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Amazon (AMZN) Q2 Earnings Beat, AWS Client Base Expands
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Amazon.com (AMZN - Free Report) reported second-quarter 2018 earnings of $5.07 per share, crushing the Zacks Consensus Estimate by $2.58 (103.6%). The company had reported earnings of 40 cents in the year-ago quarter.
Net sales of $52.89 billion missed the Zacks Consensus Estimate of $53.44 billion. However, the figure surged 39.3% year over year and was within management’s guided range of $51-$54 billion.
North America revenues (60.8% of sales) jumped 43.8% from the year-ago quarter to $32.16 billion. International revenues (27.6% of sales) increased 27.2% to $14.61 billion.
Management also noted that advertising had a strong growth in the quarter. Moreover, retail continues to grow, driven by the Prime program, increasing engagement of Prime customers and solid third-party selection.
Amazon.com, Inc. Price, Consensus and EPS Surprise
AWS revenues climbed 48.9% year over year to $6.11 billion, primarily driven by expanding customer base. The company has added 800 new services and features, so far this year.
AWS’ customer base continued to expand in the reported quarter. The company added enterprise customers like Ryanair, Epic Games, zulily, 21st Century Fox, Verizon and its subsidiary Oath, and Formula One. Moreover, several enterprise customers are running SAP workloads on AWS. The list includes the likes of Illumina, Petronas Lubricants, Bose, Louisiana Pacific and others.
Moreover, AWS announced the general availability of new services like Amazon Elastic Container Service for Kubernetes (Amazon EKS), Amazon Neptune (fully-managed graph database service) and Amazon Sumerian (augmented reality (AR), virtual reality (VR), and 3D applications).
The company also launched DeepLens, the world’s first deep learning-enabled wireless video camera built to give developers hands-on experience with machine learning.
Further, AWS launched a new Amazon Elastic Compute Cloud (Amazon EC2) instance for AWS Snowball Edge devices (SBE1). AWS Snowball Edge is a 100TB data transfer device with on-board storage and compute that can be used to move large amounts of data into and out of AWS.
Additionally, the company announced pay-per-session pricing for Amazon QuickSight.
Management stated that more than 80K databases have been migrated to AWS using the AWS Database Migration Service, which is in the second year of availability.
New Launches: Fire TV, Alexa, Echo, Ring
Amazon and Best Buy (BBY - Free Report) released Fire TV smart TVs to customers in the United States. Additional models are set to be released later this year in the U.S. and Canada.
Moreover, Amazon announced the Fire TV Cube, a 4K Ultra HD streaming media player with Alexa that allows customers to control the TV with their voice.
The Fire HD 10 Kids Edition, which comes bundled with a Fire HD 10 tablet, a year of Amazon FreeTime Unlimited, a kid-proof case and a two-year worry-free guarantee.
Further, Amazon introduced Show Mode and the Show Mode Charging Dock for Fire HD 8 and Fire HD 10 tablets.
Alexa and Echo were launched in France during the quarter. The devices are expected to be launched in Italy, Mexico and Spain later this year. The company launched Echo Spot in India and Japan.
Amazon and Ring announced Ring Alarm, a do-it-yourself home security system that offers professional monitoring for just $10 per month.
Alexa Features Expanding
Amazon has added a number of features to Alexa, which makes it more customer and developer friendly. The company introduced calendaring features, new information on current events and Remember This.
Alexa can now navigate and control video content and has integrated with TiVo, DISH, Netflix and DirecTV. The company launched Tap to Alexa to improve interaction with blind and visually impaired community.
Moreover, the Alexa Skills store now offers more than 45K skills created by third-party developers. Additionally, customers can now use Alexa to control more than 13K smart home devices from over 2,500 unique brands. The company also introduced new machine learning tools for developers to make Alexa skills even more engaging and discoverable.
Further, Amazon announced Alexa for Hospitality, which helps hotels and hospitality service providers improve guest experience.
Prime Expansion Continues
The recently concluded Prime Day was the biggest for Amazon as the company added the most number of new Prime members on Jul 16.
Prime subscribers purchased more than 100 million products, and the best-selling items worldwide were the Fire TV Stick with Alexa Voice Remote and Echo Dot.
Small and medium-sized businesses selling on Amazon exceeded $1.5 billion in sales during the Prime Day event.
Moreover, Amazon launched Prime member savings at Whole Foods Market stores nationwide, offering Prime members 10% off on hundreds of sale items and deep discounts on popular products.
The company continues to expand grocery delivery from Whole Foods Market to more than 20 cities in the United States, offering customers ultrafast delivery on natural and organic products through Prime Now.
Further, Amazon Fashion launched Prime Wardrobe in the United States.
Amazon Business expanded to Italy and Spain. The service now serves businesses of all sizes in eight countries across the globe, including the United States, the United Kingdom, Germany, Japan, India and France. Amazon Business now ships to business customers in over 70 countries worldwide.
The company continues to expand Prime member benefits internationally. The company launched Prime free same-day delivery in select cities in Italy and Spain; Prime Music and Prime Reading in Italy, Spain, and France; and Prime Student in Japan.
