Amazon.com (AMZN) overnight announced third-quarter earnings, showcasing figures that have outperformed the expectations of market analysts.
The surge in its retail unit sales and aggressive cost-cutting measures can be accredited for these promising figures and a gain of 4.99% in the share price in after-hours trading.
For the quarter, the e-commerce giant posted net sales of $143.08 billion, a robust 13% year-on-year growth, surpassing the estimated figure of $141.56 billion. A deeper look at the numbers, sales from online stores stood at $57.27 billion, marking a 7.1% year-on-year increase. Physical stores, primarily represented by Whole Foods, generated net sales of approximately $5 billion. Although Amazon continues to struggle in the grocery sector, overshadowed by giants like Walmart, it’s evident that their online marketplace remains a formidable force.
Third-party seller services and subscription services saw impressive growth as well, with net sales figures of $34.34 billion and $10.17 billion, respectively. Meanwhile, the cloud computing segment, Amazon Web Services (AWS), raked in net sales of $23.06 billion, a tad below the anticipated $23.13 billion. However, AWS’s strong profitability in this quarter has dispelled concerns ignited by its competitors’ recent performance.
While AWS’s sales narrowly missed their target, the unit’s resilience in profit generation was evident. Chief Executive Officer Andy Jassy alleviated concerns by highlighting the solid footing of AWS. He further projected the potential of generative AI to fuel tens of billions in AWS revenue in the forthcoming years. This is in line with a strategic approach this year, focusing on deep cost-cutting, ramping up profit, and diversifying towards more profitable ventures, including as advertising and logistics.
On the earnings front, Amazon registered an EPS of $0.94, a considerable climb from $0.65 in the previous quarter and well beyond the forecast $0.58. Operating income for the third quarter soared to a whopping $11.19 billion, dwarfing last year’s $2.53 billion. Another significant facet to highlight from the Q3 results is the 7.8% operating margin, a remarkable improvement from last year’s 2%. The financials further indicated a fulfilment expense of $22.31 billion and a seller unit mix of 60%.
The future also looks bright, with management providing updated guidance for Q4, projecting net sales between $160-167 billion with consensus estimates by analysts sitting at $166.57 billion. Furthermore, the operating income is anticipated to be in the ballpark of $7.0 billion to $11.0 billion.
As we approach the heart of the holiday season, the strong momentum from Amazon’s recent Prime Big Deal Days event, which is believed to have generated a significant revenue boost, places the company in good stead for the upcoming quarter. Overall, the results highlight Amazon’s resilience, adaptability, and pursuit of growth and innovation. The company is set to be primary beneficiary from the demand for Artificial Intelligence within its cloud computing unit, setting the stage for an optimistic end to 2023 and beyond.
