Online retailer giant Amazon.com Inc sales rose in the second quarter but its profit dropped as it keeps on investing to extend its already widened reach in the US economy.
The company posted second quarter revenue of $38 billion on a year to year basis, up by 25 percent from a year earlier as well as beating analysts’ expectation of $37 billion.
Quarterly income in the April-June quarter was down 77 percent from prior year to $197 million with Amazon even saying that it could lose up to $400 million in operating profit during the current quarter.
Earnings per share (EPS) also missed estimates with $0.40 against analysts’ $1.42 per share.
Investment was the major reason for the e-commerce group’s profit decline as it continues to invest in several new areas including video, fulfillment center and international expansion.
Decline of equipment, share acquisitions and other expenses were also among the factors that consumed revenue in a well-known pattern of Amazon setting long-term development before short-term profit.
Michael Yoshikami has stated that an investor would be buying for top of the line growth, revenue increase and market share, that is why despite Amazon’s shortcoming in its revenue, he believes that investors will see that the company is making great progress if they take a look at its numbers.
Amazon founder and chief executive Jeff Bezos said that their teams remain focused on their customers as they find it energizing to create for buyers and they continue to see a lot of high-quality opportunities to invest.
Amazon Web Services
Amazon Web Services is still the online retailer’s primary source for growth as added 42 percent year-on-year, making $916 million in operating profit which is more than twice of North America’s $436 million. Internationally, it suffered operating losses worth $724 million.
Revenue rose to $4.1 billion compared to $2.9 billion the same period a year earlier while operating expenses grew from $2.7 billion to $3.2 billion.
Subscription sales including Prime payments in the second quarter added 51 percent to $2.2 billion. Amazon’s video content that has Prime membership has supported the company to maintain subscribers and convince free-trial users to switch to the $99 per year subscription in the US.
This is a vital foundation of the business’ strategy as Prime invites buyers to purchase more products, more frequently from Amazon.
The company’s chief financial officer Brian Olsavsky said that the third quarter usually has a good amount of investments adding that their video content use will keep on growing both consecutively and quarter over quarter.
Analysts expect that there will be more than 50 percent Prime members of the US households by the end of 2017.
Ahead of showing retail’s unenthusiastic thin margins, forecast suggested that Amazon would invest a great deal to keep its dominance.
Amazon expects net sales to grow from 20 percent to 28 percent this quarter compared with the same period last year but operating profit will be lower.
Bezos briefly took the title as the world’s wealthiest man on Thursday as stock of Amazon reached an all-time high. Microsoft founder Bill Gates reclaimed top seat by afternoon after the e-commerce giant’s shares fell almost 1 percent to $1,046.