Amazon Beats Earnings Estimates, Gives Positive Outlook

Web services segment revenue grows 42%, sending shares higher

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Oct 30, 2017
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E-commerce company Amazon.com Inc. (AMZN, Financial) posted better-than-expected third-quarter results on Oct. 26. The e-commerce giant recorded earnings per share of 52 cents, handily surpassing estimates of three cents. Revenue soared 34% to $43.7 billion, beating estimates of $42.14 billion. After the earnings beat, Amazon’s shares surged more than 8% to $1,057.

The raw numbers

The company’s net income for the quarter came in at $256 million, up from $252 million in the same period last year.

The company’s balance of cash, cash equivalents and marketable securities stood at roughly $24.3 billion, up 13% from the prior-year quarter.Â

Business segment performance

The North American segment constituted 58% of total sales, which is a sequential increase of 13.8% and a year-over-year increase of 34.8%. The international market accounted for 31% of total sales, which marked 19.4% growth sequentially and 29.3% growth on a year-over-year basis. The company’s key business segment, Amazon Web Service (AWS), a hosting provider and a cloud-computing business, performed exceeding well with revenue increasing 42% on a year-over-year basis to $4.58 billion.

Success in AWS arena

There are millions of customers using AWS. The business provides clients with a platform to build their businesses. AWS is Amazon's profit powerhouse as it accounted for 10% of the company's total revenue for the quarter and generated $1.17 billion in operating income.

AWS remains far ahead in the cloud infrastructure sector compared to International Business Machines Corp. (IBM, Financial) and Alphabet Inc. (GOOG, Financial). AWS has captured 30% of the market, which is more than two times the share of Microsoft (MSFT, Financial) Azure (14%).

Positive outlook

Having posted disappointing second-quarter results, the company bounced back with solid third-quarter earnings and revenue. The holiday shopping season is arriving and the company projects net sales in the fourth quarter to come in between $56 billion and $60.5 billion. Amazon estimates operating income to stand between $300 million and $1.65 billion. The AWS segment is putting on a good show and the company expects this segment to grow even further.

As far as the Whole Foods combination is concerned, Amazon has taken several steps to expand its foothold, including lowering prices of key groceries, introducing private label Whole Foods products on its website and launching Amazon Lockers in select Whole Foods stores. These efforts are expected to have a positive impact on the company’s financial results for the next quarter.

Disclosure: I do not hold any positions in the stocks mentioned in this article.