Prime was also launched in Australia during the quarter.
Expanding Prime Video Content
Amazon Prime Video received 22 Emmy nominations for its original programming, including 14 nominations for the comedy series The Marvelous Mrs. Maisel.
Prime Video renewed its streaming partnership for Thursday Night Football with the National Football League. Prime Video will also stream Premier League matches in the U.K. beginning 2019.
The second season of Goliath started streaming during the quarter. Regional content expanded with the launch of Comicstaan in India, Diablo Guardian in Mexico, and season two of The Bachelor Japan.
Moreover, Prime Video Channels are now available to Prime members in Japan with more than 30 channels including J Sports, BBC World News and Nikkei CNBC Plus.
Quarter Details
Product sales (60.3% of sales) increased 28.8% year over year to $31.86 billion. Service sales (39.7% of sales) surged 59.1% from the year-ago quarter to $21.02 billion.
Operating expenses were $49.90 billion, up 33.7% from the year-ago quarter. Cost of sales, fulfillment, marketing, technology & content, general & administrative and other operating expenses increased 30.6%, 53.8%, 30.1%, 30.6%, 27.1% and 21.2%, respectively.
As percentage of revenues, operating expenses declined 400 basis points (bps) on a year-over-year basis to 94.4%. Cost of sales, marketing, technology & content, and general & administrative expenses declined 390 bps, 40 bps, 90 bps and 20 bps, respectively. Only fulfillment expenses increased 140 bps from the year-ago quarter.
Contraction in operating costs kept the overall expense figure down. Management stated that lower number of external hiring has helped in reducing fixed costs to some extent.
Operating income jumped 375% from the year-ago quarter to $2.98 billion. Operating margin expanded 400 bps from the year-ago quarter to 5.6%.
Segment wise, North America operating income soared 320.9% from the year-ago quarter to $1.84 billion. AWS operating income surged 79.3% year over year to $1.64 billion. International segment reported a loss of $494 million, narrower than the year-ago quarter loss of $724 million.
Guidance
For third-quarter 2018, Amazon expects net sales between $54 billion and $57.5 billion. The figure is anticipated to grow in the range of 23-31% on a year-over-year basis. Management projects an unfavorable impact of approximately 30 bps from foreign exchange rates.
Operating income is expected between $1.4 billion and $2.4 billion compared with $347 million in third-quarter 2017.
Both Groupon and TripAdvisor are expected to report results on Aug 1.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Amazon (AMZN) Q2 Earnings Beat, AWS Client Base Expands
Amazon.com (AMZN - Free Report) reported second-quarter 2018 earnings of $5.07 per share, crushing the Zacks Consensus Estimate by $2.58 (103.6%). The company had reported earnings of 40 cents in the year-ago quarter.
Net sales of $52.89 billion missed the Zacks Consensus Estimate of $53.44 billion. However, the figure surged 39.3% year over year and was within management’s guided range of $51-$54 billion.
North America revenues (60.8% of sales) jumped 43.8% from the year-ago quarter to $32.16 billion. International revenues (27.6% of sales) increased 27.2% to $14.61 billion.
Management also noted that advertising had a strong growth in the quarter. Moreover, retail continues to grow, driven by the Prime program, increasing engagement of Prime customers and solid third-party selection.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. Price, Consensus and EPS Surprise | Amazon.com, Inc. Quote
Amazon Web Services (AWS) Sizzles
AWS revenues climbed 48.9% year over year to $6.11 billion, primarily driven by expanding customer base. The company has added 800 new services and features, so far this year.
AWS’ customer base continued to expand in the reported quarter. The company added enterprise customers like Ryanair, Epic Games, zulily, 21st Century Fox, Verizon and its subsidiary Oath, and Formula One. Moreover, several enterprise customers are running SAP workloads on AWS. The list includes the likes of Illumina, Petronas Lubricants, Bose, Louisiana Pacific and others.
Moreover, AWS announced the general availability of new services like Amazon Elastic Container Service for Kubernetes (Amazon EKS), Amazon Neptune (fully-managed graph database service) and Amazon Sumerian (augmented reality (AR), virtual reality (VR), and 3D applications).
The company also launched DeepLens, the world’s first deep learning-enabled wireless video camera built to give developers hands-on experience with machine learning.
Further, AWS launched a new Amazon Elastic Compute Cloud (Amazon EC2) instance for AWS Snowball Edge devices (SBE1). AWS Snowball Edge is a 100TB data transfer device with on-board storage and compute that can be used to move large amounts of data into and out of AWS.
Additionally, the company announced pay-per-session pricing for Amazon QuickSight.
Management stated that more than 80K databases have been migrated to AWS using the AWS Database Migration Service, which is in the second year of availability.
New Launches: Fire TV, Alexa, Echo, Ring
Amazon and Best Buy (BBY - Free Report) released Fire TV smart TVs to customers in the United States. Additional models are set to be released later this year in the U.S. and Canada.
Moreover, Amazon announced the Fire TV Cube, a 4K Ultra HD streaming media player with Alexa that allows customers to control the TV with their voice.
