Amazon retail sales boost boosts Q3 profit, revenue above estimates Per Reuters
Written by Deborah Mary Sophia and Greg Bensinger
(Reuters) – Amazon.com on Thursday posted profit and third-quarter sales that beat Wall Street estimates, helped by strong retail sales, and shares rose 4% after the closing bell, more than making up for a decline in regular trading.
Amazon’s (NASDAQ:
Three months ago, Amazon executives warned that shoppers were “spending conscious” and looking for more affordable options.
The company faces increasing competition from discount retailers such as Shein and Temu, which sell a wide variety of goods at low prices shipped directly from China.
Amazon reported a 7% increase in retail sales for the quarter ended September 30 to $61.41 billion.
“The most notable thing about Amazon’s earnings was the dramatic improvement in margins,” said Gil Luria, head of technology research at DA Davidson. “Investors have been concerned about the retail business’s ability to maintain margins and Amazon has been able to increase margins.”
Operating margin at Amazon’s international business increased to 3.6% in the third quarter from 0.9% in the second quarter. The North American margin came to 5.9% from 5.6% in the previous quarter.
Amazon Web Services, the company’s cloud business, reported a 19% increase in sales to $27.5 billion, in line with estimates, according to LSEG data. It was the fastest pace of growth in seven quarters for AWS, which accounts for a fifth of Amazon’s sales but about two-thirds of its profits.
“The black eye here was AWS,” said Dave Wagner, a portfolio manager at Aptus Capital Advisors who owns Amazon stock. While the 19% sales growth beat expectations, he said he believed “the number buzz is that it will be closer to 21 or 22%,”
AWS competes with Microsoft (NASDAQ:)’s Azure and Alphabet (NASDAQ:)’s Google cloud, both of which reported quarterly cloud revenue growth this week.
DA Davidson’s Luria said Google Cloud has taken market share from AWS in the past two weeks.
Amazon, however, has usurped Google’s advertising business as it has become very popular with advertisers looking to get a large number of potential buyers to their website.
Amazon’s ad sales rose 19% to $14.3 billion, slightly beating expectations, thanks in part to Amazon’s ad spots in shopping carts at brick-and-mortar stores and ads on its Prime Video streaming service.
The midpoint of Amazon’s fourth-quarter revenue forecast — $185 billion — just missed the analyst estimate of $186.16 billion. Luria said the company was being cautious about “what the holiday season will be, given the high level of variability of that.”
Ahead of the earnings report, Amazon shares closed the trading session down 3.3%. Shares are up about 23% this year, outpacing a nearly 20% jump in the broader market.
Seattle-based Amazon said sales in its North American division rose 9% to $95.5 billion in the third quarter. Net income was $158.9 billion, compared with analysts’ average estimate of $157.20 billion.
Total revenue was $15.3 billion, up 55% from $9.9 billion in 2023. Amazon reported earnings of $1.43 per share, beating expectations of $1.14 per share.
Amazon has ended a practice that dates back at least 23 years of holding a separate conference call with its chief financial officer and reporters, reducing public visibility.
