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August 2 news, Thursday, US time,AmazonThe company released its second quarter financial report ending June 30, 2024. The report showed that Amazon's net sales in the second quarter were $148 billion, up 10% from $134.4 billion in the same period last year; net profit reached $13.5 billion, compared with $6.7 billion in the same period last year; diluted earnings per share were $1.26, compared with $0.65 in the same period last year. As both net sales and third-quarter performance outlook did not meet expectations, Amazon's stock price fell by more than 6% in after-hours trading.

Here are the highlights from Amazon’s second quarter earnings report:

——Net sales of $148 billion, up 10% from $134.4 billion in the same period last year, but lower than analysts' consensus estimate of $148.6 billion. Excluding the $1 billion adverse impact of foreign exchange rate changes, net sales increased 11% year-on-year. Among them:

● Sales in North America increased 9% year-on-year to $90 billion.

● International segment sales increased 7% year-over-year to $31.7 billion, and increased 10% excluding currency changes.

● AWSDivision sales increased 19% year-over-year to $26.3 billion, topping analysts' expectations of $26 billion.

- Operating profit increased to $14.7 billion in the second quarter, compared with $7.7 billion in the same period of 2023. Among them:

● Operating profit in North America was $5.1 billion, compared with $3.2 billion in the same period last year.

● The international division had an operating profit of $300 million, compared with an operating loss of $900 million in the second quarter of 2023.

● AWS division operating profit was $9.3 billion, compared with $5.4 billion in the same period last year.

-- Net income increased to $13.5 billion, compared with $6.7 billion in the second quarter of 2023. Net income in the second quarter of 2024 includes a $400 million pre-tax valuation gain on an investment in Rivian common stock, compared with $200 million in the same period last year.

-- Diluted earnings per share were $1.26, compared with $0.65 in the same period last year and above analysts' consensus estimate of $1.03.

- Amazon's operating cash flow increased 75% to $108 billion in the 12 months ending June 30, 2024, compared with $61.8 billion in the same period of 2023.

-- Free cash flow increased to $53 billion in the past 12 months, compared to $7.9 billion in the same period of 2023. Among them:

● Free cash flow, less principal repayments on finance leases and financing obligations, increased to $49.6 billion over the past 12 months, compared to $1.9 billion in the same period of 2023.

● Free cash flow, less principal payments on equipment finance leases and all other finance leases and financing obligations, increased to $51.4 billion over the past 12 months compared to $6.7 billion in the same period of 2023.

By service and business type:

- Net sales from online stores were $55.392 billion, compared with $52.966 billion in the same period last year, an increase of 5%.

- Net sales of physical stores were $5.206 billion, compared with $5.024 billion in the same period last year, an increase of 4%.

——Net sales of third-party seller services were US$36.201 billion, compared with US$32.332 billion in the same period last year, an increase of 12%.

——Net sales of subscription services were $10.866 billion, compared with $9.894 billion in the same period last year, an increase of 10%.

- Net sales of advertising services were $12.771 billion, compared with $10.683 billion in the same period last year, an increase of 20%, but lower than analysts' general expectation of $13 billion.

——Amazon AWS cloud service net sales were US$26.281 billion, compared with US$22.140 billion in the same period last year, an increase of 19%.

--Net sales of other businesses were $1.26 billion, down 6% from $1.344 billion in the same period last year.

Operating costs and expenses:

——Total operating expenses were US$133.305 billion, compared with US$126.702 billion in the same period last year. Among them:

● Cost of sales was US$73.785 billion, compared with US$69.373 billion in the same period last year.

● Contract fulfillment expenses were US$23.566 billion, compared with US$21.305 billion in the same period last year.

● Technology and infrastructure spending was $22.304 billion, compared with $21.931 billion in the same period last year.

● Sales and marketing expenses were $10.512 billion, compared with $10.745 billion in the same period last year.

● General and administrative expenses were US$3.041 billion, compared with US$3.202 billion in the same period last year.

Executive Comments:

“We continue to make progress on many fronts, with AWS growth accelerating in particular,” said Andy Jassy, ​​Amazon President and CEO. “As enterprises continue to modernize their infrastructure and move to the cloud while taking advantage of new opportunities in generative AI, AWS continues to be the top choice for customers due to its breadth of capabilities, superior security and operational performance, large partner ecosystem, and strong AI capabilities, including SageMaker (for model builders), Bedrock (for users of cutting-edge models), Trainium (for users who are cost-sensitive for training and inference), and Q (an assistant designed for top GenAI users who need deeper integrations in software development and business integrations).”

