Amazon shares were up more than 5% in after-hours trading Thursday after the Seattle tech giant beat analyst expectations for profits and revenue for its third quarter. Update: Shares came back down later Thursday afternoon, but rose again Friday morning.
“We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” Amazon CEO Andy Jassy said in a statement.
- Amazon reported $143.1 billion in third quarter revenue, up 13% year-over-year. Net income was $0.94 per share, or $9.9 billion, compared with $0.28 per share, or $2.9 billion, last year.
- Wall Street analysts expected revenue of $141.5 billion and earnings of 58 cents a share.
- Operating income came in at $11.2 billion, up from $2.5 billion in the year-ago quarter and well ahead of analyst estimates of $7.5 billion.
Amazon’s cost-cutting moves over the past year, including thousands of layoffs and tightening of its fulfillment network, appear to be helping improve the company’s bottom line as it manages macroeconomic forces such as inflation and interest rates.
Investors are keeping a close watch on the company’s cloud business, which has seen revenue growth decline in recent quarters.
- Amazon Web Services reported $23 billion in revenue for the third quarter, up 12%, matching the growth rate from the second quarter.
The company is scrambling to demonstrate momentum in generative artificial intelligence in Amazon Web Services and across its business in recent months, seeking to counter the perception that it has fallen behind in the AI technology race.
- From Jassy’s statement: “The AWS team continues to innovate and deliver at a rapid clip, particularly in generative AI…” He said companies such as Adidas and United Airlines are running generative AI workloads with AWS.
Amazon said last month it will seek to hire 250,000 people for the holiday season, a significant increase from past years.
Earlier this week, Microsoft topped expectations for its quarterly results, with increased cloud revenue foreshadowing strong interest in its artificial intelligence products. Alphabet, meanwhile, missed expectations for its cloud business.
Amazon’s stock is up more than 40% this year, outpacing the S&P 500.
Here’s a breakdown of Amazon’s financials for the third quarter.
Online stores: Revenue was up 7% year-over-year at $57.2 billion.
Amazon Web Services: Amazon’s cloud business was up 12% at $23 billion, with $6.9 billion in operating income, up 29% from the year-ago period, accounting for a majority of the company’s profits.
- AWS reported $22.1 billion in revenue in Q2, which was up 12% year-over-year. AWS reported 27% growth in the year-ago quarter.
- AWS operating income in Q2 was down 6% year-over-year.
Advertising: Along with AWS, advertising is one of Amazon’s higher-margin businesses. Advertising brought in $12 billion in revenue in the quarter, up 26% over a year ago. That compares to a 22% growth rate in Q2, and 25% growth in the year-ago quarter.
- A digital ad rebound helped boost Meta, Google, and Snap earnings reports this week.
Third-party seller services: Amazon has been expanding services and products for third-party merchants in recent years. Revenue from third-party seller services was up 20% to $34.3 billion.
Shipping costs: Amazon spent $21.7 billion on shipping in Q3, up 9%. Analysts with Wedbush last week noted that the company could be facing retail margin pressure due to rising oil prices.
Physical stores: The category, which includes Whole Foods and Amazon Go stores, posted revenue of $4.9 billion, up 6%.
Headcount: Amazon now employs 1.5 million people, down 3% year-over-year. That figure does not include seasonal and contract workers.
Prime: Subscription services revenue, which includes Prime memberships, came in at $10.1 billion, up 14%.
Guidance: The company forecasts Q4 sales of $160-to-167 billion. Operating income for the fourth quarter is expected to range between $7 billion and $11 billion. Both are in range of analyst estimates.
