Amazon Rides To Record Profits On AWS, Ads, Whole Foods; Sales Climb 39%

Amazon Rides To Record Profits On AWS, Ads, Whole Foods; Sales Climb 39%

Amazon reached a record profit as itsnet income grew 12-fold from a year ago, signaling that the e-Commerce giant has a firm grasp on its high-margin businesses. Earnings per share reached $5.07, doubling Thomson Reuters estimates of $2.50 per share and generating a record $2.5 billion in net income for the quarter. This is the third consecutive quarter that Amazon surpassed $1 billion in profits.

Net sales increased 39% to $52.9 billion in Q2, compared with $38.0 billion for the same quarter in 2017, narrowly missing $53.41 billion expectations.In North America, Amazon’s retail sales rose 44% to $32.17 billion, boosted in part by the addition of Whole Foods

Amazon Web Services (AWS) reported $6.1 billion in revenue, up 49%; Microsoft reported an 89% growth rate for its Azure cloud services segment last week. AWS represents just 11% of Amazon's total sales, but its operating income of $1.6 billion accounted for 55% of the total.While cloud rivals are gaining ground, AWS remains far in front with a 31% market share, versus 18% for Microsoft and 8% for Google. 

The earnings report shows that Amazon has increasingly learned to compensate for the high costs of fast shipping by controlling expenses and generating revenue in more areas. Amazon's revenue labeled as “other,” which is comprised of advertising sales, its own products and the Prime Video service, came in at $2.2 billion, up 132% from last year. This is the second-straight quarter when this category surpassed $2 billion in revenue.

“A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising,” Brian Olsavsky, CFO of Amazon said on a media call. “We’ve seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centers, marketing.”

Bezos Praises Alexa As Growth Driver

With Prime Day in the rear-view mirror, CEO Jeff Bezos made a point of highlighting Alexa’s growth in Amazon’s official earnings report statement. Amazon heavily pushed its Alexa-powered smart home devices such as the Echo and Fire TV stick as part of Prime Day promotions. Prime Day sales are not included in Q2 earnings.

“We want customers to be able to use Alexa wherever they are,” said Bezos in a statement. “There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year.”

Amazon is integrating Alexa with more products, including soundbars from Polk and Sonos; headphones from Jabra; smart home devices from ecobee and First Alert; Windows 10 PCs from Acer, HP, and Lenovo; and cars from automakers including BMW, Ford and Toyota.

For Q3, Amazon anticipates net sales will range between $54.0 billion and $57.5 billion, growing between 23% and 31% compared with the same quarter last year. Operating income is expected to be between $1.4 billion and $2.4 billion, compared with $347 million in Q3 2017.

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