Amazon Q2 Earnings Soar Past Expectations, But Stock Falls

The e-commerce and media giant blew past both revenue and earnings-per-share projections

Last Updated: July 28, 2016 @ 1:38 PM

Amazon once again delivered huge profits and revenue that shattered expectations, but investors clearly expected more, as the company’s stock fell nearly 4 percent in after-hours trading before recouping those losses.

After the close of markets Wednesday, Amazon reported revenue of $30.4 billion and earnings of $1.78 a share for the three months ended June 30. In the corresponding period last year, Amazon had revenue of nearly $23.2 billion and reported a surprise profit of 19 cents a share when analysts had expected a loss. This time, analysts had estimated $29.6 billion in revenue and earnings of $1.11 a share on average — which Amazon exceeded once again.

Amazon Prime, which gives customers who pay a $99 annual fee free two-day shipping on thousands of items and unlimited access to its video and music streaming library, has steadily increased its membership. Its Prime Day promotion, a one-day sale held on July 12 on items ranging from its Echo robot speaker to a toilet bowl light available only to Prime members, surpassed last year’s take by 60 percent, according to the company, ending as the company’s highest-grossing day ever.

As malls across the country struggle, Amazon continues to gobble up a bigger piece of the expanding e-commerce pie. USA Today reported that, according to research firm eMarketer, Amazon’s e-commerce sales jumped nearly 16 percent over the last 12 months to almost $83 billion.

While investors tend to look at Amazon as a proxy for American consumer habits, it also has a thriving cloud computing business, Amazon Web Services, that has steadily grown its revenue. And through Prime, Amazon also offers a glimpse into the future of media.

Prime is a different take on the old bundle: instead of packaging hundreds of TV channels (and telephone and internet service) for a monthly fee, it’s tied together shopping and shipping discounts, movies, TV and music (but notably, no live sports or news), for a lower monthly fee. As that user base grows, that fee revenue can finance more programming.

The Prime Video and Prime Music access accorded Prime members includes over one million songs and thousands of movies and TV shows from big and small producers — and increasingly, from Amazon’s own studio.

Amazon Studios is behind acclaimed originals such as “Mozart in the Jungle,” which won the 2016 Golden Globe for best comedy series, and “Transparent,” which has won multiple Globes and Emmys. Amazon has also produced several theatrical movies, including “Manchester by the Sea,” which comes out Nov. 18.

Last quarter, Amazon also launched “Style Code Live,” a home shopping show watchable on the company’s website — and with an interface that allows Amazon customers to seamlessly buy the products featured.

In a statement accompanying the earnings report, Amazon founder and CEO Jeff Bezos highlighted the company’s efforts to grow its user base in India.

“It’s been a busy few months for Amazon around the world, and particularly in India — where we launched a new AWS Region, introduced Prime with unlimited free shipping, and announced that Prime Video is coming soon, offering Prime members in India exclusive access to Amazon Original Series and Movies — including original content featuring top Indian creators and talent,” Bezos said in the release. “The team in India is inventing at a torrid pace, and we’re very grateful to our Indian customers for their welcoming response.”

Amazon will hold a conference call at 5 p.m. ET to discuss the earnings report.