1 Reason Amazon Crushed Its Latest Earnings Report -- And It's Not What You Might Think
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Expectations were high going into Amazon.com's (NASDAQ: AMZN) second-quarter financial report. With the stock already up 55% in 2018, there was little room for error. The company has made a habit of delivering on elevated expectations, and investors were hoping the days of heady growth could continue. True to form, Amazon absolutely crushed it yet again, driving the stock to new all-time highs.
Amazon reported revenue that grew to $52.9 billion, up 39% year over year, consistent with both analysts' consensus estimates for $53.44 billion, and management's own forecast of $52.5 billion at the midpoint of guidance. The company benefited from a foreign currency tailwind of about $760 million. In constant currency, net sales increased 37% compared to the year-ago quarter.
Image source: Amazon.
Amazon's second-quarter earnings: The raw numbers
| Metric | Q2 2018 | Q2 2017 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $52.89 billion | $37.95 billion | 39.3% |
| Operating income | $2.98 billion | $0.63 billion | 375% |
| Net income | $2.53 billion | $0.20 billion | 1,186% |
| Earnings per share | $5.07 | $0.40 | 1,168% |
Data source: Amazon's Second-Quarter Financial Report. Chart by author.
Operating income of $2.98 billion blasted past the company's forecast of $1.5 billion at the midpoint of its guidance range. Net income soared to $2.53 billion, up 1,186% compared to the prior-year quarter, producing earnings per share of $5.07, nearly doubling analysts' expectations for $2.54 per share.
Explosive growth as far as the eye can see
Each of Amazon's reporting segments impressed. Sales in the North America segment jumped 44% year over year to $32.2 billion, while international sales of $14.61 billion grew 27% compared to the prior-year quarter. The most remarkable results came from Amazon Web Services (AWS) as revenue from the company's cloud computing division soared an incredible 49% over the year-ago quarter, and accounted for 11.5% of Amazon's Q2 sales.
If the revenue growth numbers were impressive, the operating income metrics were astonishing.
| Amazon Q2 Operating Income by Segment | |||
|---|---|---|---|
| North America | $1.84 billion | $0.44 billion | 321% |
| International | ($0.49 billion) | ($0.72 billion) | N/A |
| AWS | $1.64 billion | $0.92 billion | 79% |
| Total | $2.53 billion | $0.20 billion | 1,186% |
Data source: Amazon's Second-Quarter Financial Report. Chart by author.
Amazon touched only briefly on its just-completed Prime Day in its press release, as the event was held during the third quarter. The company said it was "Amazon's biggest global shopping event ever, welcoming more new Prime members on July 16th than any other previous day in Amazon history." The company sold more than 100 million products, with the best-selling items being the Fire TV Stick with Alexa Voice Remote and the Echo Dot.