Amazon reported mixed results in its second-quarter earnings release on Thursday, failing to meet profit expectations while exceeding revenue forecasts.
The results show Amazon’s renewed investments into the company are paying off, driving sales growth at the cost of lower profit margins.
Amazon shares dropped roughly 2% in after-hours trading, as its profitable AWS units underwhelmed expectations.
Here are the most important numbers:
- EPS: $5.22 vs. $5.57, according to analysts surveyed by Refinitiv
- Revenue: $63.4 billion vs. $62.5 billion, according to Refinitiv
- AWS: $8.38 billion vs. $8.5 billion, according to analysts surveyed by FactSet
Amazon’s revenue jumped 20% from the year-ago period, a rebound from first-quarter’s 16.8% growth, which was the slowest in four years. The revenue bounce back follows Amazon’s pledge to spend $800 million in the second quarter improving warehouses and delivery infrastructure as part of a plan to make one-day shipping the standard for Prime members. Analysts predict that shorter delivery times will lead to more frequent purchases and higher revenue.
But Amazon Web Services, its most lucrative business, reported 37% growth in its cloud business on Thursday, below analysts’ estimates. The growth in AWS, which provides computing and storage for corporations, schools and government agencies, slipped from 41% in the previous quarter, and recorded the first sub-40% growth rate since disclosing that figure five years ago.
In the “Other” category, which includes Amazon’s fast-growing ad business, revenue climbed 37% to $3 billion. International sales grew 12% to $16.4 billion. Physical stores, which includes Whole Foods, remained flat, recording $4.3 billion in sales.
Meanwhile, the company is facing heightened regulatory scrutiny, with antitrust officials in the U.S. and EU launching investigations into the company’s business practices.
Earlier this month, Amazon held Prime Day, its biggest shopping event of the year. The company said it set another sales record during the two-day sales promotion, which is likely why Amazon’s third-quarter revenue guidance of $66 billion to $70 billion exceeded street estimates of $67.3 billion, according to FactSet.
During the second-quarter, Amazon rolled out a new round of discounts across hundreds of products at its Whole Foods stores, while expanding the grocery store’s delivery footprint to more regions in the U.S. It also announced a partnership with Rite Aid that allows customers to pick up their Amazon packages in-store.
In June, Amazon’s first re: Mars conference took place, where CEO Jeff Bezos share more details on Project Kuiper, its plan to launch over 3,200 satellites to improve broadband connection.
Amazon shares have climbed 32% this year, outpacing the 20% gain for the S&P 500.
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