Amazon reports Q2 results; net sales up 27%

Amazon reported its Q2 2021 earnings on Thursday after the closing bell. The company reports a $15.12 earnings per share beating analysts estimates. Shares fell over 5% after hours. The company also falls short on its Q3 guidance.

  • Revenue: $113.08 billion versus $115.06 billion expected
  • EPS: $15.12 versus $12.22 expected
  • AWS revenue: $14.81 billion versus $14.18 billion expected
Details:
  • Operating cash flow increased 16% to $59.3 billion for the trailing twelve months, compared with $51.2 billion for the trailing twelve months ended June 30, 2020.
  • Free cash flow decreased to $12.1 billion for the trailing twelve months, compared with $31.9 billion for the trailing twelve months ended June 30, 2020.
  • Free cash flow less principal repayments of finance leases and financing obligations decreased to $0.6 billion for the trailing twelve months, compared with $21.3 billion for the trailing twelve months ended June 30, 2020.
  • Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations decreased to $4.2 billion for the trailing twelve months, compared with $19.4 billion for the trailing twelve months ended June 30, 2020.
  • Common shares outstanding plus shares underlying stock-based awards totaled 522 million on June 30, 2021, compared with 517 million one year ago.
  • Net sales increased 27% to $113.1 billion in the second quarter, compared with $88.9 billion in second quarter 2020. Excluding the $2.5 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 24% compared with second quarter 2020.
  • Operating income increased to $7.7 billion in the second quarter, compared with $5.8 billion in second quarter 2020.
  • Net income increased to $7.8 billion in the second quarter, or $15.12 per diluted share, compared with $5.2 billion, or $10.30 per diluted share, in second quarter 2020.

“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic. At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud,”

“Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers—I am very excited to work with you as we invent and build for the future.”

Andy Jassy, Amazon CEO.

Link to their webcast

Here’s what analysts expect, in line with estimates sourced by Visible Alpha.   

  • Earnings: $12.47 per share anticipated 
  • Revenue: $115.4 billion anticipated
  • AWS Revenue: $14.2 billion
Earning History 

 Amazon currently has a market cap of $1.875 Trillion and ranks as one of the world’s top companies by market value. The American online retailer witnessed a spurt in its online shopping orders amid the pandemic. It remains the reigning champion in the online retail sector.   

 Amazon’s net sales rose 44% to $108.5bn in Q1 2021, compared with $14.3bn in the corresponding period 2020. For FY 2020 which ended December 31, 2020, the company reported a net income of $21.3 billion. Amazon’s ad prices have been increasing for years.  The company reported negative adjusted EPS in two of the past 13 quarters: Q1 and Q2 FY 2020, at the start of the COVID-19 pandemic.  

During Q4 FY 2020, Amazon beat analysts’ earnings expectations. EPS grew 117.7% compared to the year-ago quarter, marking the second-fastest pace of growth since Q3 FY 2018. Amazon’s revenue rose 43.8% year over year (YOY) marking the fastest pace of growth in at least 15 quarters. 

However, growth in Amazon Web Services (AWS) AWS revenue has been sluggish over the past five years. Last year, revenue for Amazon’s cloud segment grew at a slow pace of 29.5% pace as against 69.7% in FY 2015. In Q1 FY 2021, AWS revenue rose 32.1%. 

 In FY 2020, Amazon’s global retail sales- and subscription-based business segments generated ~88% of the company’s total revenue while AWS accounted for a mere 12%. However, AWS accounted for 59% of total operating income for the year, making it Amazon’s main profit generator. 

According to Consumer Intelligence Research Partners (CIRP) data, Amazon’s focus on adding to its more than 200 million Prime members around the world is yielding results. 

 “Beyond meeting the obvious and enormous challenge of scaling up to accommodate increased demand, Amazon mostly convinced shoppers to join Prime. The well-developed Prime membership model worked, with Amazon gaining about 30 million new individual Prime shoppers in the U.S. in the past 12 months,” says Josh Lowitz, CIRP partner, and co-founder in a press statement. 

 Annual forecast 

For full-year FY 2021, analysts predict EPS to increase 35.9% while annual revenue expands 27.1%, slowing from last year’s pace. Annual AWS revenue is expected to grow 30.3%, slightly faster than last year. 

 Plans  

 Amazon announced in May that it plans to acquire MGM studio for an $8.45 billion deal that is currently under Federal Trade Commission review. According to inside traders, Amazon’s new deal, which includes the James Bond films, along with an $11 billion investment in Prime Video and Music content as well as investments in logistics and fulfillment are all part of the company’s efforts to enhance its Prime offerings. 

 Jeff Bezos journey to space and back  

Amazon.com Inc. founder Jeff Bezos, the world’s richest man blasted into space on July 20, this year. The billionaire landed into space on his company Blue Origin’s New Shepard spacecraft, marking a historic moment in space travel. Upon landing, Bezos declared it “the best day ever” on his communications check.  

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