Amazon.com Inc forecast strong fall sales and posted a profit that was double Wall Street targets on Thursday thanks to the retailer\u2019s younger, higher-earning businesses, including cloud computing and advertising.<\/p>\n
Shares rose more than 3 percent in after-hours trade. The report was a relief to investors in the US technology sector, still reeling from a profit warning by Facebook Inc Wednesday that plunged its stock 19 percent.<\/p>\n
Amazon\u2019s report shows how the world\u2019s largest online retailer has increasingly learned to compensate for the high costs of fast package delivery and video streaming by controlling expenses and building up higher-profit businesses. It was the first mover in the business of selling data storage and computing power in the cloud, a bet that continues to reap rewards and give it the leeway to invest in grand projects.<\/p>\n
For instance, the company is working to ship food from Whole Foods Market stores across the United States, in an ambitious attempt to bring groceries into the age of online retail.<\/p>\n
Amazon\u2019s spending typically climbs in the summer quarter, pressuring profits as the company prepares for Christmas and the winter holidays, its peak sales period each year.<\/p>\n
Yet the company said it expects an operating profit between $1.4 billion and $2.4 billion, up from $347 million a year earlier. The company also reported a second-quarter profit of $2.5 billion, its largest ever.<\/p>\n
\u201cA big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising,\u201d Brian Olsavsky, Amazon\u2019s chief financial officer, said on a call with media. \u201cWe\u2019ve seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing.\u201d<\/p>\n
The Seattle-based company cut hundreds of consumer jobs in its headquarters earlier this year, in a move that may have lowered costs and freed up resources for fast-growing areas like Amazon\u2019s voice aide Alexa.<\/p>\n
Wedbush Securities analyst Michael Pachter called the expansion in the company\u2019s gross profit margin \u201cremarkable,\u201d citing impressive results from cloud sales and services to third-party merchants on Amazon.<\/p>\n
CFO Olsavsky noted that third-party sales were changing the profit equation for Amazon, too. The company for years was notorious for roller-coaster results.<\/p>\n
More lucrative than sales of goods that Amazon owns, third-party transactions offer the company a commission that increases significantly when merchants choose to hand over fulfilment and advertising to Amazon, as many do. Half of all units sold through Amazon are from these sellers, and these sales keep growing.<\/p>\n
The company is working to automate tasks for advertisers and to help media buyers measure the results, Olsavsky said.<\/p>\n
Key to its allure has been that advertisers\u2019 placements result directly in sales, reaching customers on Amazon with an intent to shop. That contrasts with ads reaching users who are on industry leaders Facebook and Alphabet Inc\u2019s Google for a range of purposes.<\/p>\n
Amazon Web Service , the company\u2019s must lucrative unit, saw its operating profit margin expand from a year earlier. Sales picked up speed from the year prior, too, rising 49 percent to $6.1 billion and beating the average estimate of $6 billion.<\/p>\n
The unit\u2019s success has helped make Amazon Chief Executive Jeff Bezos the richest person in the world.<\/p>\n
\u201cIt\u2019s really becoming the crown jewel of Bezos\u2019 empire,\u201d said GBH Insights analyst Daniel Ives. \u201cThey\u2019ve invested significant dollars in building out the infrastructure, sales force and AWS partner ecosystem worldwide that I think now is starting to pay just massive dividends.\u201d<\/p>\n
While cloud rivals are gaining ground, AWS remains far in front with 31 percent of the fast-expanding market, versus 18 percent for Microsoft Corp and 8 percent for Google in the second quarter, research firm Canalys said Thursday. Amazon shares, up 55 percent this year versus 6 percent for the S&P 500 as of Thursday\u2019s close, trade at a premium, too. The stock\u2019s price-to-earnings ratio is more than 10 times that of Microsoft.<\/p>\n","protected":false},"excerpt":{"rendered":"
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