Amazon’s second-quarter earnings have exceeded expectations, leading to a significant increase in the company’s stock price. In after-hours trading, shares in the global e-commerce and cloud computing company rose by 9.5% to $141.10 each. This surge comes as a contrast to fellow US tech giant Apple Inc, whose share price saw a decline following the release of its quarterly results overnight.
Amazon’s impressive performance in the second quarter can be attributed to its double beat on both revenue and earnings. The company’s stock price experienced a sensational rise in after-hours trading, and if this strength is sustained upon the market opening tonight, Amazon shares will reach their highest level since August 2022.
Prior to the release of the results, analysts had estimated revenue of $131.50 billion and earnings per share (EPS) of 35 US cents. However, Amazon surpassed these expectations by a wide margin, delivering an EPS figure that was 85.7% higher than analysts’ projections.
The standout phrase for Amazon’s second-quarter performance is undoubtedly bigger and better. The company achieved numerous milestones during this period, including the delivery of the largest selection of products to US prime members at the fastest speeds ever recorded. Additionally, Amazon saw a significant influx of new customers migrating to its AWS cloud platform in Q2. Among the new customers and commitments were renowned companies such as Royal Philips, 3M Health Information Systemsis, Omnicom, Sumitomo Corporation, and Acciona. Many of these companies have expressed their intention to utilize Amazon’s generative AI application, Bedrock.
Advertising emerged as Amazon’s fastest-growing segment by revenue in the quarter, excluding ‘other.’ Net sales in this sector increased by 22% to $10.7 billion. Third-party seller services witnessed the second-most notable growth, rising by 18% year-on-year to $32.3 billion.
Amazon’s online store segment, responsible for the largest portion of net sales, experienced a modest increase of 4% compared to the previous corresponding period.
Looking ahead, Amazon has forecasted net sales in Q3 to range between $138 billion and $143 billion. This suggests top-line growth of 9% to 13% compared to the previous comparable period. Furthermore, management anticipates Q3 2023 operating income to fall within the range of $5.5 billion to $8.5 billion. To put this into perspective, Amazon recorded operating income of $2.5 billion in the third quarter of 2022. Therefore, a potential 180% improvement in operating income at the midpoint is expected.
Although Amazon shares have climbed 50% in 2023, the company has underperformed many of its big tech peers. This disparity in performance could be partly attributed to Amazon’s high price-to-earnings (P/E) ratio, currently at 312 times. Additionally, some investors may consider Amazon more exposed to economic weakness than other companies in the tech industry.
Overall, Amazon’s second-quarter earnings have far exceeded expectations, leading to a surge in its stock price. The company’s performance across various sectors, such as advertising and third-party seller services, has been commendable. Looking ahead, Amazon’s optimistic forecasts for net sales and operating income in Q3 further demonstrate its confidence in continued growth and success. However, its relatively high P/E ratio and perceived vulnerability to economic fluctuations may account for its underperformance compared to other tech giants.
