Company beats on Q2 earnings and outlook, stock climbs 6%

Amazon (AMZN) reported its second quarter earnings on Thursday after the bell, beating on the top and bottom line despite earlier concerns about how its cloud business will fare.

Amazon stock rose 6% in after-hours trading.

The tech giant reported a relatively small but vital beat for revenue in its cloud business, Amazon Web Services or AWS, with sales coming in at $22.14 billion compared to the $21.71 billion that Wall Street expected.

The company’s third quarter revenue outlook was also a notable beat, coming in between $138 billion and $143 billion, ahead of the $138.3 billion expected.

Currently, cloud results are top-of-mind for tech investors, as the sector is in the midst of a slowdown with an uncertain future. For Amazon, AWS has long underpinned essential parts of the company’s revenue.

The earnings rundown

Here are the most important numbers that Amazon reported, as compared to analysts’ expectations compiled by Bloomberg:

Net sales: $134.38 billion actual versus $131.63 billion estimated

EPS: $0.65 versus $0.35 estimated

Amazon Web Services (AWS) net sales: $22.14 billion versus $21.71 billion estimated

Operating margin: 5.7% versus 3.46% estimated

Operating income: $7.68 billion versus $4.72 billion estimated

Q3 net sales outlook: $138 billion-143 billion versus $138.3 billion estimated

In Q1, Amazon guided to Q2 net sales of $127 billion to $133 billion.

IMAGE DISTRIBUTED FOR AMAZON WEB SERVICES - Attendees walk through an expo hall at AWS re:Invent 2021, a conference hosted by Amazon Web Services (AWS), on Wednesday, Dec. 1, 2021, at The Venetian in Las Vegas. (Noah Berger/Amazon Web Services via AP Images)

Attendees walk through an expo hall at AWS re:Invent 2021, a conference hosted by Amazon Web Services (AWS), on Wednesday, Dec. 1, 2021, at The Venetian in Las Vegas. (Noah Berger/Amazon Web Services via AP Images)

Cloud has been a key battleground among tech giants. Alphabet (GOOG, GOOGL) and Microsoft (MSFT), both cloud rivals for Amazon, reported earnings last week, with relatively mixed cloud results.

For its part, Microsoft Azure clocked a decline in its revenue growth, which has been the case each quarter since at least Q3 of last year. Despite the company’s overall 8% revenue increase, Microsoft’s stock dropped after hours. Meanwhile, Google Cloud turned profitable for the first time in Q1 and saw an income of $395 million this quarter — a stark contrast to the same quarter last year, when Google Cloud reported a $590 million loss.

What else caught our attention: Forward guidance and operating income

Amazon’s operating income beat comes at the heels of months of serious cost-cutting efforts under CEO Andy Jassy. That push towards efficiency push is notable even among tech giants — and it’s visibly materialized in the company’s 27,000 layoffs to date, and now, in its improved operating income and margins.

Additionally, investors saw a Q3 outlook beat, which is noteworthy for a few reasons, and Prime Day is chief among them. In Q3, Amazon’s Prime Day numbers will be reflected in full, and that forward outlook suggests last month’s Prime Day was a good one.

Amazon held its often-seismic Prime Day event in July. On the first day of the event, Amazon marked its largest-ever single day of sales, as consumers spent more than $2.5 billion on north of 375 million products, according to the company.

What analysts said pre-earnings

Amazon’s fundamentals might not be the primary topic of conversation during the company’s earnings call, according to RBC Capital Markets’ Brad Erickson.

Instead, AI will feature heavily, especially given Amazon’s (still-mostly-theoretical) competitive advantage with large enterprise customers.

“We expect commentary to be positive, where not unlike Meta, we’d expect management to speak to an open-sourced mindset with its platform having the greatest ability to allow superior performance, efficiency, and product capabilities to serve the largest customers’ AI needs,” Erickson wrote.

Cues from management will be crucial, both when it comes to AI and cloud services.

“The key question will be whether management suggests that … AWS is likely to start showing revenue growth acceleration beginning in Q3,” Evercore ISI analyst Mark Mahaney wrote in a note.

This is breaking news, more to come.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here

Read the latest financial and business news from Yahoo Finance

Leave a Comment