Andy Jassy, the CEO of Amazon.Com Inc., made a significant impact during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 5, 2021.
Photo: David Ryder | Bloomberg | Getty Images
Amazon witnessed a significant jump of 8% in its shares on Friday, following its outstanding second-quarter earnings report and optimistic outlook.
The e-commerce giant outperformed expectations with earnings of 65 cents per share compared to the Refinitiv consensus estimate of 35 cents per share. This marks Amazon’s highest profit beat since 2020 and can be attributed to the cost-cutting efforts implemented by CEO Andy Jassy.
The company also reported a notable increase in revenue, with a year-over-year surge of 11% to $134.4 billion, surpassing the recent single-digit growth. Analysts had predicted revenue of $131.5 billion. Amazon’s third-quarter sales forecast of $138 billion to $143 billion also exceeded the consensus estimate of $138.25 billion, according to Refinitiv.
The strong performance of Amazon Web Services and improved retail margins were well received by Wall Street. Bernstein analysts, who maintain an outperform rating on Amazon’s stock, expressed their satisfaction with the overall results, stating, “Amazon fired on all cylinders: AWS finally stabilizing and now a coiled spring; Retail performance hanging in with weakened consumer; N. American retail margins are back to pre-pandemic levels and accelerating alongside compressing fulfillment windows — impressive; and aggregate operating profits are up and to the right. Was this a sneak peek of a Jassy-led growth era? Or was 2Q23 a peak unlikely to repeat? We’ll take the former thank you very much.”
Analysts were further encouraged by Amazon executives’ remarks on the improved efficiency of its retail business. The company has implemented measures to reduce expenses in its fulfillment network by transitioning from a national “hub-and-spoke” strategy to a regional model. This change has resulted in faster deliveries, while also cutting costs.
Morgan Stanley analysts labeled this shift as the “next retail flywheel” for Amazon and gave the company an overweight rating. They emphasized that Amazon’s ability to achieve lower costs through improved infrastructure, particularly in same-day facilities, historically leads to higher conversion and consumer spending growth. This, combined with better unit economics, suggests the potential for faster sustained growth and improved profitability for Amazon’s North America retail segment.
— CNBC’s Michael Bloom contributed to this report.
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