Financial report interpretation:

Amazon continues to face challenges from slow growth in its core retail business as competition intensifies. Competition mainly comes from discount websites such as Temu and Shein, which allow Chinese merchants to sell low-priced goods directly to American consumers. Sales in Amazon's online store division grew only 5% year-on-year, while revenue growth from third-party seller services (including commissions, fulfillment fees and shipping costs) was more significant, increasing 12% this quarter.

Amazon Chief Financial Officer Brian Olsavsky admitted in a conference call after the release of the earnings report: "We did have slightly less revenue growth in North America compared to our internal estimates. The reason for the price decline is that consumers choose to buy cheaper products, resulting in a decrease in the average selling price (ASP). What we see is that customers are choosing products with lower ASPs, and they continue to be cautious in their spending and tend to buy products with lower ASPs."

Amazon said at an event with Chinese sellers in June that it plans to launch a discount store that will mainly sell unbranded goods priced below $20, according to media reports. The store is expected to offer clothing, home furnishings and other products.

In its cloud computing business, AWS's revenue grew 19% year-on-year, beating expectations, but its expansion was slower than that of rivals Microsoft andGoogleIn their respective earnings reports, Microsoft and Google both reported 29% growth in their cloud computing businesses, although their figures include more than just cloud infrastructure, thanks in part to early deployments of artificial intelligence models.

Companies have already begun using cloud services to deploy generative AI models, powering technologies like OpenAI’s ChatGPT chatbot. Like other cloud computing service providers, Amazon has said it will significantly increase capital spending in 2024, much of which will go toward acquiring Nvidia’s GPUs for training and running generative AI models.

AWS currently accounts for 18% of the parent company's total revenue, but in terms of profits, AWS is much more important. Amazon said AWS's quarterly operating profit was $9.3 billion, accounting for 63% of the company's total operating profit. Analysts had expected AWS to have an operating profit of $8.51 billion.

Amazon’s advertising revenue surged 20% to $12.77 billion in the second quarter, just shy of expectations. The unit has become one of Amazon’s biggest profit generators, and while the bulk of its ad sales still come from sponsored product listings in its online store, the company has added new products and gained market share in digital advertising, competing with Meta and Google.

Meta had the strongest quarterly revenue growth among online ad companies, at 22%. Google’s ad business grew just 11% in the quarter. Snap said Thursday that its ad revenue grew 16% from the same period last year.

Amazon's net income doubled to $13.5 billion, or $1.26 a share, from $6.7 billion, or $0.65 a share, a year earlier, a sign that massive cost-cutting efforts across the company are paying off.

Olsavsky said Amazon's weak third-quarter outlook was partly due to consumers being distracted by world events, such as the opening of the Paris Fashion Week in late July.Olympic Games, and the attempted assassination of former President Donald Trump.

“No matter what you sell or offer to a customer, the customer’s attention span is limited,” Olsavsky added. “Big events like the Olympics don’t happen very often, but we do see different traffic patterns during those events. When big events happen, like the assassination attempt a few weeks ago, you see people’s attention shift to the news.”

Performance Outlook:

Amazon expects net sales in the third quarter of 2024 to be between $154 billion and $158.5 billion, or an increase of 8% to 11% from the third quarter of 2023. The median of the forecast range is $156.25 billion, lower than the average analyst estimate of $158.24 billion. At the same time, this guidance expects foreign exchange rates to have an unfavorable impact of about 90 basis points.

Operating profit is expected to be between $11.5 billion and $15 billion, compared with $11.2 billion in the third quarter of 2023, compared with the analyst consensus estimate of $15.3 billion.

Stock price changes:

Amazon's stock price closed down 1.56% at $184.07 per share on Thursday. As of press time, the stock fell nearly 6% in after-hours trading and is currently trading at $173.3 per share.

In the past 52 weeks, Amazon's stock price has been as high as $201.2 and as low as $118.35. Based on Thursday's closing price, Amazon's market value is approximately $1.92 trillion. (Xiaoxiao)