Amazon Jumps on Revenue Beat and Rosy Guidance for Third Quarter

Amazon shares increased by over 13% during the trading session that ran through Thursday following the company announced better-than-expected results for its second-quarter earnings and provided a positive outlook for the future.

Here’s what the company did:

  • Earnings per share: loss of 20 cents
  • Earnings: $121.23 billion vs. $119.09 billion estimated According to Refinitiv

Here’s what other important Amazon segments fared in the fourth quarter:

  • Amazon Web Services: $19.7 billion, compared to. $19.56 billion is anticipated as per StreetAccount.
  • advertising: $8.76 billion against. $8.65 billion is anticipated as per StreetAccount

Growth in revenue of 7 percent during the second quarter beat estimates, defying the trend in Apple’s Big Tech peers, which all had poor results prior to Thursday. Apple and Amazon have surpassed expectations.

Amazon announced that it is expecting to report third-quarter revenues between $125 billion to $130 billion. This represents an increase of 13%-17 percent. Analysts had predicted revenues of $126.4 billion as per Refinitiv.

Amazon has had to contend with increased costs as the spread of pandemics has resulted in the company being overwhelmed by more workers and many warehouses.

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” CEO Andy Jassy said in a statement.

Amazon has reduced its workforce by 99,000 to 1.52 million in the second quarter, after nearly growing by a third during the outbreak.

Companies in the field of technology have announced reductions in staff, hiring freezes, and canceling job offers amid economic uncertainty. In a conference call with reporters, Amazon’s CFO Brian Olsavsky said Amazon will continue to recruit engineers for its units such as Amazon Web Services as well as advertising, but they will be wary of the hiring process in various other fields.

“I think it’s right for people to step back and question their hiring plans,” Olsavsky declared. “We’re doing the same thing. I don’t believe you’ll find hiring at the same rate that we did in the last year, or even the last couple of years.”

Amazon has posted a $3.9 billion deficit from its Rivian investment following the shares of the electric car maker fell 49% in its second quarter. This brings the total loss from the investment to $11.5 billion.

Due to the Rivian write-down, Amazon had an overall loss of $2 billion during the period. The estimates of analysts’ earnings per share varied widely, making it difficult to measure actual results against an agreed-upon number.

Amazon’s main e-commerce business continues to fall behind because online sales aren’t growing as they did at the peak of the Covid-19 shutdown. Amazon’s online store segment fell by 4% over the course of the year. The sales of physical stores have continued to increase from the previous year increasing by 11%.

Amazon’s advertising business is an optimistic signpost in the midst of a downturn for online advertising, and it shows that Amazon is taking market share in one of the fastest-growing businesses.

Revenue from advertising grew by 18% during the time. Facebook, however, reported the first time it has ever seen a decrease in revenue and has forecast another drop for this third quarter. At Alphabet, the pace of growth for advertising decreased to 12% and YouTube recorded a significant decline to 4.8 percent, down from 84% the year before.

In addition to other top tech firms, Microsoft also reported disappointing results this week. Apple outperformed on the bottom and top lines, boosting the share during trading after hours.

Amazon’s cloud business is still humming along. The sales of Amazon Web Services jumped 33 percent from the previous year and reached $19.74 billion, well above the $19.56 billion predicted according to Wall Street.

Operating profit, which is minus the loss incurred by investors, fell to $3.3 billion, down from $7.7 billion the year before. AWS had an operating profit that was $5.7 billion, which accounts for the entirety of Amazon’s profits and a few in the time.

The positive results may aid in improving the mood at Jassy who took over from Jeff Bezos as CEO just over one year ago. Jassy’s debut year on the job was hampered by problems, such as the ongoing battle over labor and market turmoil as well as the increasing pressure from regulators, and the exodus of the best talent.

He’s also being pressured to show that he’s capable of returning Amazon’s retail core business back to the level of growth that investors have become familiar with it, which is a daunting task considering the macro-economic pressures that Amazon is facing including a soaring rate of inflation and the slowing of consumption of consumer goods and services.

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