Amazon Q2 Results: Surprisingly strong growth and profits
Amazon announced better than expected Q2 results yesterday. The business posted sales of $134bn up 11% YOY alongside net profits of $6.7bn compared to a loss last year. These results exclude Prime Day (July 11-12), which they indicated was the ‘biggest Prime Day ever’ with Prime members purchasing more than 375 million items.
Amazon’s International business (ex US) grew by 10% YOY to £29.7bn and they managed to continue the trend of reducing their operating loss for the third quarter in a row.
Amazon’s advertising business has jumped by 22% on the previous year representing a 7.3% share of the world-wide digital ad market.
The results highlight the following:
- Amazon remains resilient in a tough economic climate, both in the US and abroad.
- Amazon is reaping the financial rewards of the well reported layoffs and cost cutting measures of the last 12 months.
- Their strong profit margin has delivered a better cashflow position. This will provide an opportunity to invest in even more innovative products and services in the future. Perhaps we will see them return to the acquisition trail?
- Amazon continues to find international growth harder to deliver. With an established business in the US, you would expect the international operation to grow faster as they copy the playbook for the rest of the world. With a cash rich position, we may see a more aggressive strategy in H2, especially in India and other emerging markets.
- We don’t see hyper growth in AWS anymore. Performance has stabilised as customers look to squeeze more out of cloud spending. Andy Jassy took the opportunity in the Q2 earning call to sell AWS and push their significant investment in generative AI.
- Customer experience and selection remains a key priority. In the report, they proudly announced that some of the best performing categories on Prime Day were Home and fashion. Categories Amazon are not commonly associated with. In addition, they celebrated how General Mills and Coca-Cola had expanded their selection in the grocery division.
- Amazon Business was mentioned as one of their fastest growing offerings with $35bn gross sales with 6 million customers. These numbers are staggering considering so few businesses are aware of this service still.
- Amazon Advertising growth continues at pace. Amazon continues to close the gap on the top two players (Meta & Google) who are struggling for marketing effectiveness due to Apple’s privacy updates and/or the loss of third party cookies. Advertisers are starting to see more value in retail media sales versus search and social media.
- The integration of amazon media into Pinterest was mentioned in the report. Amazon is excited by Pinterest, even though it is a relatively small social platform, as it enables them to tap into audiences that primarily use social media to find products - a trend they need to stay close to.
- Amazon continues to invest heavily in the creation and distribution of content. This strengthens their Prime membership and brings in new users to the Amazon ecosystem. To capitalise on this traffic, Amazon ads are getting more integrated with Prime Video, targeting is improving, creative is more engaging and AMC is enabling advertisers to attribute the shopper journey.
Overall, it was another positive quarter for Amazon against a backdrop of economic uncertainty. The business is stronger, they have the cash to invest and with the success of Prime Day banked into the next quarter the outlook is bright.
