Tech powerhouse Amazon — whose dominance now stretches from e-commerce to entertainment — continued to generate monster revenue but surprisingly reported a drastic drop in profits for the second quarter. That sent its shares down 1.5 percent after hours after its net income fell from $857 million to $197 million — a 77 percent drop year-over-year.
After markets closed Thursday, Amazon reported $38 billion in revenue and earnings of $0.40 a share for the three months ended June 30 — beating analyst expectations of $37.2 billion in revenue but falling way short of $1.41 EPS. After blowing past Wall Street estimates last quarter, Amazon failed to meet sky-high hopes from investors. Still, its sales increased a healthy 25 percent year-over-year — its eighth straight quarter with 20 percent growth or better.
Amazon Founder and CEO Jeff Bezos highlighted Prime memberships increasing in a statement announcing the earnings.
“Our teams remain heads-down and focused on customers,” Bezos said in a statement accompanying the earnings. “In the last few months, we launched Echo Show (our newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, launched four new Fire tablets, expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service, and held our third annual Prime Day — signing up more Prime members than ever before. It’s energizing to invent on behalf of customers, and we continue to see many high-quality opportunities to invest.”
Amazon’s second quarter was remarkably busy — even by the monolith’s standards. Its third annual “Prime Day,” offering customers deals on thousands of products if they’re signed up for Prime membership, was Amazon’s biggest yet, growing 60 percent from last summer. Amazon’s bread and butter business, e-commerce, is stronger than ever, with retail giants like Nike and Sears entering into partnerships with the Seattle-based company. And as it expands into India and other international markets, Amazon plopped down nearly $600 million to buy Souq, a major e-commerce player in the Middle East.
Amazon Studios held steady with 16 Emmy nominations — the same amount it had in 2016 — buoyed by “Mozart in the Jungle,” Transparent,” and “The Man in the High Castle.” Amazon’s entertainment business has room to grow when compared to its main streaming competitors; stalwart HBO had 111 nominations, Netflix had 91, and Hulu made a healthy leap from two nods in ’16 to 18 this year. The studio did receive commercial and critical acclaim for releasing the Judd Apatow production “The Big Sick” earlier this summer.
At the same time, Amazon continued to diversify its increasing array of products and services, with its pending $13.7 billion purchase of Whole Foods making the largest waves. Don’t expect Amazon execs to discuss the deal on its conference call, since it hasn’t closed yet. But as Amazon moves closer to drone delivery, it’s easy to imagine bags of organic fruit and grass-fed beef flying through the air in the near future.
Bezos and Co. have continued to pour money back into the business, developing its own messaging app and launching “Spark,” a shopping social network. And investors have enthusiastically signed off on this strategy; since the start of 2017, Amazon’s shares have been on a blistering pace heading into Thursday, running up 40 percent since hovering around $750 a share in early January. But Thursday’s earnings put a halt to that momentum — at least for the time being — and Amazon issued third quarter guidance that looks like more of the same. The company expects revenue to jump between 20 and 28 percent compared to the previous year, but operating income to come in between negative $400 million and $300 million — which would be a substantial drop from the $575 million Amazon hauled in during the third quarter of 2016.
The after hours stock drop ended Bezos’ status as the world’s richest man — a mantle he wrestled away from Microsoft co-founder Bill Gates earlier on Thursday. The 53-year-old exec founded Amazon in 1994 and is now worth about $90 billion. With Amazon expanding at a breakneck clip for a company its size, don’t be surprised seeing Bezos back at the top of the billionaire food chain soon.
The company will hold a call to discuss the earnings at 5:30 p.m. ET.