Media Moves and News

Coverage: Amazon crushes Wall Street expectations

July 29, 2016

Posted by Chris Roush

AmazonOnline retailer Amazon.com Inc. reported second-quarter earnings that crushed Wall Street expectations, sending its stock higher in after-hours trading.

Krystina Gustafson of CNBC.com had the news:

The online retailer reported earnings per share of $1.78 adjusted, easily sweeping past expectations for $1.11, according to a Thomson Reuters consensus estimate. Revenue came in at $30.4 billion, also beating forecasts of $29.55 billion.

That compared with net income of $92 million, or 19 cents per diluted share, in second quarter 2015.

The company’s shares initially dipped following its announcement, but then inflected higher. Amazon stock is up more than 40 percent over the past year.

“Obviously this has been an incredibly strong stock since February or March so the bar is very high here,” said Edward Yruma, an analyst at KeyBanc Capital Markets.

Investors have been keeping a close eye on Amazon’s profits, with the second quarter marking its fifth-straight period of profitability. The company has invested to lower delivery costs and increase online media offerings to its members.

Eugene Kim of Business Insider noted that the profit is unusual for a company known for reinvesting in its operations:

Amazon had $857 million in net profit, its fifth straight profitable quarter, an anomaly for a company known for investing in growth over profits. Operating income came in at $1.3 billion, nearly triple last year’s $464 million.

When asked if this a sign of Amazon’s investment opportunities drying up, Amazon CFO Brian Olsavsky said that’s not the case, stressing its investments in video content, fulfillment centers, and AWS for the remainder of the year. Instead, he said it’s an indication of the company’s “operating efficiency.”

“I would not take our financial results as an indication of we’re running out of investment opportunities in any way, shape, or form,” he said during a press call.

Amazon gave third quarter revenue guidance in the range of $31 billion to $33.5 billion, close to street estimates of $31.6 billion.

Amazon Web Services continues to be Amazon’s fastest-growing and most profitable business. Its revenue grew another 58% year-over-year to $2.88 billion, while posting $718 million in operating income, which is bigger than the $702 operating income its North America retail business recorded.

Kate Vinton of Forbes notes that  the stock price increase makes CEO Jeff Bezos the third-richest man in the world:

Bezos gained $1.3 billion during trading on Thursday, passing investor Warren Buffett by $300 million and ending the day as the world’s third richest person; he briefly passed Buffett on Friday for the first time but by end of that day had slipped back to fourth. Bezos then gained another $1.3 billion in after-hours trading on Thursday, putting him $1.5 billion ahead of Buffett.

As expected, Amazon’s second quarter earnings beat analyst estimates for both profit and revenue. Amazon’s reported profit of $1.78 per share was well above analyst estimates of $1.11 per shares. Revenue grew 31% in the second quarter to $30.4 billion, surpassing analyst estimates by $900 million.

In April 2016, Bezos had an even bigger bump following Amazon’s first quarter earnings report, gaining $6 billion in after-hours trading. At that time, he was still $9 billion behind Buffett. Since then Amazon stock has risen 24% as of markets close on Thursday while Berkshire Hathaway stock has dropped 2%. Additionally, Buffett made his annual charitable donation in mid-July, which lowered his net worth by $2.9 billion.

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