Amazon posted $5.2 billion in profits in the second quarter, doubling its bottom line from the same quarter a year ago, despite spending more than $4 billion on COVID-19 initiatives.
The company’s net sales of $88.9 billion eclipsed Wall Street’s expectations by $7.4 billion, and its earnings of $10.30/share were seven times the analyst consensus of $1.46/share.
The blockbuster result comes a day after Amazon CEO Jeff Bezos appeared along with leaders of other tech giants at a Congressional antitrust hearing probing their market power.
Analysts were so surprised by the result that one, Mark Mahaney of RBC Capital Markets, jokingly asked on Amazon’s earnings conference call if Bezos was aware of the size of the company’s profits. The Amazon founder is notorious for running the company on razor-thin profit margins, at best, preferring to plow profits back into strategic initiatives to drive long-term growth.
Coming into the second quarter, Amazon was uncertain if it would be able to keep its shipping capacity up while trying to keep employees safe from COVID-19, but the company was able to ship more than it had envisioned, said Brian Olsavsky, the company’s chief financial officer, on a conference call with reporters following the earnings release.
“Demand stayed strong, especially among Prime members who were shopping more often and with larger baskets,” he said.
However, the company declined to say if it will reinstate its previous hazard pay for its front-line logistics workers or issue additional bonuses. Amazon has also declined to disclose the total number of workers in its fulfillment network who have been diagnosed with COVID-19.
Compensation for front-line workers, including increased pay and bonuses, accounted for the largest portion of the $4 billion in increased spending for COVID-19, Olsavsky told analysts on the company’s earnings conference call.
Amazon reported $9.4 billion in capital expenditures and finance leases for the quarter, up 65% year-over-year, focused primarily on building out its fulfillment and logistics network, Olsavsky said.
The company’s international division, which typically loses money, posted $345 million in operating income on $22 billion in sales, vs. a loss of $601 million on $17 billion in sales a year ago.
In its guidance for the third quarter, Amazon signaled that the growth in sales and profits could continue, even though it expects to spend another $2 billion on COVID-19 initiatives in the third quarter. The company said it expects net sales to grow 24% to 33% to between $87 billion and $93 billion for the third quarter, with operating profits between $2 billion and $5 billion, vs. $3.2 billion in the same quarter last year.
Amazon Web Services posted sales of $10.8 billion, up 29%, and operating profits of $3.4 billion, both new records for the company’s cloud division. However, the year-over-year quarterly sales growth rate dropped below 30% for the first time since the company began breaking out AWS results separately.
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” Bezos said in Amazon’s earnings release for the second quarter.
Bezos continued, “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners.”
Addressing one of the issues at the heart of the antitrust probe, Bezos said Amazon’s third-party sales “again grew faster this quarter than Amazon’s first-party sales.”
The company has created 175,000 new jobs since March and is in the process of converting 125,000 of those roles into regular, full-time positions, Bezos said. Amazon’s employee count, not including contractors and temporary workers, reached 876,800 as of the end of the second quarter.
Post updated at 3:20 p.m. Pacific with additional details. Amount by which Amazon’s net sales exceeded expectations has been corrected since original post.
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