Amazon shares climbed over 4% in after-hours trading on Thursday after the company beat Wall Street expectations for its third quarter of 2024, posting a wider-than-expected profit and an 11% year over year increase in revenue.
The results were bolstered by a 19% year over year increase in advertising services revenue to $14.3 billion, which includes sales to sellers, vendors, publishers, authors and others through programs such as sponsored ads, display and video advertising.
Net sales for its subscriptions services segment, which includes annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audiobook, digital music, e-book and other non-Amazon Web Services subscription services, grew 11% to $11.3 billion during the third quarter.
Here are the top-line results:
Net income: $15.3 billion, compared to $9.9 billion a year ago.
Earnings per share: $1.43 per diluted share, compared to $1.14 expected by analysts surveyed by Zacks Investment Research.
Revenue: $158.9 billion, up 11% year over year, compared to $157.07 billion expected by analysts surveyed by Zacks Investment Research.
Operating income: $17.4 billion, compared to $11.2 billion a year ago.
In January, Prime Video launched its ad-supported tier, which serves as the default for all subscribers and is available to more than 200 million monthly viewers, including 115 million in the United States.
Currently, Amazon Prime, which includes Prime Video, costs $14.99 per month or $139 a year. A membership that only includes Prime Video and none of the company’s shipping benefits costs $8.99 a month. Users can pay an extra $2.99 per month for an ad-free experience.
In September, it was revealed that Amazon secured more than $1.8 billion in advertiser commitments for its streaming services during its inaugural upfront presentation in New York City — topping the tech company’s internal expectations.
“Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue,” chief financial officer Brian Olsavsky told analysts on Thursday. “There are many opportunities to further expand our ads offering in areas that are driving growth today, like sponsored products, as well as more recent growth areas like Prime Video Ads.”
During the quarter, the tech giant launched a new generative AI feature around video generation and live image capabilities for advertisers, which makes it fast and easy for brands to deliver short, animated campaign images.
Amazon also touted the launch of Season 2 of “The Lord of the Rings: The Rings of Power” on Prime Video, the addition of Apple TV+ to the streamer’s collection of over 100 add-on subscription channels in the U.S. and last week’s “Thursday Night Football” game between the Cowboys and the Giants drawing over 17 million viewers, becoming the most-streamed NFL regular season game ever.
“As we get into the holiday season, we’re excited about what we have in store for customers,” Amazon president and CEO Andy Jassy said in a statement. “We kicked off the holiday season with our biggest-ever Prime Big Deal Days and the launch of an all-new Kindle lineup that is significantly outperforming our expectations; and there’s so much more coming, from tens of millions of deals, to our NFL Black Friday game and Election Day coverage with Brian Williams on Prime Video, to over 100 new cloud infrastructure and AI capabilities that we’ll share at AWS re:Invent the week after Thanksgiving.”
Jassy also told analysts that AWS has released nearly twice as many machine learning and generative AI features as the other leading cloud providers combined. He also noted the AWS AI business is a “multi-billion dollar revenue rate business” that continues to grow at a triple digit year over year percentage — more than three times faster than AWS itself.
North America segment sales grew 9% year-over-year to $95.5 billion, while its operating income came in at $5.7 billion, compared to $4.3 billion a year ago. International segment sales jumped 12% year-over-year to $35.9 billion, while operating income was $1.3 billion compared with a loss of $100 million in the prior year period. AWS segment sales increased 19% year-over-year to $27.5 billion, while operating income grew to $10.4 billion from $7 billion a year ago.
Operating cash flow grew 57% to $112.7 billion for the trailing 12 months, compared with $71.7 billion for the 12 months ending Sept. 30, 2023. Free cash flow increased to $47.7 billion for the trailing 12 months, compared with $21.4 billion during the same period a year ago.
Looking ahead at the fourth quarter of 2024, Amazon expects net sales in the range of $181.5 billion to $188.5 billion, or growth of 7% to 11% compared with the prior year period, while operating income is expected to be between $16 billion and $20 billion, compared with $13.2 billion in the fourth quarter of 2023.
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