Amazon Delivers Record Q2 Profit, While Sales Miss Wall Street Forecasts

Amazon Delivers Record Q2 Profit, While Sales Miss Wall Street Forecasts

The company said subscription revenue increased 57 percent to US$3.4 billion. It was the first mover in the business of selling data storage and computing power in the cloud, a bet that continues to pay dividends and give it the leeway to invest in grand projects.

For instance, the company is working to ship food from Whole Foods Market stores across the United States, in an ambitious attempt to bring groceries into the age of online retail.

AMZN stock was up about 1.2% following the company's latest quarterly earnings results. During the quarter, Amazon raised the price of a Prime membership from $99 to $119 a year.

Olsavsky outlined some factors influencing that change in growth rate, the first being that Amazon had very strong unit growth past year in Q2, so it was tougher comparison. "We've seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing".

But the company also did well on the cost front.

At the firm's lucrative cloud services division, Amazon Web Services, sales were up almost 50% year-on-year to $6.1bn.

"That drove the bulk of the earnings beat", he said.

Rising third-party sales are also helping increase profits, he said. The company for years was notorious for roller-coaster results. Now Amazon could use a new line of phones as its Trojan Horse to get Alexa - its Siri-competing voice assistant - into every part of its customers lives.

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Profits hit a record $2.53bn (£1.9bn) in the three months to the end of June - about 12 times more than it made during the same period previous year. The company drew $1.64bn in operating income off $6.1bn in AWS revenues, compared to $1.83bn in operating income off $32.1bn in North American net sales. (Amazon lowered its Super Saver Shipping threshold from $49 to $35 to $25, resulting in growth in lower priced items).

"Their most profitable businesses are growing the fastest", said Tom Forte, an analyst with D.A. Davidson who tracks the company.

The markets were jittery ahead Thursday after Facebook spooked investors by warning of slowing sales growth in the second half of the year as it focuses on "putting privacy first".

"The profitability trajectory appears to be accelerating quicker than expected which given the leverage in the Amazon model is a "potential game changer" that could translate into further multiple expansion", Daniel Ives, head of technology research at GBH Insights, wrote in a note.

"We just celebrated our fifth year anniversary, and it's the most visited site in India".

One of Amazon's revenue drivers is its Prime subscription service which offers streaming video and music, free delivery and other perks and which has more than 100 million members worldwide.

Revenue rose 39 per cent to US$52.9 billion, shy of most forecasts, but shares in Amazon nonetheless lifted 4.1 per cent in after-hours trade.

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