Amazon shares rose more than 13% in extended trading Thursday after the company reported better-than-expected second-quarter earnings and an upbeat outlook.
Here’s how the company did it:
EPS: Loss of 20 centsIncome: $121.23 billion vs. $119.09 billion expected, according to Refinitiv
Here’s how other key Amazon segments did during the quarter:
Amazon Web Services: $19.7 billion vs. $19.56 billion expected, according to StreetAccountAdvertising: $8.76 billion versus $8.65 billion expected, according to StreetAccount
Revenue growth of 7% in the second quarter beat estimates, bucking the trend among its Big Tech peers, which all reported disappointing results earlier Thursday. Apple, along with Amazon, exceeded expectations.
Amazon said it expects to post third-quarter revenue of $125 billion to $130 billion, representing growth of 13 percent to 17 percent. Analysts had expected sales of $126.4 billion, according to Refinitiv.
Amazon has been struggling with higher costs as the pandemic-driven expansion left the company with too many workers and too much warehouse capacity.
“Despite continued inflationary pressures on fuel, energy and transportation costs, we are making progress on the more controllable costs we referenced last quarter, notably by improving the productivity of our fulfillment network,” said CEO Andy Jassy in a statement.
Amazon cut its workforce by 99,000 to 1.52 million employees at the end of the second quarter after nearly doubling in size during the pandemic.
Tech companies have been announcing layoffs, hiring freezes and rescinding job offers amid economic uncertainty. In a call with reporters, CFO Brian Olsavsky said Amazon will continue to hire engineers for units like Amazon Web Services and advertising, but will be cautious about hiring in other areas.
“I think it’s right for people to step back and question their hiring plans,” Olsavsky said. “We’re doing that, too. I don’t think you’re going to see us hiring at the same rate that we did in the last year, or the last few years.”
Amazon posted a $3.9 billion loss on its investment in Rivian after the electric vehicle maker’s stock fell 49% in the second quarter. That brings his total investment loss this year to $11.5 billion.
Due to the drop from Rivian, Amazon had an overall loss of $2 billion in the quarter. Analysts’ EPS estimates varied wildly, making it difficult to compare actual results to a consensus figure.
Rivian CEO RJ Scaringe and Udit Madan stand in front of Amazon’s new EV van powered by Rivian. Amazon and Rivian unveil their final custom electric delivery vehicles (EDVs) to begin use for customer deliveries in Chicago, Illinois on July 21, 2022.
Jim Vondruska | Reuters
Amazon’s core e-commerce business continues to suffer as online sales are no longer flourishing as they were at the height of the Covid-19 shutdown. The company’s online store segment declined 4% year over year. Brick-and-mortar store sales continued to pick up compared to last year’s period, growing 12%.
Amazon’s ad business is a bright spot in an otherwise gloomy quarter for online advertising and shows the company is taking a stake in one of its fastest-growing businesses.
Advertising revenue increased by 18% during the period. Facebook, meanwhile, posted its first-ever drop in revenue and forecast another drop for the third quarter. At Alphabet, advertising growth slowed to 12% and YouTube showed a dramatic slowdown to 4.8% from 84% a year earlier.
Among other major tech companies, Microsoft also reported disappointing results this week. Apple beat the top and bottom lines, pushing the stock higher in after-hours trading.
Amazon’s cloud segment continues to hum. Amazon Web Services sales rose 33% from a year earlier to $19.74 billion, above the $19.56 billion projected by Wall Street.
Operating income, which excludes the investment-related loss, fell to $3.3 billion from $7.7 billion a year earlier. AWS generated operating income of $5.7 billion, which accounted for all of Amazon’s profit plus some during the period.
The upbeat results could also help improve the mood around Jassy, who replaced Jeff Bezos as CEO a little more than a year ago. Jassy’s first year on the job has been marred by challenges, including an ongoing labor battle, the market slump, growing regulatory pressure and an exodus of top talent.
He’s also under pressure to show he can return Amazon’s core retail business to the growth investors have grown accustomed to, a difficult task given the macro pressures the company faces, such as rising inflation and the slowdown in consumer discretionary spending.
I WILL SEE: First look at electric vans from Amazon and Rivian