Amazon.com Inc. AMZN, -2.98% shares jumped about 4% Thursday afternoon after the company reported its largest quarterly profit total in history, disclosing earnings per share more than double what analysts expected. The e-commerce and cloud-computing company reported second-quarter net income of $2.5 billion, or $5.07 a share, up from earnings of 40 cents a share a year ago and the first time Amazon has reported more than $2 billion in quarterly profit. Amazon reported revenue of $52.9 billion, up from $37.96 billion a year ago but slightly lower than analyst estimates. Analysts on average were expecting earnings of $2.48 a share on sales of $53.37 billion. Amazon shares jumped more than 4% in immediate after-hours trading, following a 3% decline in the regular session to $1,808. The stock has gained 54.6% so far this year, as the S&P 500 index SPX, -0.30% has increased 6.5%.
Amazon is essentially two businesses under one roof: A massive e-commerce company with typically thin profit margins and a smaller but more profitable cloud-computing company that sells services to businesses. Amazon reported that its retail business brought in revenue of $46.78 billion, slightly lower than the average analyst estimate of $47.37 billion, but operating profit of $1.34 billion blew away expectations of $240 million.
The big outperformance in the retail business came from North America, where Amazon reported operating profit of $1.84 billion, more than four times the $436 million recorded in the same quarter a year ago and far higher than the $1.04 billion expected by analysts. Amazon reported an operating loss in the rest of the world of $494 million for its retail business, up from a loss of $724 million a year ago and also well ahead of analyst estimates of $797 million, according to FactSet.
When asked in a conference call Thursday about the higher profit totals, Chief Financial Officer Brian Olsavsky cited a number of factors, namely an increase in online-ad sales, a high-margin business and “better-than-expected efficiencies in operations infrastructure costs and generally all of our fixed costs.” Olsavsky also noted that Amazon’s pace of hiring has decelerated in comparison to last year.
“We’re seeing a lot of our growth areas being fueled by headcount that’s moving within the company. There’s a lot of movement of tech headcount. And so there was less external hiring in the first half of this year,” Olsavsky said. “We don’t think that that’s necessarily the long-term trend but it certainly created a lot of operating efficiency and that will reset and evaluate where we need to still add people.”
Amazon Web Services, Amazon’s cloud-computing business, reported revenue of $6.1 billion, up from $4.1 billion a year ago, with operating profit of $1.64 billion. Analysts on average had expected AWS operating profit of $1.47 billion and revenue of $6.1 billion.
Amazon reported total operating income of $3 billion after producing $628 million a year ago and forecasting $1.1 billion to $1.9 billion. Analysts on average were expecting $1.73 billion.
In Amazon’s previous earnings report, Olsavsky announced an increase in the subscription price for its Prime program, which offers free shipping and other perks like a video-streaming service. The company recently held its annual Prime Day sale, and said that it signed up more new Prime customers on July 16, the first day of the sale, than ever before, but that event happened after the quarter that was reported Thursday.
It will factor into the forecast for the third quarter, however. Amazon predicted third-quarter revenue of $54 billion to $57.5 billion, and operating income of $1.4 billion to $2.4 billion. Analysts on average were predicting operating income of $1.25 billion on sales of $58.07 billion, according to FactSet.
