As Facebook teeters, Amazon climbs higher
Amazon.com
SAN FRANCISCO posted a profit that was double Wall Street targets on Thursday and forecast a strong pre-holiday quarter thanks to the retailer’s newer high-earning businesses, including cloud computing and advertising.
Shares rose more than two per cent in after-hours trade.
The report may come as a relief to investors in the technology sector, still reeling from a profit warning by Facebook Inc. on Wednesday that plunged its stock 19 per cent.
Amazon’s report shows how the world’s largest online retailer has increasingly learned to compensate for the high costs of fast package delivery and video streaming, which it has marketed around the globe to huge success.
It was the first mover in the business of selling data storage and computing power in the cloud, a bet that continues to pay dividends and give it the leeway to invest in grand projects. For instance, the company is working to ship food from online sales from Whole Foods Market stores across the U.S.
Amazon’s spending typically climbs in the July through September quarter, pressuring profits as the company prepares for Christmas and the winter holidays, its peak sales period for the year.
Yet the company said it expects an operating profit between US$1.4 billion and US$2.4 billion, up from US$347 million a year earlier. Analysts were expecting US$843 million, according to Thomson Reuters I/B/E/S. The company reported a second-quarter profit of US$2.5 billion, its largest ever.
“A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising,” Brian Olsavsky, Amazon’s chief financial officer, said on a call with media. “We’ve seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing.”
Rising third-party sales are also helping increase profits, he said.
Ajulyeventthatthecompany created to drum up business during the summer shopping lulls, Prime Day, has become a bonafide event to rival Black Friday. Popular brands now agree to put their inventory on sale for members of Amazon’s loyalty club Prime.
This year, Amazon said the July event saw Prime members purchase more than 100 million products. It said it now expects third-quarter sales of between $54 billion and US$57.5 billion, up from US$43.7 billion a year earlier.
Even more crucially, more people joined Prime on July 16 than on any previous day in the company’s history, Amazon said.
Prime includes fast shipping and video streaming for US$119 per year in the U.S. and is the cornerstone of Amazon’s strategy.
In the second quarter, its total net sales rose 39 per cent to US$52.89 billion, missing the average analyst estimate of US$53.40 billion. Reuters