Amazon has reported a significant boost in its quarterly profits, though the company fell short of revenue estimates, resulting in a decline in its stock price in after-hours trading. For the April-June period, Amazon reported earnings of $13.5 billion, surpassing the $10.99 billion anticipated by industry analysts surveyed by FactSet. This marks a notable increase from the $6.7 billion earned during the same period last year.
Earnings per share for the second quarter came out to $1.26, exceeding analysts’ expectations of $1.03. Despite these strong profit numbers, Amazon’s stock dropped by over 6% following the closing bell due to the company’s revenue results. Amazon posted revenue of $148 billion, a 10% increase that fell slightly below the analyst expectations of $148.67 billion.
Looking ahead, Amazon expects its revenue for the current quarter, ending September 30, to range between $154 billion and $158.5 billion. This forecast is lower than the $158.22 billion projected by analysts.
Amazon’s financial performance during the COVID-19 pandemic saw a significant increase in spending to meet the surge in demand from consumers reliant on online shopping. However, as demand normalized and broader economic conditions impacted other areas of its business, the company undertook aggressive cost-cutting measures. These included eliminating unprofitable businesses and laying off over 27,000 corporate employees. These efforts have contributed to growth in profits.
One of Amazon’s bright spots is its cloud computing unit, Amazon Web Services (AWS), which experienced a 19% revenue jump compared to the same period last year. The buzz around generative artificial intelligence has helped reaccelerate AWS growth. Amazon CEO Andy Jassy highlighted the progress in AWS growth, stating, “We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth.”
AWS has been attracting more customers with new tools like Amazon Bedrock, a service that provides companies with access to AI models for their applications. Jassy previously mentioned that AWS was on track for $100 billion in annual revenue. To support this growth, Amazon’s capital expenditures for the first half of the year exceeded $30 billion, primarily aimed at enhancing AWS infrastructure. This spending is expected to increase in the second half of the year.
Chief Financial Officer Brian Olsavsky noted that Amazon has been ramping up investments in data centres, chips, and power for AI workloads. The company plans to invest billions in additional infrastructure in locations such as Saudi Arabia, Mexico, and Mississippi, where it has secured state incentives for building data centre complexes. Olsavsky emphasized the importance of efficiently matching supply and demand.
Amazon’s core e-commerce business saw a 5% revenue growth, which was slower compared to recent quarters. Notably, these figures did not include sales from Amazon’s Prime Day discount event held last month. Olsavsky attributed the revenue shortfall in North America to cautious consumer spending and a shift towards cheaper items.
Meanwhile, Amazon’s advertising business, primarily driven by ad listings on its online platform, saw a 20% increase in sales. Earlier this year, Amazon began placing ads on movies and TV shows on its Prime Video service to generate additional revenue. Prime Video also recently signed an 11-year media rights deal with the National Basketball Association.
Despite these gains, Amazon faces several challenges. Federal regulators recently held Amazon responsible for the recall of over 400,000 hazardous products sold on its platform by third-party sellers. Additionally, Amazon is contending with an antitrust lawsuit alleging overcharging sellers and stifling competition.
Amazon’s earnings report follows similar reports from other tech giants, including Microsoft, Meta, and Alphabet Inc., Google’s parent company.
