Amazon, the e-commerce giant, has reported its biggest earnings beat since the fourth quarter of 2020, signaling the success of CEO Andy Jassy’s cost-cutting efforts. The company initiated the largest layoffs in its history, cutting 27,000 jobs since last fall and freezing corporate hiring. As a result, the global headcount decreased by 4% year over year to 1.46 million people as of the end of the second quarter.
Third Quarter Forecast
For the third quarter, Amazon forecasts sales between $138 billion and $143 billion, representing a growth rate of 9% to 13%. The guidance reflects the strength of Amazon’s 48-hour Prime Day discount event held in July, which the company hailed as its “biggest ever.” Analysts had expected revenue of $138.25 billion, according to Refinitiv.
Under the leadership of CEO Andy Jassy, who took over from founder Jeff Bezos in July 2021, Amazon has returned to double-digit growth after facing sluggish expansion for five of the past six quarters. Jassy attributed some of the improvement to Amazon Web Services (AWS), which saw clients shift from cost optimization to new workload deployment, stabilizing AWS growth.
Amazon earnings: What investors should be watching
Surpassing Wall Street Projections
Sales at AWS climbed 12% in the second quarter to $22.1 billion, surpassing Wall Street’s projected $21.8 billion. However, this marks a deceleration compared to the previous quarter’s 16% growth, making it the slowest growth rate for AWS since it began reporting cloud revenue in 2015. Nevertheless, AWS remains a significant contributor, accounting for 70% of Amazon’s $7.7 billion operating profit.
The company reported net income of $6.7 billion, or 65 cents per share, compared to a loss of $2 billion, or 20 cents per share, in the same period last year, which was due to a markdown on Amazon’s investment in electric vehicle company Rivian.
A Major Role of Tech Companies
Amazon’s strong performance comes as the mega-cap tech companies’ earnings season wraps up. Apple, another major player, also reported better-than-expected results, driven by its services business.
While growth in the large-cap tech group remains below historical standards, recent results indicate a rebound after a challenging 2022. Moreover, the implementation of cost-cutting measures is boosting profitability for the company and its peers. Additionally, the company’s focus on artificial intelligence (AI) is evident in its AWS products, which are being utilized by various customers, including Royal Philips, 3M, Old Mutual, and HSBC.
Advertising continues to be a lucrative business for Amazon, with quarterly revenue surging by 22% to $10.7 billion. In comparison, Google’s ad revenue rose only 3.2% in the second quarter, and Facebook’s rose 12%.
