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Amazon (AMZN) Reports Loss in Q2, Beats Sales Estimates
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Amazon.com (AMZN - Free Report) reported a second-quarter 2022 loss of 20 cents per share against earnings of 76 cents per share recorded in the year-ago quarter.
The company’s net loss, which totaled $2 billion, is inclusive of a pre-tax valuation loss of $3.9 billion in the non-operating expenses associated with its investment in Rivian Automotive.
The adjusted bottom-line figure stands at earnings of 10 cents per share, which missed the Zacks Consensus Estimate of earnings of 15 cents per share.
Net sales of $121.2 billion rose 7% year over year. Notably, the figure was slightly above the higher-end of the management’s guided range of $116-$121 billion. Further, it surpassed the Zacks Consensus Estimate of $119.7 billion.
The company witnessed a $3.6-billion impact of unfavorable fluctuations in foreign exchange rates, without which year-over-year net sales growth would be 10%.
Although Amazon faced a slowdown in online shopping activities, huge inflationary pressure in fuel, energy and transportation costs, and supply-chain disruptions during the reported quarter; its solid strength in cloud and advertising businesses drove top-line growth.
Online stores’ sales decreased 4% from the prior-year quarter to $50.9 billion in the reported quarter.
Physical stores’ sales grew 12% year over year to 4.7 billion in the second quarter.
Strength in Prime was a positive. The company witnessed 10% growth in its subscription services sales, which were $8.7 billion in the reported quarter.
Strengthening relationships with third-party sellers remained a positive. In the reported quarter, sales generated by third-party seller services rose 9% on a year-over-year basis to $27.4 billion.
Additionally, sales from robust advertising services increased 18% to $8.8 billion.
Coming to the segmental details, North America revenues (62% of sales) rose 10% from the year-ago quarter to $74.4 billion. International revenues (22% of sales) declined 12% year over year to $27.1 billion. Amazon Web Services’ (“AWS”) revenues (16% of sales) rose 33% year over year to $19.7 billion.
Amazon expects inflationary pressure to continue in the third quarter.
The company has lost 17.3% on a year-to-date basis compared with the industry’s decline of 27.4%.
Nevertheless, Amazon’s strong global presence, growing Prime momentum, strengthening AWS portfolio, improving Alexa skills, expanding smart devices portfolio, and growing efforts toward gaining strong traction among small and medium businesses are likely to drive its near-term financial performance.
Its strong initiatives toward controlling costs and improving the productivity of its fulfillment centers remain noteworthy.
Notably, shares of the company rose 13.6% in the after-hours trading. This is primarily attributed to the better-than-expected second-quarter sales and strong outlook for third-quarter sales growth.
Amazon.com, Inc. Price, Consensus and EPS Surprise
AWS, which witnessed strong top-line growth, continued to gain customer momentum in the second quarter, courtesy of its highly reliable services portfolio, and the increasing number of data centers, availability zones and regions.
In the second quarter, the company announced the general availability of AWS IoT TwinMaker, AWS Amplify Studio, Amazon Aurora Serverless v2, AWS Mainframe Modernization, and Graviton3 processor-backed Amazon Elastic Compute Cloud C7g instances.
On the heels of these factors, AWS experienced strong growth in its clientele with the addition of Geisinger, British Telecom and Jefferies.
SKF collaborated with AWS to come up with a joint solution for the advancement in industrial machine reliability and predictive maintenance.
Prime & Retail Efforts
The company continued to make strong efforts to bolster its Prime program and the retail business.
The increasing number of Fresh grocery stores remained a major positive. AMZN opened 12 Amazon Fresh stores across the United States. The growing momentum across its new shopping experience, Amazon Dash Cart, was another tailwind.
The growing momentum of the company’s Just Walk Out technology remained noteworthy. The implementation of the technology at Amazon stores, third-party retail stores, airports and stadiums continued to drive its customer momentum.
The company’s deepening focus on fashion retail was another positive. Amazon rolled out an augmented reality (AR)-powered interactive mobile experience, ‘Virtual Try-On for Shoes,’ which enables customers to check the look of a pair of shoes on them virtually.
Amazon’s growing efforts toward executing Prime Air drone deliveries remained noteworthy. Lockeford, CA, and College Station, TX, have been selected to receive free drone deliveries later this year.
In addition to these, expanding original content and the overall content portfolio on Prime Video continued to accelerate Prime engagement. The rising number of local originals across the world remained another major positive.
Notably, Prime Video streamed original series — The Terminal List; The Summer I Turned Pretty; Chloe; The One That Got Away and Forever Summer: Hamptons.
Further, it streamed Original movies — Emergency; Don’t Make Me Go and Anything’s Possible.
The second seasons of Undone and Fairfax were also premiered in the reported quarter.
The international content streamed on Prime Video included titles like Yosi, the Regretful Spy (Argentina); The Kids in the Hall (Canada); Modern Love Mumbai (India); Bang Bang Baby (Italy) and Lovestruck High (UK).
Apart from this, the strengthening momentum of Amazon Music on the back of the live performance of global superstars contributed well.
