- Shares indicated up as much as 12%, sparking Nasdaq rally
- Sales beat forecasts although earnings miss
- Third quarter guidance tops market forecasts
Shares in US retail and web services giant Amazon.com (AMZN:NASDAQ) leapt as much as 12% in pre-market trading on Wall Street after the firm posted higher than expected sales for the second quarter.
The outlook for the third quarter was also better than investors were expecting, given the troubles of other consumer-facing firms like Walmart (WMT:NYSE).
RETAIL AND ENTERTAINMENT
Total group revenues for the three months to June rose 7% to $121.2 billion against a forecast of $119 billion, helped by 10% growth in subscription services.
Second-quarter revenues from retail, video and devices reached $101.5 billion against $98.2 billion last year, with gains in the US offsetting a drop in international activity.
Prime Video grew its slate with several new original series while current hits such as The Boys continued to increase audience share.
A new series, The Lord of the Rings: The Rings of Power, is scheduled for global release on 2 September and is expected to be a major draw for Prime Video this autumn.
Prime Day, which took place in the second quarter last year, was bumped to July and according to Amazon was its best event in terms of orders.
Over two days, Prime members bought more than 100,000 items per minute with devices, consumer electronics and home products among the top sellers.
In total more than 300 million items were purchased, with Amazon estimating savings to its customers of more than $1.7 billion on recommended retail prices.
WEB SERVICES
AWS reported revenues of $19.7 billion, an increase of 33% on last year, giving it an estimated 35% market share of the global cloud market according to Bloomberg.
More importantly, while the retail and entertainment businesses still make a small operating loss, AWS generates all of Amazon’s profit.
For the second quarter, operating profits for AWS were $5.7 billion against $4.2 billion last year, an increase of 36%, although these were wiped out by non-operating expenses of $5.97 billion which helped tip the firm into an overall loss per share of $0.20, worse than the $0.12 market estimate.
Part of the non-operating charge was a $3.9 billion writedown on Amazon’s stake in electric vehicle maker Rivian, whose shares are down 67% year to date.
POSITIVE GUIDANCE
With the market having prepared itself for a disappointing sales report, the better than expected second quarter number and upbeat guidance for the third quarter combined to drive the shares higher pre-market.
Net sales for the three months to September are seen between $125 billion and $130 billion, an increase of 15% to 17% on last year, helped by the surge in Prime Day trading.
Meanwhile, operating income is expected to be between breakeven and $3.5 billion compared with $4.9 billion last year, and investors will be keeping their fingers crossed there are no more writedowns to come.
