- Amazon reported third-quarter results surpassing analyst expectations with earnings per share of 94 cents, well above the anticipated 58 cents, and revenue reaching $143.1 billion (+13%), exceeding the expected $141.4 billion.
- The core e-commerce business saw a 7% year-over-year expansion, rebounding from the previous quarter’s 4% growth. Amazon’s net income more than tripled to $9.9 billion, driven in part by a pre-tax valuation gain of $1.2 billion from the company’s investment in electric car company Rivian.
- Amazon reported an operating margin of 7.8%, the highest since early 2021. This marks a significant improvement from the 2% operating margin a year ago.• Key segments such as Amazon Web Services and Advertising performed well.
- Comparing advertising revenue in Q3 ’23, Google Search had $44 bn (+11% y/y), Meta achieved $33.6 bn (+24% y/y), and Amazon brought in $12.1 bn (+26% y/y) versus $11.6 billion expected by analysts. Amazon, while still a distant third, is catching up slowly.
- Amazon CEO Andy Jassy credited the strong quarter to improved cost-efficiency, speed of delivery, AWS stability, and robust advertising revenue. Amazon Web Services revenue came in $23.1 billion versus the $23.2 billion expected by analysts.
- In the cloud segment, Amazon appears to have given up some market share. However, still showed growth in the quarter of 12%. Microsoft earlier this week said Azure revenue jumped 19% in its most recent quarter, and Google’s Cloud expanded by 22%.
- Jassy spoke optimistically about the outlook for AWS, and said the cloud unit is seeing the pace and volume of closed deals pick up.
- Amazon anticipates fourth-quarter sales between $160 billion and $167 billion, with analysts projecting revenue of $166.6 billion, signifying a 9.6% growth from the previous year.
- Amazon’s cost-cutting measures over the past year, including layoffs and discontinuing unprofitable ventures, have proven successful. Customer spending is showing positive signs considering the difficult economic conditions. And despite a slowdown in cost optimization efforts, Amazon’s margin improvements and the potential of AWS are a source of optimism. The company’s earnings and pricing power, and long-term growth prospects remain compelling. This Q3 report was positive overall and the share remains a stock I hold in offshore managed portfolios for clients.
By Lee Kern
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