Amazon Surpasses Expectations with 13% Revenue Growth in Q3 Results

 Amazon Surpasses Expectations with 13% Revenue Growth in Q3 Results

Amazon reports better-than-expected results, as revenue jumps 13%

Amazon has reported its third-quarter earnings and revenue, exceeding analysts' expectations and showing a strong performance in various segments. While the stock initially saw gains in extended trading, it later gave up some of those gains. Here are the key highlights from Amazon's Q3 results:

Earnings per share: Amazon reported earnings of 94 cents per share, surpassing the 58 cents per share expected by LSEG (formerly known as Refinitiv).

Revenue: The company posted revenue of $143.1 billion, exceeding the $141.4 billion expected by LSEG.

Investors were closely monitoring the performance of Amazon's segments:

• Amazon Web Services: Generated $23.1 billion in revenue, slightly below the expected $23.2 billion, according to StreetAccount.

• Advertising: Amazon's advertising segment brought in $12.1 billion in revenue, surpassing the expected $11.6 billion, as reported by StreetAccount.

Amazon also provided guidance for its fourth-quarter sales, which includes the critical holiday period, projecting revenue between $160 billion and $167 billion. Analysts had anticipated revenue of $166.6 billion, according to LSEG. At the midpoint of this guidance range, Amazon's revenue would grow by 9.6%, reaching $163.5 billion compared to $149.2 billion the previous year.

The third-quarter results showcased a 13% increase in revenue, indicating a positive shift for Amazon, especially after a challenging 2022 marked by surging inflation and rising interest rates.

Over the past year, Amazon has been focused on cost-cutting measures as it recognized the need to streamline its operations after rapid expansion during the pandemic. The company made significant workforce reductions, laying off 27,000 employees since the previous fall, and discontinuing less profitable ventures.

CEO Andy Jassy, who took over from founder Jeff Bezos in mid-2021, highlighted the success of these cost-cutting efforts. Jassy mentioned that the third quarter saw improvements in the cost-to-serve and delivery speed in Amazon's Stores business. Additionally, the company's cloud computing division, Amazon Web Services (AWS), showed signs of stability. Advertising revenue witnessed robust growth, and overall operating income and free cash flow increased substantially.

Sales within Amazon's core e-commerce business continued to recover, growing by 7% year-over-year, building on a 4% increase in the previous quarter. This performance included results from this year's Prime Day promotion held in July, described by Amazon as its "biggest ever" sale.

Amazon's net income more than tripled, reaching $9.9 billion, or 94 cents per share, compared to $2.9 billion, or 28 cents per share, in the previous year. The quarterly net income includes a pre-tax valuation gain of $1.2 billion related to the company's investment in electric car company Rivian.

Amazon's results followed strong performances from Alphabet and Meta earlier in the week. Despite Amazon's impressive results, its shares experienced a decline, reflecting the broader market trend where mega-cap tech companies responded to Alphabet and Meta's reports with a decrease in their stock prices.

Notably, digital advertising remains a bright spot for Amazon, with third-party sellers and major brands increasing their ad spending to enhance visibility in a competitive market. Amazon's advertising revenue grew by 26% year-over-year, outpacing Google's ad growth (9%) and Facebook's ad growth (23%). Snap reported a more modest 5% increase in revenue.

In the cloud computing sector, Amazon's AWS showed a growth rate of 12% for the quarter. While Amazon Web Services leads in market share, this growth rate is notably lower than Microsoft Azure's (29%) and Google Cloud's (22%) reported growth.

The slowdown in AWS growth is attributed to some businesses looking to control costs. Amazon's CFO, Brian Olsavsky, explained that there's a gradual reduction in cost optimization efforts by customers, with new workloads gradually taking their place.

Furthermore, Amazon has successfully reduced costs across its operations, including fulfillment, delivery, and inventory handling, leading to an operating margin of 7.8%, the highest since early 2021. This reflects Amazon's commitment to improving profitability through cost-cutting measures.