Amazon more than quadrupled its operating profit, and the stock rose in after-market trading

Amazon more than quadrupled its operating profit, and the stock rose in after-market trading

Following overall growth for Microsoft, Meta, and Alphabet, it was Amazon’s turn to present numbers for the past three months on Thursday evening.

The third quarter report showed revenues of $143 billion, an increase of 13 percent compared to the same quarter last year. Operating profits reached $11.5 billion, four times higher than the same quarter last year.

The pre-tax result ended at $12.2 billion.

Up front, revenue of $141.6 billion and pre-tax profits of $7.5 billion were expected, according to Bloomberg estimates.

-We had a strong third quarter. Costs related to store deliveries have taken a step in the right direction, AWS growth has continued to be stable and advertising revenue has been growing well, CEO Andrew Jassy says in a press release.

The stock rose four percent in after-hours trading after falling 1.5 percent in regular trading on Thursday.

Strong growth

From the online shopping segment Amazon gets the lion’s share of its top line. In the second quarter, when revenue ended at $134 billion, online shopping accounted for $52.96 billion.

In the third quarter, online shopping sales amounted to $57.3 billion out of total revenue of $143 billion.

The last 10 quarters have given mixed signals for perhaps the world’s strongest retail company. Annual income growth appears to have remained stagnant throughout the past year, while only one quarter showed growth exceeding 10%. This followed a period in which sales rose during the pandemic and naturally rose sharply year-on-year in 2021.

However, apart from the core business, other sectors of the giant have grown at a rapid pace in recent years. For Amazon Web Services (AWS), the top line rose from 16 billion at the end of 2021 to more than 22 billion in the second quarter of this year, although the last two quarters showed signs of slowing as large customers tightened their wallets in the face of rising prices.

Otherwise, both the advertising segment and subscription services, such as Amazon Prime, have achieved double-digit annual growth over the past eight quarters.

This is how things went for the sectors in the third quarter of 2023:

  • AWS revenue increased 12 percent year over year to $23.05 billion, slightly below prior expectations. Operating profits rose 29 percent to $6.97 billion.
  • Advertising revenues rose 25 percent year over year to $12.06 billion.
  • Subscription services achieved annual revenue growth of 13 percent, reaching $10.2 billion.

For the fourth quarter, Amazon expects the top line to be between $160 and $167 billion, or annual growth of between seven and 13 percent. Analysts, for their part, expect its sales volume to reach $166 billion.

Operating profit is expected to range between seven and eleven billion dollars.

The wealth of artificial intelligence

In AWS, the tech giant has its own cloud services and where it competes fiercely with Microsoft and Alphabet. The latter was punished on the stock exchange after releasing the numbers when Google Cloud’s revenues ended up falling short of expectations.

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For Microsoft, it was quite the opposite. Azure achieved annual revenue growth of about 30 percent and rose significantly on the stock market after that.

Like Microsoft, Alphabet and Meta, Amazon also jumped on the AI ​​boom, which the market rewarded with strong price increases. The stock is up 42 percent so far in 2023, versus 23 percent for the S&P 500.

In addition to the hype around AI, cost reductions in the form of downsizing have been well received in the market. Amazon announced earlier this year that it would cut another 9,000 jobs on top of the 18,000 it announced at the end of 2022.

Amazon is worth $1,200 billion, making it the fifth largest company in the world by market capitalization.

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Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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