Nearly Tripled Profits Show Amazon Still Got It

On Thursday, the e-commerce titan Amazon.com Inc AMZN joined Microsoft Corporation MSFT, Alphabet GOOGGOOGL and Meta Platforms META in showing Big Tech is defying macroeconomic challenges as it continues its comeback after a rocky 2022.

Amazon Rebounds After A Tough Year

Last year, Amazon was dealing with a weakened demand as pandemic restrictions eased while unfavorable macroeconomic factors, i.e. inflation, restricted consumers’ wallets. But 2023 has been a year of revenue growth so far, showing CEO Andy Jassy’s cost-cutting efforts are paying off. Back in March, Amazon announced another round of layoffs impacting 9,000 jobs, in addition to the 18,000 that were confirmed in January, along with a hiring freeze. But this year also came with its challenges as last month, the Federal Trade Commission and 17 states have sued Amazon in a landmark monopoly case that alleges the e-commerce titan abused its economic dominance and harmed fair competition. 

Amazon’s Third Quarter Highlights

For the September quarter, Amazon recorded revenue of $143.1 billion which implies a 13% YoY increase. For the quarter that ended on September 30th, Amazon more than tripled its net income as it earned a profit of $9.9 billion that also topped estimates. Operating profit amounted to $11.2 billion, with an operating margin of 7.8% implying a more than 2% YoY increase, while also breaking the previous record from 2021’s first quarter when it amounted to 8.2%. 

Amazon Web Services experienced a 12% expansion as revenue amounted to $23.1 billion. When it comes to the cloud, Microsoft won this round as it reported a 29% growth, followed by Google whose cloud revenue rose 22%. Microsoft surpassed $31.8 billion in cloud revenue in its latest reported quarter, while Google also reported a substantial rise with revenue totaling $8.41 billion. Amazon is really trying to maintain its cloud dominance, but competition is only getting more intense and generative AI is further elevating the stakes. According to estimates from Synergy Research Group, Amazon held a market share of 32% in the third quarter, followed by Microsoft owning 21% with Azure, but Microsoft experienced a 1% rise in market share compared to the second quarter while both Amazon and Google seem to be losing market share. 

The core e-commerce segment continued to recover, expanding 7% YoY, after having grown 4% in the previous, second, quarter. North America was another bright spot as its revenue rose 11% YoY to $87.9 billion.

Advertising brought in $12.1 billion which translates to an impressive 26% YoY rise, outpacing both Alphabet who reported Q3 ad growth of 9% as well as Meta who recorded a 23% growth.

A Confident Outlook

Despite increasing interest rates and people returning to physical stores, the world’s largest retailer is expecting robust margins to persevere througout the remaining three months of the year. Amazon guided for total net sales for the fourth, undergoing quarter, in the range between $160 billion and $167 billion, implying a YoY increase of 12%.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.