Amazon.com Inc. forecast strong fall sales and posted a profit that was double Wall Street targets on Thursday thanks to the retailer’s younger, higher-earning businesses, including cloud computing and advertising.
Jeffrey Dastin and Arjun Panchadar of Reuters had the news:
The report was a relief to investors in the U.S. technology sector, still reeling from a profit warning by Facebook Inc Wednesday that plunged its stock 19 percent.
Amazon’s report shows how the world’s largest online retailer has increasingly learned to compensate for the high costs of fast package delivery and video streaming by controlling expenses and building up higher-profit businesses. It was the first mover in the business of selling data storage and computing power in the cloud, a bet that continues to reap rewards and give it the leeway to invest in grand projects.
For instance, the company is working to ship food from Whole Foods Market stores across the United States, in an ambitious attempt to bring groceries into the age of online retail.
Amazon’s spending typically climbs in the summer quarter, pressuring profits as the company prepares for Christmas and the winter holidays, its peak sales period each year.
Eugene Kim of CNBC.com reported that the revenue was below expectations:
Here are the most important numbers:
- EPS: $5.07 vs. $2.50, as estimated, according to Thomson Reuters
- Revenue: $52.9 billion vs. $53.41 billion, as estimated, according to Thomson Reuters
- AWS revenue: $6.1 billion vs. $6 billion, as estimated, according to FactSet
Amazon’s net income saw a whopping twelve-fold increase from the year-ago period, to a record $2.5 billion, marking the third consecutive quarter of surpassing $1 billion in profits. Amazon’s quarterly profit topped the $1 billion threshold for the first time in the fourth quarter of 2017.
The profit expansion is largely driven by the growth of Amazon’s high-margin businesses, like cloud and advertising. Amazon CFO Brian Olsavsky said in a conference call that those two businesses were a “big contributor” to its profit growth, as Amazon’s traditional retail business runs on thin margins. He also credited better efficiencies in Amazon’s warehouses and data centers, as well as the growth of its higher-margin third party marketplace.
Troy Wolverton of Business Insider reported that the company’s North American retail business fared well:
Without the foreign-exchange effect, Amazon’s revenue miss would have been even more dramatic, as its sales growth for the period would have been 37% instead of 39%. Without that boost and a few other minor adjustments, Amazon would have posted $2.07 billion in income for the quarter, or $4.14 a share — which still far exceeded analysts’ forecasts.
But Amazon’s results were more than just a product of a stronger dollar. The company saw strong growth — particularly on the bottom line — in all its business segments. Its North American retail business specifically fared well.
In the period, that segment’s sales rose 44%, to $32.17 billion, boosted in part by the addition of Whole Foods, which Amazon didn’t own in the second quarter last year. More impressively, the North American retail businesses operating profit jumped to $1.84 billion from $436 million last year.
Amazon’s international retail business’ revenue jumped 27% from the year-ago period, to $14.61 billion, and cut its operating loss to $494 million from $724 million a year earlier.
