Amazon – cloud delivers and retail engines are firing, for now
- Net sales rose 11% year-on-year in the third quarter, reaching $143.1bn and ignoring the effect of exchange rates. North America sales up 11%, with International sales rising 11%
- AWS sales were up 12%, broadly as expected
- Advertising saw growth of 25%
- Operating profit jumped from $2.5bn last year to $11.2bn
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“Amazon results were always going to be about the cloud. Thin margins in Amazon’s retail business makes cloud so much more important than it does for the other tech companies, whose broader business models are a lot less capital intensive. When AWS does well, it manages the incredible feat of propping up the majority of Amazon’s bottom line these days.
The retail division is sparking back into life, especially in North America and the losses are within a whisker of closing in international markets. There’s been a significant increase in the number of seasonal workers Amazon’s taken on in readiness for the Christmas rush, which bodes well for expectations around discretionary spending, but we could be looking at a final spending push before a substantial pull back in the new year. So, this is a risk that will need monitoring closely.
The wider opportunity cost dynamics playing out in the market means keeping investors excited about Amazon stock is a harder task than usual, because of spiking treasury yields. The sell off seen in recent days has been partially undone, but there could be more volatility waiting in the wings. The advertising potential is also an enormous opportunity, and one that isn’t necessarily fully baked into expectations over the long term.”
