Amazon Delivers a Pile of Cash, but No FireworksSAN FRANCISCO — Hold that champagne.
Expectations for Amazon’s second quarter were extremely high, and in some respects the company exceeded them when it released results on Thursday. But any hope that it would be the event that hurtled the company’s valuation above the trillion-dollar mark will have to wait.
Amazon’s greatest strength is its ability to sell vast quantities of things, while its actual profit is famously erratic. This quarter, those qualities were reversed. Profit was strong, while revenue was not quite what analysts had anticipated.
Net sales increased 39 percent, to $52.9 billion, compared with the same period a year ago. Analysts predicted $53.37 billion. What’s a $500 million miss from a highflier? Well, Facebook on Wednesday missed its estimates by about $200 million, on revenue that was a quarter of Amazon’s, and the stock tumbled 19 percent.
But Amazon leads a charmed life: Good results mean things are working out, and weak results mean it is investing so things will work out in the future.
Net income for the quarter was impressive: $2.5 billion, or $5.07 per share, compared with $197 million, or $0.40 per share, in 2017. Analysts anticipated only about half that. Amazon has now been consistently profitable since early 2015, something a few analysts — and quite a few short-sellers, who were betting on the stock dropping — thought they would never see.
“A blowout quarter by virtually any measurement,” said Charlie O’Shea, Moody’s lead retail analyst.
The company’s result eased some tech investor worries that Facebook’s problems would spread elsewhere. Amazon fell $56, or about 3 percent, in regular trading Thursday — a minor blip in the stock’s relentless march upward over the last decade. The company’s results, posted after the markets closed, made up those losses plus a few dollars more in after-hours trading.
Last week, both the power and the perils of Amazon were on vivid display. The company had its fourth-annual Prime Day, a made-up shopping holiday that is available only to Prime customers. It was so successful that the site crashed. Michael Pachter, an analyst at Wedbush, estimated that Prime Day sales rose 33 percent from last year.
But the sale was conducted against the backdrop of work stoppages in Europe that lasted as long as three days, one of the biggest labor actions in the company’s history. The strikes, which happened in Germany, Poland and Spain, did not involve all the workers in those countries. In Spain, the police clashed with the strikers, resulting in at least one worker injury.
“In spite of the company’s strategy to open new centers in countries that are ‘quieter’ from the point of view of trade unionism, the tough working conditions it enforces are driving more and more workers to rebel against them,” the strikers said.
Amazon responded with a statement saying it was “a fair and responsible employer” that was offering Europeans “good jobs with highly competitive pay, full benefits and innovative training programs.”
In its announcement about its earnings, Amazon brought up the things it cares most about: its membership club, Prime; its market-leading cloud division, Amazon Web Services; and Alexa, the voice technology that powers the Echo devices people use in their homes.
While Amazon gives few numbers on Alexa and Echo, the research firm eMarketer says 41 million people in the United States will use an Echo this year, up 31 percent over last year. Echo has about twice the market share of its closest competitor, Google Home.
Amazon is so dominant in e-commerce that it barely needed to mention it in the earnings announcement. It controls exactly half of the online market in the United States. Its next competitors, including eBay and Walmart, own market shares mired in the single digits. Ebay, which bested Amazon in auctions long ago, has been struggling. It said it would lay off hundreds of employees this month.
For years, Amazon has been on a hiring binge — world domination needs many hands. But in the second quarter, it slowed a bit, increasing only 12,000 from the first quarter. In 2017, employment grew 31,000 between the first and second quarters.
Daniel Ives, head of technology research for GBH Insights, reaffirmed Thursday his $2,000 target for Amazon’s shares, a price that would make it a trillion-dollar company.
“After the Facebook debacle last night,” Mr. Ives wrote in a research note, “we believe the Street will be somewhat relieved to see Amazon deliver another strong quarter.”