Amazon shares rose more than 10 percent in after-hours trading Thursday after beating revenue expectations and offering an upbeat forecast for the rest of the year as the company cut e-commerce costs and benefited from strong demand in its cloud computing business.
Amazon said it expected to return to double-digit quarterly revenue growth now that year-over-year comparisons with the periods affected by the coronavirus pandemic in 2020 and 2021 had passed.
Strong performance from its Amazon Web Services cloud business and its fast-growing advertising arm were credited with better-than-expected revenue, offsetting another year-over-year decline in online store sales.
Amazon said its capital investments would reflect these adjustments in demand, spending more on building cloud infrastructure than on e-commerce logistics for the rest of the year.
The results solidified a generally positive week for large-cap technology stocks. Alphabet, Microsoft and Apple are trading higher as their results reassured investors who feared the effects of tough macroeconomic conditions. One exception was Meta, which fell 7 percent for the week, after suffering its first quarterly revenue decline.
Amazon said it expected global revenue for the current quarter to come in between $125 billion and $130 billion, which would represent growth of 13-17 percent. It includes sales from the Prime Day discount event, which took place earlier this month. Last year’s Prime Day was in the second quarter.
Global sales rose 7% year over year to $121.2 billion, more than the $119 billion analysts expected, according to FactSet data. AWS revenue came in at $19.7 billion, up 33% from a year ago and slightly higher than Wall Street had expected. Amazon’s advertising business also performed better, growing 18% to $8.8 billion.
Amazon’s strong performance in the cloud and advertising offset a second straight quarter of declines in sales from its online store, which fell 4% year over year to $50.9 billion. Analysts had expected sales of $51.8 billion.
The company posted an overall net loss of $2 billion, due to the poor performance of its investment in electric vehicle company Rivian, which cost Amazon $3.9 billion in non-operating costs.
Amazon’s operating income for the quarter was $3.3 billion, down from $7.7 billion in 2021.
“Amazon’s strong 7% sales growth, 10% in North America alone, is entirely driven by growth in services like AWS and advertising,” said Guru Hariharan, chief executive of the commerce management platform eCommerceIQ and former Amazon executive. “Slump in online store sales reveals how the e-commerce giant is still subject to macroeconomic pressures.”
While other online advertising players, such as Meta and Alphabet, said they were feeling the effects of a pullback in ad spending, Brian Olsavsky, chief financial officer, argued that Amazon’s advertising model, which is based on mainly in the promotion of products in your market, it is better. protected
“I think if you look at our type of advertising, it works well in recessionary environments. Much of our advertising is right when customers go shopping.”
Inflationary pressures and supply chain headaches have dragged down Amazon’s performance in 2022. Even if Thursday’s after-hours stock jump holds, the stock price would still be down nearly 30 percent during the year.
Amazon announced this week that it would increase the price of its Prime subscription scheme in five of its European markets, including the UK, where annual subscriptions rose by 20 per cent.
This followed a move in February to raise the price for Prime customers in the US, where it also added a 5% surcharge to delivery costs for sellers, in an effort to offset rising fuel prices .
Amazon has also had several high-profile exits. Last week, Jay Carney, the company’s influential head of corporate affairs, announced he was leaving to join travel company Airbnb.
Other recent departures include Dave Clark, head of global consumer and architect of its logistics network. Amazon acknowledged amid spiraling costs that it had overextended itself in storage and staffing during the coronavirus crisis. Subsequently, it has withdrawn some of its plans to open warehouses.
Amazon said it would increase its capital investments over the coming year, while shifting the emphasis of that spending to technology infrastructure for AWS and away from e-commerce logistics. The headcount was also down from earlier this year, when it had hired additional staff to deal with the Omicron variant of the coronavirus, Olsavsky said.