MUMBAI: E-commerce giant Amazon posted much-stronger-than-expected second quarter earnings. Owing to growth in prime subscriptions, cloud computing and nascent advertising business, the company topped $2 billion in quarterly profit for the first time in its history. Analysts predict those two factors will continue to push the company forward in coming quarters.
Net income increased to $2.5 billion in the second quarter while last year in the same quarter the growth was $197 million. Net sales increased 39 per cent to $52.9 billion in the second quarter, compared with $38.0 billion in second quarter 2017. However, the sales growth was slightly below Wall Street's estimates.
"A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising," CFO Brian Olsavsky said. "We've seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing."
This was the third consecutive quarter that Amazon has topped $1 billion in profit. Amazon's cloud computing business, Amazon Web Services division, jumped to more than $6 billion in sales for the quarter. "Amazon Web Services is basically the silver bullet for them for future growth," Synovus Trust senior portfolio manager Dan Morgan said as quoted by CNN.
“I would say that, in addition to the operating efficiencies, advertising is also starting to make an impact on gross profit, although advertising is smaller in the international segment than it's in North America, it's growing at a same rapid clip year-over-year,” Olasavsky said in an earnings call.
“We continue to invest. We're investing in India obviously, and have seen good traction there. We just passed our Fifth Year Anniversary – celebrated our Fifth Year Anniversary, as the most visited site in India. So we think there's a lot of great innovation that has continued to occur for Indian consumers and sellers, and that will continue,” he commented on Indian market.
Amazon is on an upward journey this year. Earlier this month, its market value topped $900 billion for the first time. Following the result, the stock jumped 3 per cent in afterhours trading.
