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Amazon's growth is leaving the shop behind

27 July 2018

The profit in the past quarter compared with net income of US$197 million in the same period a year ago.

The online retailer posted revenue of $52.8 billion in the period, less than the $53.4 billion expected by analysts surveyed by Zacks Investment Research.

On a conference call with investors, Brian Olsavsky, the company's chief financial officer, attributed the quarter's success to accelerating growth in Amazon's "most profitable areas", particularly the cloud-computing division, Amazon Web Services (AWS).

Amazon's workforce, 575,700 people worldwide at the end of June, increased by 1.7 percent from the start of the year. On a per-share basis, Amazon booked earnings of $5.07, more than double analysts' estimate of $2.50.

Though Amazon's financial results and forecasts are decidedly more optimistic than Facebook's were, the company has not entirely evaded the increased political scrutiny now facing the US's major technology companies.

At the close of trade on Thursday, Amazon's market value was some US$877 billion, roughly equal with Google parent Alphabet and trailing Apple at US$955 billion.

The quarter did not include results for Amazon Prime Day, but the retailer said the July 16 event was "Amazon's biggest global shopping event ever", signing up more new Prime members than any other day in the company's history. But as online sales grew, so did shipping costs: Amazon spent almost $6 billion mailing out packages in the second quarter, a 31 percent increase from a year ago.

About half of the company's quarterly revenue came from its flagship e-commerce business, which delivered $27.2 billion in the second quarter.

We'll have to wait and see what the company says at the earnings call later today. Subscription services (including Prime), sales in physical stores and third-party seller fees made up the rest. But an emerging new advertising arm of Amazon is also fueling record profits for the Seattle tech giant. It also acquired online pharmacy PillPack, marking its first official move into health care. Second-quarter operating expenses rose 34 per cent to US$49.9 billion. President Trump has been a vocal critic of the company - and its founder's ownership of The Washington Post.

"As Prime members increasingly scan their mobile apps to get discounts, Amazon is collecting more data about consumers' grocery purchase habits", said Patricia Orsini, an analyst for eMarketer.

It wasn't just growing businesses driving Amazon's profitability.

Amazon's growth is leaving the shop behind