Amazon Second Quarter Results Report 2018

Wall Street was expecting great things from Amazon in the second quarter. And the e-commerce giant has delivered huge profits – at least ultimately.

The Seattle company posted a profit of $ 2.5 billion during the period. This was not just a quarterly record for Amazon, but it was almost 13 times larger than the profit posted by the company in the second quarter of last year. On a per share basis, Amazon gained $ 5.07, more than twice what analysts had expected.

The company's sales rose 39 percent to $ 52.9 billion, but they remained at odds with Wall Street expectations.

"It was a strong quarter," said Brian Olsavsky, chief financial officer of Amazon, during a conference call with analysts.

Olsavsky attributes the company's significantly better-than-expected profitability to its ability to keep the line on operating costs and boost its rapidly growing and highly profitable advertising business.

"Advertising is starting to impact our gross profit," he said.

Amazon also offered a more optimistic outlook for its third-quarter net profit as analysts were forecasting. But the company's good news on its bottom line was tempered by the fact that it missed Wall Street's revenue forecast in the second quarter and that it expects its sales to be lower than their previous expectations. in the third quarter.

Investors initially encouraged the results, pushing the company's stock up to 4% in after-hours trading. As a result of the call, the stock was trading up $ 65.83, or 3.6%, to $ 1,873.83.

In the end, Amazon beat the Wall Street forecast

Here is what the company reported and how it compared with what Wall Street was looking for:

• Turnover: $ 52.88 billion. Analysts were looking for $ 53.35 billion. During the same period a year ago, Amazon recorded a turnover of $ 37.96 billion.
• Earnings per share: $ 5.07. Wall Street had projected $ 2.49 per share, but these numbers might not be comparable; Amazon posted earnings per share of $ 0.40 in the second quarter of last year.

This is what the company expects for the third quarter and how that compares with previous analysts' projections:

• Turnover: 54 to 57.5 billion dollars. Earlier Wall Street forecasts were $ 58.03 billion. In the third quarter of last year, Amazon recorded a turnover of 43.74 billion dollars.
• Operating Profit: $ 1.4 billion to $ 2.4 billion. Wall Street was expecting $ 1.28 billion. During the same period last year, the company posted operating earnings of $ 347 million, including the results of Whole Foods.
• Earnings per Action: Amazon does not offer guidance on earnings. Analysts expected earnings per share of $ 1.68 for the third quarter. In the same period last year, he earned $ 0.52 per share.

The company benefited from favorable exchange rates

Amazon's second-quarter earnings benefited from a kind of artificial wind – the appreciation of the dollar against other currencies, which has boosted the value of its sales abroad. This factor added $ 760 million to its revenues and $ 466 million to its net profit for the period, the company said.

Without the currency effect, Amazon's shortfall would have been even more dramatic, since its sales growth would have been 37% instead of 39%. Without this push and some other minor adjustments, Amazon would have posted $ 2.07 billion in revenue for the quarter, or $ 4.14 per share – which still far exceeds analysts' forecasts.

But the results of Amazon were more than a mere product of a stronger dollar. The company has experienced strong growth – especially on the bottom line – in all of its business segments. His North American retail business is particularly well behaved.

During the period, sales in this segment increased 44% to $ 32.17 billion, in part due to the addition of Whole Foods, which Amazon did not own. not in the second quarter last year. More impressively, the operating profit of North American retail businesses climbed to $ 1.84 billion from $ 436 million last year.

But advertising boosted it – just like the costs

Amazon's business turnover jumped 27% over the same period of the previous year to $ 14.61 billion from $ 724 million to $ 494 million a year earlier.

Meanwhile, Amazon Web Services, the company's cloud computing business, saw its sales jump 49% over the second quarter of last year, to 6, $ 11 billion. It posted operating profit of $ 1.64 billion, up from $ 916 million a year ago.

And his advertising activities continued to climb. Amazon's "other" business, which includes primarily advertising sales, grew 132% in the quarter to $ 2.2 billion. This growth is beginning to affect the growth rates and profitability of Amazon's business segments in North America and internationally, Olsavsky said.

But society has also done well on the cost front. Its total operating expenses increased by 33.7% over the second quarter of last year, which is a much slower pace than the 39.3% rate at which sales increased.

While the company's running costs jumped nearly 54% in the quarter, all of its other costs – execution, marketing, technology, administration – grew much more slowly than sales.

On the call, Olsavsky noted that Amazon slowed down the pace of its hiring in the second quarter and significantly reduced its construction of new run centers. He also focused on the efficiency of his data centers.

Amazon saw "better than expected efficiencies in its operations," he said.

The company also benefited from a dramatic drop in taxes during the quarter. During the period, despite its exceptional profits, the company allocated only $ 74 million in taxes, compared with $ 467 million a year ago.