It sounds like a broken record when it comes to Amazon’s (Nasdaq: AMZN) earnings. The company delivered another stellar quarter that even recorded its biggest profits ever. And most of it is thanks to the cloud.
Amazon’s second quarter revenues grew 31% over the year to $30.4 billion, compared with the market’s expectations of $29.6 billion. EPS of $1.78 also shot past the Street’s forecast of $1.11 per share.
By segment, net product sales increased 23% to $21.12 billion with its North America commerce segment growing 28% to $17.67 billion and International sales growing 30% at $9.84 billion. Net services sales grew 53% to $9.29 billion. Within the Net services segment, revenues from AWS grew 58% over the year and 13% over the quarter to $2.886 billion. In fact, Salesforce selected AWS as its preferred public cloud infrastructure provider and for the first time, Salesforce will expand use of AWS to Salesforce’s core services — including Sales Cloud, Service Cloud, App Cloud, Community Cloud, and Analytics Cloud.
For the current quarter, Amazon projected revenues of $31 billion-$33.5 billion, compared with the market’s forecast of $31.62 billion. It forecast an operating income of $50 million-$650 million, compared with the Street’s projections of $831 million. The recently held Amazon Prime Day is expected to impact the profits for the current quarter.
Amazon’s International Expansion
During the quarter, Amazon continued to push its services in newer markets, especially in India. The company launched its Prime service in India. Amazon Prime in the country will allow Indian customers in more than 100 cities to enjoy unlimited free one-day and two-day delivery on thousands of products. Sellers using Fulfillment by Amazon will benefit from the unlimited fast, free delivery. Amazon also plans to launch Prime Video in India so that consumers there will have exclusive access to Amazon Original Series and Movies, premium movies, and TV shows. Amazon.in has already become one of the most visited e-commerce sites in India and the most downloaded mobile shopping app as well.
Within other international markets, Amazon worked with the UK government to announce a partnership that will advance the safe use of drones for small parcel delivery. In the UK, it also launched AmazonFresh and made it the first international location for this service. AmazonFresh currently operates only in Boston, northern and southern California, northern New Jersey, Baltimore, New York, Philadelphia, and Seattle. For Europe, it launched the Pan-European Fulfillment Program, a service that will help sellers of all sizes efficiently export their products to Amazon customers across Europe while ensuring that customers benefit from faster delivery and lower shipping costs.
Amazon is also seeing strong growth in the Latin American countries. It was launched in Mexico just over a year ago, and the service has expanded its portfolio to over 50 million items and now retails products in newer categories including Toys & Games, Office Supplies, and Amazon Fashion.
Amazon Competing with Netflix
Amazon also upped the ante on Netflix with its extended content library. Its original content has been received well by the audience and Amazon Studios received 16 Emmy nominations for its series Transparent, The Man in the High Castle, Mozart in the Jungle, and Catastrophe. For the second consecutive year, Transparent was nominated for Outstanding Comedy Series and Outstanding Lead Actor in a Comedy Series.
Amazon Studios continued to launch newer program and is now working on new seasons of Transparent, Mozart in the Jungle, The Man in the High Castle along with first seasons of Good Girls Revolt, Goliath, and Woody Allen’s first-ever TV series. The studio will also release critically-acclaimed films in theaters this fall, including Manchester by the Sea, The Handmaiden, and Gleason. Finally, the company launched Amazon Video Direct, a new self-service program for video creators. The service allows video content providers to deliver their content to Amazon customers across multiple distribution streams such as Prime Video, one-time purchase, rental, or ad-supported viewing.
Besides content, Amazon Prime is also becoming a favorable option on the basis of price. Recently Netflix announced the end of all grandfathered price plans in the US. The new subscription fee of $9.99 a month for Netflix is now more expensive than Amazon’s Prime membership fee of $99 a year. Granted Netflix’s library is massive when compared with Amazon, but Amazon is packing quite a punch in its library with the award winning titles.
Amazon’s Cloud Initiatives
Overall for Amazon, yet again, profitability was all about the Cloud. And nothing is stopping Amazon as it continues to add to the services and features for AWS. During the quarter, Amazon introduced the industry’s first fully-managed, cloud-based file system called Amazon Elastic File System (Amazon EFS). EFS simplifies the process of setting up and scaling file storage in the AWS Cloud. Using the service, customers will be able to create petabyte scale file systems with gigabytes of throughput that will be accessible to multiple Amazon EC2 instances and can support thousands of concurrent client connections with consistent performance.
It also expanded its physical presence in Mumbai, India to become the sixth AWS Region in Asia Pacific. It announced the availability of a new Memory Optimized instance X1 for Amazon EC2. With its 2 TB of memory, X1 instances will have the most memory available in any cloud instance offered today by any cloud provider. X1 instances are powered by Intel processors and certified by SAP to be the ideal solution for running in-memory databases like SAP HANA.
The market is obviously pleased with Amazon’s performance. Its stock is trading at $758.81 with a market capitalization of $358 billion. It touched a record high of $766 on Friday following the stellar results. The stock has recovered from the year low of $451.00 it had fallen to in August last year.
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