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Online retailer and cloud computing veteran Amazon.com (NASDAQ: AMZN) reported third-quarter results after the closing bell on Thursday. The company sailed past its own guidance targets across the board, but the forward-looking guidance for the holiday quarter could have been more ambitious. Amazon's shares fell as much as 9.5% lower in after-hours trading before recovering to an 8% drop at the close of the extended trading session.
Here's a closer look at Amazon's results and holiday-season guidance numbers.
Image source: Amazon.com.
By the numbers
In the third quarter, Amazon's net sales rose 30% year over year to land at $56.6 billion. Operating income multiplied many times over, rising from $347 million to $3.72 billion. On the bottom line, net income grew 11-fold to $5.75 per diluted share, up from $256 million in the year-ago period.
Management's guidance ranges for the quarter had centered around top-line sales of roughly $55.8 billion and operating income in the neighborhood of $1.9 billion.
North American retail sales rose 35% to $34.3 billion. International e-commerce saw a 13% revenue boost to stop at $15.5 billion. Cloud computing services under the Amazon Web Services (AWS) banner delivered 46% revenue growth and a total of $6.7 billion in net sales. Segment-level operating income was evenly split between North American e-commerce and AWS at roughly $2 billion each, while the international division suffered an operating loss of $385 million.
Amazon's stated long-term goal is to "optimize free cash flows." To that end, the third quarter's free cash flows came in at $6.06 billion, 442% above the $1.11 billion seen in the same period of 2017.
Looking ahead
For the next quarter -- that all-important holiday season when retailers' dreams can be made or crushed -- Amazon issued the following guidance:
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Net sales should land near $69.5 billion, approximately 15% above the fourth quarter of 2017.
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Operating income should at least match the year-ago period's $2.1 billion and could rise as high as $3.6 billion.
These figures include the operating expenses incurred when Amazon raises its minimum wages to $15 per hour on Nov. 1, covering 250,000 employees in the U.S. and U.K. markets. Operating margins were found at 6.2% in the third quarter, up from 5.6% in the second-quarter report and possibly the richest reading in Amazon's history. Hitting the midpoint of the fourth-quarter guidance targets would back this margin down to something like 4.1%, still comfortably above the 3.5% margin seen a year earlier.