Following a tepid first quarter, tech giant Amazon (NASDAQ: AMZN) has delivered a better than expected second quarter revenue and provided a rosy outlook.
Amazon’s Financials
Amazon’s second quarter revenues grew 7% to $121.23 billion, ahead of the market’s forecast of $119.09 billion. Net loss was $2 billion, or $0.20 per diluted share, compared with net income of $7.8 billion, or $0.76 per diluted share a year ago. It missed the analyst estimate of a loss of $0.14 per share.
By segment, net product sales fell 2.4% to $56.6 billion and net service sales increased 17.4% to $64.7 billion.
North American sales grew 10% to $74.43 billion, while international sales fell 1% to $27.1 billion.
Revenues from Amazon Web Services (AWS) increased 33% to $19.7 billion, above the analyst estimate of $19.56 billion. Advertising services revenue grew 21% to $8.7 billion even as Google and Facebook experienced a slowdown in advertising spending.
Online stores revenue fell 4.3% to $50.8 billion. Amazon made up for the decline in e-commerce sales through fees from Prime customers. Subscription services revenues grew 14% to $8.7 billion.
Physical stores revenue grew 12% to $4.7 billion. Revenue from third party sellers grew 13% to $27.3 billion.
Amazon expects third quarter revenues of $125-$130 billion or a growth 13% to 17%. The market was looking for revenues of $126.4 billion.
Amazon’s Shopping Upgrades
Amazon has been focusing on Shopping innovation. It announced Store Analytics, a new service that provides brands with aggregated and anonymized insights about the performance of their products, promotions, and ad campaigns in applicable stores.
It recently launched Virtual Try-On for Shoes, where shoppers can virtually try on thousands of sneaker styles, and Luxury Stores at Amazon in France, Germany, Italy, Spain, and the UK, where customers can shop established and emerging luxury fashion brands online. Amazon Style uses machine learning algorithms to produce tailored recommendations for customers as they shop. In the fitting room, customers can use touchscreens to browse more options and request additional styles and sizes.
Amazon expanded its grocery store footprint by opening 12 Amazon Fresh stores across the U.S. and the UK. It also introduced the next generation Amazon Dash Cart, a smart shopping cart that uses computer vision algorithms and sensor fusion to help identify items placed in a cart, so customers can skip the checkout line when they are done shopping.
AWS Upgrades
AWS announced the general availability of Amazon Elastic Compute Cloud (Amazon EC2) C7g instances, the next generation of compute-optimized instances powered by AWS-designed Graviton3 processors. Graviton3 processors provide up to 25% better performance for compute-intensive applications and use up to 60% less energy.
AWS announced the general availability of AWS Mainframe Modernization to make it faster and easier for customers to modernize mainframe-based workloads by moving them to the cloud, with no upfront costs or underlying infrastructure to manage.
AWS also announced the general availability of AWS Cloud WAN, a managed wide area network service that makes it faster and easier to build, manage, and monitor a unified network that spans multiple locations and seamlessly connects cloud and on-premises environments. AWS Cloud WAN connects data centers, branch offices, and cloud resources into a single, centrally managed network that reduces operational cost and complexity while improving network health, performance, and security, so enterprises can remove the need to individually configure and manage multiple networks using different technologies.
With the twin engines of AWS and Prime, Amazon has shown resilience against macro pressures like slowing consumer discretionary spending and soaring inflation.
Its stock is trading at $134.16 with a market capitalization of $1.24 trillion. It hit a 52-week low of $134.09 in June this year and a 52-week high of $137.11 in November last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.
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