Amazon Beats Expectations in Q2 – Issues Continuing Growth Forecast

A positive earnings report in an otherwise less than stellar second quarter for big tech in 2022.

Following the company’s better-than-expected second-quarter revenue and the issuing of an optimistic outlook, shares in Amazon climbed more than 13% in extended trading.

Amazon reported revenue growth of 7% in the second quarter which topped estimates and ran counter to the trend among its tech peers, which all reported disappointing results, while Amazon and Apple were among the rare few to beat expectations.

Looking ahead Amazon said it expects net sales  to be between $125 billion and $130 billion, or to grow between 13% and 17% compared with the third quarter of 2021.

 
 

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” said CEO Andy Jassy in a statement.

Amazon’s core e-commerce business continued to lag as online sales receded from the height of the Covid-19 shutdowns. The company’s online stores segment declined by 4% year over year, while its physical store sales continued to rebound from a year ago, growing 12%.

A bright spot for the company is its advertising business with ad revenue climbing 18% in the period.

 
 

Amazon’s quarter was also given a lift by its cloud business, Amazon Web Services, which recorded a profit of $5.7 billion on revenues of nearly $20 billion — that marks a 33% increase from the same period last year.

The company additionally announced that it cut its workforce by nearly 100,000 people in the quarter—a reduction of about 6%, which marks Amazon’s largest cut in a single quarter.


Highlights

  • Operating cash flow decreased 40% to $35.6 billion for the trailing twelve months, compared with $59.3 billion for the trailing twelve months ended June 30, 2021.
  • Free cash flow decreased to an outflow of $23.5 billion for the trailing twelve months, compared with an inflow of $12.1 billion for the trailing twelve months ended June 30, 2021.
  • Free cash flow less principal repayments of finance leases and financing obligations decreased to an outflow of $33.5 billion for the trailing twelve months, compared with an inflow of $0.6 billion for the trailing twelve months ended June 30, 2021.
  • Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations decreased to an outflow of $26.1 billion for the trailing twelve months, compared with an inflow of $4.2 billion for the trailing twelve months ended June 30, 2021.
  • Common shares outstanding plus shares underlying stock-based awards totaled 10.6 billion on June 30, 2022, compared with 10.4 billion one year ago. All share and per share information throughout this release has been retroactively adjusted to reflect the 20-for-1 stock split effected on May 27, 2022.
  • Net sales increased 7% to $121.2 billion in the second quarter, compared with $113.1 billion in second quarter 2021. Excluding the $3.6 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 10% compared with second quarter 2021.
  • Operating income decreased to $3.3 billion in the second quarter, compared with $7.7 billion in second quarter 2021.
  • Net loss was $2.0 billion in the second quarter, or $0.20 per diluted share, compared with net income of $7.8 billion, or $0.76 per diluted share, in second quarter 2021. Second quarter 2022 net loss includes a pre-tax valuation loss of $3.9 billion included in non-operating expense from our common stock investment in Rivian Automotive, Inc.

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