Robust Smart Devices Portfolio
Amazon’s strengthening portfolio of Fire devices was beneficial.
Improving the skills and features of Alexa helped the company in winning deals with automakers.
Further, expanding global footprint of Blink Video Doorbell remained noteworthy.
Quarter in Detail
Product sales (46.7% of sales) decreased 2.5% year over year to $56.6 billion. Service sales (53.3% of sales) rose 17.4% from the year-ago quarter to $64.7 billion.
Operating expenses were $117.9 billion, up 11.9% from the year-ago quarter. As a percentage of revenues, the figure expanded 410 basis points (bps) on a year-over-year basis to 97.3%.
Cost of sales, fulfillment, technology and content, marketing, and general and administrative expenses increased 3.5%, 15.3%, 30.3%, 34.1% and 34.5% to $66.4 billion, $20.3 billion, $18.1 billion, $10.1 billion and $2.9 billion, respectively, on a year-over-year basis.
Other operating expenses were $90 million in the reported quarter compared with $11 million in the year-ago quarter.
Overall operating income decreased 56.9% from the year-ago quarter to $3.3 billion. The operating margin contracted 410 bps from the year-ago quarter to 2.7%.
Operating income for AWS was $5.7 billion, up 36.3% year over year.
The North America segment reported an operating loss of $627 million against the operating income of $3.1 billion in the prior-year quarter. Also, the International segment reported an operating loss of $1.8 billion against the operating income of $362 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash and cash equivalents were $37.5 billion, up from $36.4 billion as of Mar 31, 2022. Marketable securities totaled $23.2 billion at the end of the second quarter, down from $29.9 billion at the end of the first quarter.
Long-term debt was $58.1 billion in the reported quarter, up from $47.6 billion in the previous quarter.
In the second quarter, the company generated $8.97 billion of cash from operations against $2.8 billion of cash used in operations in the first quarter.
On a trailing 12-month basis, free cash flow was an outflow of $23.5 billion compared with $18.6 billion in the prior quarter.
Guidance
For third-quarter 2022, Amazon expects net sales between $125 billion and $130 billion. Net sales are expected to grow 13-17% year over year. The Zacks Consensus Estimate for net sales is pegged at $126.9 billion.
Management projects an unfavorable foreign exchange impact of 390 bps.
Operating income is anticipated to be between $0 and $3.5 billion.
Image: Bigstock
Amazon (AMZN) Reports Loss in Q2, Beats Sales Estimates
Amazon.com (AMZN - Free Report) reported a second-quarter 2022 loss of 20 cents per share against earnings of 76 cents per share recorded in the year-ago quarter.
The company’s net loss, which totaled $2 billion, is inclusive of a pre-tax valuation loss of $3.9 billion in the non-operating expenses associated with its investment in Rivian Automotive.
The adjusted bottom-line figure stands at earnings of 10 cents per share, which missed the Zacks Consensus Estimate of earnings of 15 cents per share.
Net sales of $121.2 billion rose 7% year over year. Notably, the figure was slightly above the higher-end of the management’s guided range of $116-$121 billion. Further, it surpassed the Zacks Consensus Estimate of $119.7 billion.
The company witnessed a $3.6-billion impact of unfavorable fluctuations in foreign exchange rates, without which year-over-year net sales growth would be 10%.
Although Amazon faced a slowdown in online shopping activities, huge inflationary pressure in fuel, energy and transportation costs, and supply-chain disruptions during the reported quarter; its solid strength in cloud and advertising businesses drove top-line growth.
Online stores’ sales decreased 4% from the prior-year quarter to $50.9 billion in the reported quarter.
Physical stores’ sales grew 12% year over year to 4.7 billion in the second quarter.
Strength in Prime was a positive. The company witnessed 10% growth in its subscription services sales, which were $8.7 billion in the reported quarter.
Strengthening relationships with third-party sellers remained a positive. In the reported quarter, sales generated by third-party seller services rose 9% on a year-over-year basis to $27.4 billion.
Additionally, sales from robust advertising services increased 18% to $8.8 billion.
Coming to the segmental details, North America revenues (62% of sales) rose 10% from the year-ago quarter to $74.4 billion. International revenues (22% of sales) declined 12% year over year to $27.1 billion. Amazon Web Services’ (“AWS”) revenues (16% of sales) rose 33% year over year to $19.7 billion.
Amazon expects inflationary pressure to continue in the third quarter.
The company has lost 17.3% on a year-to-date basis compared with the industry’s decline of 27.4%.
Nevertheless, Amazon’s strong global presence, growing Prime momentum, strengthening AWS portfolio, improving Alexa skills, expanding smart devices portfolio, and growing efforts toward gaining strong traction among small and medium businesses are likely to drive its near-term financial performance.
Its strong initiatives toward controlling costs and improving the productivity of its fulfillment centers remain noteworthy.
Notably, shares of the company rose 13.6% in the after-hours trading. This is primarily attributed to the better-than-expected second-quarter sales and strong outlook for third-quarter sales growth.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote
Expanding AWS Clientele Aids Growth
AWS, which witnessed strong top-line growth, continued to gain customer momentum in the second quarter, courtesy of its highly reliable services portfolio, and the increasing number of data centers, availability zones and regions.
