Amazon (AMZN, Financial) has been on a great run this year due to the recovery of the stock market from the February-lows and the company’s efficient execution of its business leading to strong growth and good quarterly results.
In the second quarter, Amazon reported earnings per share of $1.78, 67 cents greater than the estimates. The company’s revenue came in at $30.4 billion, a surge of 31.1% year-over-year. On the other hand, the company’s trailing 12-month free cash flow escalated to $7.3 billion, a surge of $2.9 billion.
In terms of segment, North America revenue surged 28% to $17.7 billion. Most significantly, Amazon’s international revenue increased 30% to $9.8 billion. The company’s revenue growth was 28%, after eliminating the $184 million year-over-year favorable foreign exchange impact.
Moving onward, the company’s international operating loss was $135 million equated to the loss of $189 million in 2015. Furthermore, revenue generated from the company’s web services showed the highest growth, as it surged 58% to $2.9 billion.
Amazon Prime is a huge success
With time, consumers are gradually moving towards Amazon, as they are searching their products on Amazon, instead of search engines or any other online retailer. The reason behind this is the range of the products offered by the company.
One more reason why consumers are shifting towards Amazon is because of its Prime service. Amazon Prime subscription has become one of the most prosperous loyalty programs to date. With the growth of Prime membership, the number of people starting product searches on Amazon is also growing.
Moreover, it is worth remarking that the company, as a product search engine, offers numerous advantages over Google (GOOG, Financial) as well as old search engines, such as reviews, and a valuable pricing benchmark. Apart from this, majority of buyers visit Amazon.com just because they know they can receive free two-day shipping as well as the pricing will be viable.
At present, the company has approximately 49 million Prime members. Furthermore, Prime members spend around $1,200 each year on Amazon, allied to $500 a year for non-Prime members.
With time, as the company carries on taking a rising share of product searches, it could also discover increasing demand from advertisers seeking to expand (apart from Google).
Conclusion
The success of Amazon Prime should help the company outperform its peers in the long run. With each customer spending more on Amazon Prime, the growth of the platform should benefit Amazon considerably, which is good news for long-term investors.
Disclosure: I don't hold a position in the stock mentioned in the article.
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