(Reuters) -Amazon.com Inc on Thursday reported sales growth and profit ahead of Wall Street’s expectations, as the company delivered goods faster and more cheaply to shoppers and as recent cloud-computing headwinds began to subside.
Amazon’s shares surged over 7%, extending its stock market value by at least $90 billion in after-hours trading.
Facing an array of challenges, Amazon has aimed to keep its mantle as the world’s biggest cloud provider and online retailer.
The company recently answered AI front-runners Google and Microsoft with rival services of its own, drawing thousands of customers and touting the breadth of technology it has an offer, similar to what’s powering the human-like chatbot ChatGPT.
In retail, Amazon has reorganized its delivery network and opened warehouses for same-day shipping closer to big metro areas, saving time and costs on delivery.
Brian Olsavsky, Amazon’s chief financial officer, said on a call with reporters that faster speeds have meant Prime loyalty customers are “shopping more often.”
For the second quarter, Amazon’s revenue grew 11% to $134.4 billion, beating estimates of $131.5 billion from analysts polled by Refinitiv.
Amazon’s cloud-computing division has been key to the company. In recent months, Amazon Web Services (AWS) saw its sales growth slow as economy-wary businesses scrutinized their cloud bills. Olsavsky said such “cost optimization” continued, but big companies were embracing the cloud anew, a lift to the division this spring and summer.
CEO Andy Jassy said in a statement, “Our AWS growth stabilized.”
The all-important unit beat estimates of around $21.7 billion in second-quarter cloud sales, increasing them 12% to $22.1 billion. Its rivals posted bigger jumps off smaller bases: 28% growth in Alphabet’s June-quarter cloud revenue and a 26% quarterly increase for Microsoft’s Azure.
For Arun Sundaram, senior equity analyst at CFRA Research, the results showed Amazon was holding its own, including in so-called generative AI that can create new text, images and other content from past data.
“We can put any negative narrative to rest,” Sundaram said, adding AI’s potential “should benefit all the large tech companies.”
Still, the boost that Amazon’s cloud could reap from powering businesses’ AI demand has yet to materialize in full. Thomas Monteiro, senior analyst at Investing.com said, “In Q3, it is likely that companies will have to start showing results on that front.”
In e-commerce, consumers have acted with some reserve, putting off discretionary purchases and shopping for value. Olsavsky, Amazon’s CFO, said household budgets remained tight.
Yet Amazon is now expecting a bump from its biggest sales day ever, as part of last month’s marketing blitz for loyalty shoppers known as Prime Day.
The company forecast current-quarter net sales in the range of $138 billion and $143 billion. Analysts polled by Refinitiv were expecting revenue of $138.25 billion.
Amazon has aimed to cut costs all the while, with 27,000 people affected by layoffs or what had been 9% of its roughly 300,000-person staff. It recently revealed more role reductions at Amazon Fresh stores after months of searching for a better grocery strategy.
The company reported a quarterly profit of $6.7 billion, nearly double what analysts expected.
(Reporting by Chavi Mehta in Bengaluru and Jeffrey Dastin San Francisco; Additional reporting by Noel Randewich; Editing by Arun Koyyur and Aurora Ellis)
Credit: The Star : Tech Feed