The Fire HD 10 Kids Edition, which comes bundled with a Fire HD 10 tablet, a year of Amazon FreeTime Unlimited, a kid-proof case and a two-year worry-free guarantee.
Further, Amazon introduced Show Mode and the Show Mode Charging Dock for Fire HD 8 and Fire HD 10 tablets.
Alexa and Echo were launched in France during the quarter. The devices are expected to be launched in Italy, Mexico and Spain later this year. The company launched Echo Spot in India and Japan.
Amazon and Ring announced Ring Alarm, a do-it-yourself home security system that offers professional monitoring for just $10 per month.
Alexa Features Expanding
Amazon has added a number of features to Alexa, which makes it more customer and developer friendly. The company introduced calendaring features, new information on current events and Remember This.
Alexa can now navigate and control video content and has integrated with TiVo, DISH, Netflix and DirecTV. The company launched Tap to Alexa to improve interaction with blind and visually impaired community.
Moreover, the Alexa Skills store now offers more than 45K skills created by third-party developers. Additionally, customers can now use Alexa to control more than 13K smart home devices from over 2,500 unique brands. The company also introduced new machine learning tools for developers to make Alexa skills even more engaging and discoverable.
Further, Amazon announced Alexa for Hospitality, which helps hotels and hospitality service providers improve guest experience.
Prime Expansion Continues
The recently concluded Prime Day was the biggest for Amazon as the company added the most number of new Prime members on Jul 16.
Prime subscribers purchased more than 100 million products, and the best-selling items worldwide were the Fire TV Stick with Alexa Voice Remote and Echo Dot.
Small and medium-sized businesses selling on Amazon exceeded $1.5 billion in sales during the Prime Day event.
Moreover, Amazon launched Prime member savings at Whole Foods Market stores nationwide, offering Prime members 10% off on hundreds of sale items and deep discounts on popular products.
The company continues to expand grocery delivery from Whole Foods Market to more than 20 cities in the United States, offering customers ultrafast delivery on natural and organic products through Prime Now.
Further, Amazon Fashion launched Prime Wardrobe in the United States.
Amazon Business expanded to Italy and Spain. The service now serves businesses of all sizes in eight countries across the globe, including the United States, the United Kingdom, Germany, Japan, India and France. Amazon Business now ships to business customers in over 70 countries worldwide.
The company continues to expand Prime member benefits internationally. The company launched Prime free same-day delivery in select cities in Italy and Spain; Prime Music and Prime Reading in Italy, Spain, and France; and Prime Student in Japan.
Prime was also launched in Australia during the quarter.
Expanding Prime Video Content
Amazon Prime Video received 22 Emmy nominations for its original programming, including 14 nominations for the comedy series The Marvelous Mrs. Maisel.
Prime Video renewed its streaming partnership for Thursday Night Football with the National Football League. Prime Video will also stream Premier League matches in the U.K. beginning 2019.
The second season of Goliath started streaming during the quarter. Regional content expanded with the launch of Comicstaan in India, Diablo Guardian in Mexico, and season two of The Bachelor Japan.
Moreover, Prime Video Channels are now available to Prime members in Japan with more than 30 channels including J Sports, BBC World News and Nikkei CNBC Plus.
Quarter Details
Product sales (60.3% of sales) increased 28.8% year over year to $31.86 billion. Service sales (39.7% of sales) surged 59.1% from the year-ago quarter to $21.02 billion.
Operating expenses were $49.90 billion, up 33.7% from the year-ago quarter. Cost of sales, fulfillment, marketing, technology & content, general & administrative and other operating expenses increased 30.6%, 53.8%, 30.1%, 30.6%, 27.1% and 21.2%, respectively.
As percentage of revenues, operating expenses declined 400 basis points (bps) on a year-over-year basis to 94.4%. Cost of sales, marketing, technology & content, and general & administrative expenses declined 390 bps, 40 bps, 90 bps and 20 bps, respectively. Only fulfillment expenses increased 140 bps from the year-ago quarter.
Contraction in operating costs kept the overall expense figure down. Management stated that lower number of external hiring has helped in reducing fixed costs to some extent.
Operating income jumped 375% from the year-ago quarter to $2.98 billion. Operating margin expanded 400 bps from the year-ago quarter to 5.6%.
Segment wise, North America operating income soared 320.9% from the year-ago quarter to $1.84 billion. AWS operating income surged 79.3% year over year to $1.64 billion. International segment reported a loss of $494 million, narrower than the year-ago quarter loss of $724 million.
Guidance
For third-quarter 2018, Amazon expects net sales between $54 billion and $57.5 billion. The figure is anticipated to grow in the range of 23-31% on a year-over-year basis. Management projects an unfavorable impact of approximately 30 bps from foreign exchange rates.
Operating income is expected between $1.4 billion and $2.4 billion compared with $347 million in third-quarter 2017.
Zacks Rank & Other Stocks to Consider
Amazon carries a Zacks Rank #3 (Hold).
Groupon (GRPN - Free Report) and TripAdvisor (TRIP - Free Report) are stocks worth considering in the same sector. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Groupon and TripAdvisor are expected to report results on Aug 1.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>