Amazon beats again in Q2, thanks to cloud services
Amazon was facing a very high bar for its Q2 earnings report on Thursday—and it cleared that bar.
Analysts expected $29.54 billion in revenue and earnings of $1.11 per share. Amazon beat on both metrics, with $30.4 billion in revenue and earnings of $1.78 per share. Amazon stock (AMZN) popped 3% in after-hours trading on the news. The stock is up 40% in the past year.
The company has been crushing it recently, thanks mainly to cloud computing service Amazon Web Services (AWS). Last quarter, AWS revenue beat expectations, with revenue up 28% to $2.57 billion. This quarter, it obliterated that growth, with AWS revenue up 58% to $2.89 billion.
For a long time, the biggest question with Amazon was profitability. But this was Amazon’s fifth-straight profitable quarter.
Amazon’s international business has struggled with profitability. This quarter it lost money again, but less than a year before: $135 million before $189 million in Q2 2015.
The same is true for most of Amazon’s hardware; this quarter it shared no new numbers on Kindle. Last quarter, Amazon said it sold more than twice as many Kindle Fire tablets as it did in Q1 2015, but most analysts believe tablet sales still aren’t profitable. Amazon likely loses money or breaks even, at best, on the Kindle sales, but makes a small profit in the end thanks to e-books and advertising. (Amazon does not break out data for its hardware; in 2012, CEO Jeff Bezos said Amazon was breaking even on Kindle sales.)
Amazon Web Services is a different story: it is massively profitable. In Q1, its revenue was up 64% and operating income was up 170%. It accounted for 56% of profit at Amazon last quarter. AWS provides storage services to illustrious clients like General Electric (GE), Netflix (NFLX), and Spotify.
In advance of the earnings, e-commerce research firm Slice Intelligence sent out insights on two key new offerings from Amazon: Prime Day and Dash. The company’s second-ever Prime Day was a whopping success, the firm said, with sales surpassing Cyber Monday 2015 by 19%. On the earnings call, Amazon confirmed it: sales on its second Prime Day surpassed the first one by 60%. So-called “heavy shoppers” (people who buy from Amazon more than four times per month) accounted for 56% of the Prime Day sales.
As for Dash (physical buttons that allow you to order more of an item without going on the Web), Amazon boasts that it added 50 new brands to the Dash program, which now has over 150 buttons. But Slice Intelligence reports that of all the people who bought a Dash button from March 31 last year (when it launched) to June 18 of this year, more than half never made a single order through it.
Despite apparent lack of excitement over Dash, despite profitability concerns outside the US, despite difficulties with making money on tablets, AWS is killing it, and as long as it keeps doing so, the stock is likely to respond.
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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.
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