Amazon revenue beats estimates as cloud sales surge

 29 Jul 2016 - 2:03

Amazon revenue beats estimates as cloud sales surge
An Amazon Fire tablet is displayed during a media event in San Francisco California, September 16, 2015. Reuters / Beck Diefenbach

 

Amazon.com Inc reported a better-than-expected rise in quarterly revenue on Thursday, powered by blockbuster growth in its cloud services unit.

Amazon’s web retail sales in the United States and internationally, the core of the company’s business, also topped expectations, and it forecast revenue ahead of expectations for the third quarter. Shares of Amazon, the world’s biggest online merchant, were up 2 percent in after-hours trading.

“They crushed estimates,” said Michael Pachter, analyst at Wedbush Securities.

The Seattle-based company is riding a wave of retail sales moving to the internet and is using original videos in a Netflix-like service to win new customers. The cloud business, Amazon Web Services, is the company’s fastest growing business and is regarded by analysts as the next driver of growth for the company.

The expansion in so many areas requires substantial investment, though, and shares initially dipped in after-hours trade, as the company forecast relatively low operating income for the current quarter of $50 million to $650 million.

It earned $857 million in the second quarter, or $1.78 per share, compared with analysts’ average estimate of $1.11 per share, according to Thomson Reuters I/B/E/S.

“It was the largest June quarter profit in the company’s history, but we’re back to guiding barely any profitability,” BGC Partners analyst Colin Gillis said of the September quarter guidance.

Still, that period typically has higher costs for Amazon as the retailer ramps up for the holiday shopping season, Gillis said.

Amazon forecast current-quarter net sales of between $31.0 billion and $33.5 billion, factoring in sales from its Prime Day annual shopping festival. Wall Street on average had targeted $31.6 billion, according to Thomson Reuters I/B/E/S.

The company’s net sales in North America, its biggest market, jumped 28.1 percent to $17.67 billion.

Revenue from Amazon Web Services surged 58.2 percent to $2.89 billion. This beat the average estimate of $2.83 billion, according to market research firm FactSet StreetAccount.

The company’s net sales rose 31.1 percent to $30.40 billion in the second quarter ended June 30.

(Reporting by Anya George Tharakan in Bengaluru and Jeffrey Dastin in San Francisco; Writing by Peter Henderson; Editing by Saumyadeb Chakrabarty and Matthew Lewis)

Reuters