Amazon.com Inc. Earnings Saw $1.8 Billion in Domestic Retail Profits
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Online retailer and cloud-computing service provider Amazon.com (NASDAQ: AMZN) reported second-quarter results this Thursday evening. The report far exceeded Amazon's guidance, particularly on the operating profit line.
Amazon's second-quarter results: The raw numbers
| Metric | Q2 2018 | Q2 2017 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $52.9 billion | $38.0 billion | 39% |
| Net income | $2.53 billion | $197 million | 1,184% |
| GAAP Earnings per share (diluted) | $5.07 | $0.40 | 1,168% |
Data source: Amazon.com.
What happened with Amazon this quarter?
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These results compared favorably to Amazon's guidance for the quarter, which called for total operating income of roughly $1.5 billion on revenues in the neighborhood of $52.5 billion. The actual results were $3.0 billion and $52.9 billion, respectively.
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Amazon's 39% year-over-year sales growth included a modest tailwind from a strengthening dollar as compared to other major world currencies in markets where the company does business. This effect was right in line with the expectations management baked into their official second-quarter guidance targets. Counted in constant currencies, Amazon's revenues rose 37% higher.
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North American retail sales increased by 44%, to land at $32.2 billion. This division produced $1.84 billion of segment-level operating income, up from $436 million a year earlier. That works out to a 5.7% operating margin for this business unit.
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International retail sales stopped at $14.6 billion, a 27% gain as reported, or 21% when you back out currency exchange effects. Here, Amazon recorded an operating loss of $494 million compared to a $724 million loss in the year-ago period.
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The cloud-computing service known as Amazon Web Services, or AWS, boosted top-line revenues by 49%, to $6.11 billion. Easily Amazon's highest-margin division with a 27% operating margin, this unit grew its operating income by 79%, to $1.64 billion.
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Management's stated long-term goal is to optimize Amazon's free cash flows. To that end, the company more than tripled its free cash flows in the second quarter. The free cash meter stopped at a cool $4.5 billion this time around.
Image source: Getty Images.
What management had to say
Management's prepared comments in the earnings release focused on the growth of the Amazon Alexa digital assistant and its global ecosystem. "We want customers to be able to use Alexa wherever they are," said Amazon founder and CEO Jeff Bezos. "There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year."