Amazon’s performance in the second quarter resulted in weaker-than-anticipated revenue, leading to a lackluster forecast for the current period. In extended trading, its shares plummeted by up to 6%.
The company achieved earnings of $1.26 per share, surpassing LSEG’s projected $1.03 per share, and reported revenue of $147.98 billion, slightly lower than LSEG’s expectation of $148.56 billion.
Amazon Web Services (AWS) revenue outperformed expectations, reaching $26.3 billion versus the projected $26 billion according to StreetAccount. Conversely, advertising revenue fell short of expectations at $12.8 billion compared to the estimated $13 billion in revenue as per StreetAccount.
Amazon projected its revenue for the upcoming quarter to range between $154 billion and $158.5 billion, indicating a growth rate of 8% to 11% year over year. However, the mid-point of $156.25 billion fell behind the average analyst estimate of $158.24 billion from LSEG.
The company continues to face challenges in its core retail business, grappling with intensified competition, particularly from discount platforms like Temu and Shein, enabling Chinese vendors to offer cheap products to American consumers.
Sales in its online stores segment expanded by just 5% year over year, while revenue from third-party seller services saw a faster growth of 12% during the quarter.
Amazon’s Finance Chief, Brian Olsavsky, attributed a revenue shortfall in North America to consumers opting for cheaper products, leading to a decline in average selling prices. He noted a trend of customers exhibiting caution in spending and opting for lower-priced items.
Amazon anticipates that third-quarter operating income will fall within the range of $11.5 billion to $15 billion, a slight increase from $11.2 billion in the same period last year. Analysts surveyed by StreetAccount had projected operating income to reach $15.3 billion.
In the cloud sector, Amazon Web Services exceeded expectations by witnessing a 19% growth year over year, albeit at a slower pace compared to competitors like Microsoft and Google, who reported 29% growth in their respective earnings reports.
Despite the revenue increase in advertising, with a 20% jump to $12.77 billion, Amazon fell slightly below estimates. The advertising division has emerged as a major profit driver for the company, expanding its market share in the digital advertising sector, competing with Meta and Alphabet.
Amazon’s net income doubled from the previous year to $13.5 billion, or $1.26 per share, reflecting substantial cost-cutting endeavors throughout the organization.
Olsavsky attributed part of the guidance weakness to consumer distractions caused by recent world events, such as the Olympics and the attempted assassination of Donald Trump, impacting consumer behavior and overall market dynamics.
