenue guidance of $66 billion to $70 billion which exceeded street estimates of $67.27 billion, according to FactSet. Amazon expects Q3 operating income to be between $2.1 billion and $3.1 billion, a marked reduction from the $3.7 billion reported in the prior year period. The street is anticipating  adjusted EPS of $6.64 per share, up 16% from last year. The, Q3 performance would include the Prime Day numbers.

 

What Analysts Will Be Watching

Prime Membership

Earlier in July Amazon Prime Day set another sales record during the two-day sales promotion,

e-Commerce Expansion

Investors will want to hear Amazon's  e-commerce expansion into retail markets like apparel and grocery, in particular Wholefoods.

Which new addressable markets is Amazon attacking, across grocery, pharmaceuticals, gaming and others?

Amazon Web Sevices (AWS)

The biggie is cloud behemoth Amazon Web Services (AWS) cloud. Microsoft and SAP both reported robust Cloud numbers. The big question is that from AWS or new customers?


AWS architecture

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 produced $1.4 billion in operating income in the first quarter. That accounted for 73 percent of Amazon's operating income in Q1 and continues to grow.

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

Brick and Mortar Acquisitions and Partnerships

Over the past few years Amazon has been on a buying spree with WholeFoods, talk of Amazon Moving Into Real Estate and last quarter the deal with Sears where Kenmore appliances will be sold through Amazon. Investors will be looking for updates on these and others and a clarification of just what is their strategy going forward. One I would like to hear is about the Whole Foods locations and the $400 billion plus pharmacy market.

There is retail partnerships like this with Kohl’s Corporation $KSS. Amazon will  start selling smart-home products in Kohl’s stores and cater for product returns. With Whole Foods, Sear and now Kohls Amazon is stealthly building brick-and-mortar retail for it's digital base.

 

Source: Amazon.com AlphaStreet

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