Defying subdued predictions, Amazon on Thursday reported healthy third-quarter earnings of $0.52 per diluted share, based on net income of $256m, on par with $0.52 per diluted share and $252m a year ago.
The tech giant's sales revenue reached $43.7bn, up 34 per cent from $32.71bn in Q3 2016, which ended September 30. That figure includes $1.3bn revenue from grocery chain Whole Foods, which Amazon acquired in August. Without Whole Foods, net sales increased 29 per cent compared with Q3 2016.
Analysts had been expecting $0.03 per share and $42.14bn in sales, according to Thomson Reuters. As a result, Amazon's shares surged about eight per cent in after-hours trading to $1,052 apiece at time of writing.
Amazon Web Services showed stronger revenue growth than the company overall. It accounted for $4.58bn in sales, up 42 per cent from $3.23bn reported a year ago.
AWS by itself is at $18bn in ARR with 21% profit margins, which is similarly totally absurd for a commoditized business like hosting.— Laurie S Pumpkins (@seldo) October 26, 2017
The e-commerce giant added about 160,000 employees, a 77 per cent increase from the second quarter of 2017. Of these, about 87,000 were added through the Whole Foods acquisition, bringing the total, including its dozen or so bookstores, to about half a million people.
Amazon founder and CEO Jeff Bezo chose to focus on the growth of his company's Echo and Alexa ecosystem. In a statement, he said that Amazon had launched five new Alexa-enabled devices just in the past month and that "customers have purchased tens of millions of Alexa-enabled devices."
On the company's conference call for investors, CFO Brian Olsavsky attributed the unexpectedly rosy results to a strong customer response to the lingering impact of Prime Day, the company's annual summer sale in July. He also cited the strength of AWS. "We're very pleased with the customer response," he said, noting that usage growth was higher than revenue growth.
Olsavsky added that the company's advertising business, included in its Other line item, grew 58 per cent to $1.12bn for the quarter. "We're very pleased with the advertising business," he said, noting that Amazon's goal with ads is to help customers make better decisions rather than to be intrusive.
eMarketer, a consultancy, anticipates that Amazon’s ad revenues will reach $1.65bn in 2017, less than digital ad giants Google or Facebook, but enough to put it past Snapchat and Twitter.
For its Q4 2017 guidance, Amazon expects sales between $56bn and $60.5bn during the holiday shopping season, reflecting growth between 28 and 38 per cent year-on-year. ®