Amazon's shares rise on earnings beat, despite $2B loss
E-commerce giant Amazon reported its second-quarter results today, and despite inflation and a net loss of $2 billion, the results were surprisingly better than expected. All of the loss is chalked up to Amazon's stake in Rivian. The second-quarter net loss is compared to the net income of $7.8 billion in Q2 2021.
Sales increased 7% to $121.2 billion in the second quarter, compared with $113.1 billion in the same period in 2021. This was better than Wall Street’s estimate of $119.3 billion. The company predicted revenue between $116 billion and $121 billion for the quarter.
Because of the slightly good news, Amazon shares increased 11% in late trading on Thursday.
It's important to note that online store sales fell 4.3% to $50.89 billion. Wall Street only estimated an approximate 2% decline.
The company’s stock is down 32% year to date, mainly due to the series of disappointing quarterly earnings. In late April, Amazon toppled in the first quarter, reporting a loss of $3.84 billion. Not only did the results fall short of Wall Street's forecast, but its stock also dropped 14% that day — the largest one-day drop in 16 years.
“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” said Andy Jassy, Amazon CEO, in the company's earnings release.
Analysts have been cautious of today’s results, being that it is a dicey time for Amazon, as the company faced an array of obstacles such as supply chain and worker disruptions, wage increases, inflation, higher fuel costs and the war in Ukraine.
Jassy added, “We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year."
Looking at other figures, ad sales were higher this quarter, at $8.76 billion, up 4.3%. This is spot-on with projections. The company’s advertising arm is essential and was projected to hit $8.7 billion in revenue, up 21% from the previous year.
Amazon Web Services (AWS), the company’s cloud-computing unit, contributed $19.74 billion, a 33% jump from last year. AWS is an asset to the company, and during the first quarter, it grew 37%. The future of Amazon's cloud business is key, as the looming recession will likely cause a decline in corporate spending on cloud services.
The retail industry has seen its fair share of bad news recently, with Walmart decreasing its second-quarter and full-year guidance, saying food inflation is limiting consumer spending on nonessential items. Shopify laid off 10% of its staff due to slowing revenue growth.
Tech companies have also been going through it. Google parent Alphabet and Microsoft reported earnings this week that missed Wall Street’s expectations. Also, Facebook owner Meta reported its first ever year-over-year revenue drop.