In the second quarter, the company announced the general availability of AWS IoT TwinMaker, AWS Amplify Studio, Amazon Aurora Serverless v2, AWS Mainframe Modernization, and Graviton3 processor-backed Amazon Elastic Compute Cloud C7g instances.
On the heels of these factors, AWS experienced strong growth in its clientele with the addition of Geisinger, British Telecom and Jefferies.
SKF collaborated with AWS to come up with a joint solution for the advancement in industrial machine reliability and predictive maintenance.
Prime & Retail Efforts
The company continued to make strong efforts to bolster its Prime program and the retail business.
The increasing number of Fresh grocery stores remained a major positive. AMZN opened 12 Amazon Fresh stores across the United States. The growing momentum across its new shopping experience, Amazon Dash Cart, was another tailwind.
The growing momentum of the company’s Just Walk Out technology remained noteworthy. The implementation of the technology at Amazon stores, third-party retail stores, airports and stadiums continued to drive its customer momentum.
The company’s deepening focus on fashion retail was another positive. Amazon rolled out an augmented reality (AR)-powered interactive mobile experience, ‘Virtual Try-On for Shoes,’ which enables customers to check the look of a pair of shoes on them virtually.
Amazon’s growing efforts toward executing Prime Air drone deliveries remained noteworthy. Lockeford, CA, and College Station, TX, have been selected to receive free drone deliveries later this year.
In addition to these, expanding original content and the overall content portfolio on Prime Video continued to accelerate Prime engagement. The rising number of local originals across the world remained another major positive.
Notably, Prime Video streamed original series — The Terminal List; The Summer I Turned Pretty; Chloe; The One That Got Away and Forever Summer: Hamptons.
Further, it streamed Original movies — Emergency; Don’t Make Me Go and Anything’s Possible.
The second seasons of Undone and Fairfax were also premiered in the reported quarter.
The international content streamed on Prime Video included titles like Yosi, the Regretful Spy (Argentina); The Kids in the Hall (Canada); Modern Love Mumbai (India); Bang Bang Baby (Italy) and Lovestruck High (UK).
Apart from this, the strengthening momentum of Amazon Music on the back of the live performance of global superstars contributed well.
Robust Smart Devices Portfolio
Amazon’s strengthening portfolio of Fire devices was beneficial.
Improving the skills and features of Alexa helped the company in winning deals with automakers.
Further, expanding global footprint of Blink Video Doorbell remained noteworthy.
Quarter in Detail
Product sales (46.7% of sales) decreased 2.5% year over year to $56.6 billion. Service sales (53.3% of sales) rose 17.4% from the year-ago quarter to $64.7 billion.
Operating expenses were $117.9 billion, up 11.9% from the year-ago quarter. As a percentage of revenues, the figure expanded 410 basis points (bps) on a year-over-year basis to 97.3%.
Cost of sales, fulfillment, technology and content, marketing, and general and administrative expenses increased 3.5%, 15.3%, 30.3%, 34.1% and 34.5% to $66.4 billion, $20.3 billion, $18.1 billion, $10.1 billion and $2.9 billion, respectively, on a year-over-year basis.
Other operating expenses were $90 million in the reported quarter compared with $11 million in the year-ago quarter.
Overall operating income decreased 56.9% from the year-ago quarter to $3.3 billion. The operating margin contracted 410 bps from the year-ago quarter to 2.7%.
Operating income for AWS was $5.7 billion, up 36.3% year over year.
The North America segment reported an operating loss of $627 million against the operating income of $3.1 billion in the prior-year quarter. Also, the International segment reported an operating loss of $1.8 billion against the operating income of $362 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash and cash equivalents were $37.5 billion, up from $36.4 billion as of Mar 31, 2022. Marketable securities totaled $23.2 billion at the end of the second quarter, down from $29.9 billion at the end of the first quarter.
Long-term debt was $58.1 billion in the reported quarter, up from $47.6 billion in the previous quarter.
In the second quarter, the company generated $8.97 billion of cash from operations against $2.8 billion of cash used in operations in the first quarter.
On a trailing 12-month basis, free cash flow was an outflow of $23.5 billion compared with $18.6 billion in the prior quarter.
Guidance
For third-quarter 2022, Amazon expects net sales between $125 billion and $130 billion. Net sales are expected to grow 13-17% year over year. The Zacks Consensus Estimate for net sales is pegged at $126.9 billion.
Management projects an unfavorable foreign exchange impact of 390 bps.
Operating income is anticipated to be between $0 and $3.5 billion.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the retail-wholesale sector are Dollar General (DG - Free Report) , Costco Wholesale (COST - Free Report) and The Kroger (KR - Free Report) . All three companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General has gained 4% on a year-to-date basis. The long-term earnings growth rate for the DG stock is currently projected at 12.16%.
Costco has lost 5.5% on a year-to-date basis. The long-term earnings growth rate for the COST stock is currently projected at 9.18%.
Kroger has gained 1.7% on a year-to-date basis. The long-term earnings growth rate for the KR stock is currently projected at 11.27%.