Source: Company reports/FGRT

2Q17 Results

Amazon reported 2Q17 net sales of $38.0 billion, up 24.8% year over year and beating the $37.2 billion consensus estimate. Sales would have increased by 26% if the $502 million impact from unfavorable foreign exchange rate changes were excluded. Total operating expenses were $13.9 billion, up 39.6% year over year, i.e., growing faster than revenues. EPS was $0.40, versus $1.78 in the year-ago quarter and missing the $1.41 consensus estimate. Management highlighted its continuing focus on customers, with accompanying investments that include the launch of the new Echo Show (which has a screen) and the launch of Amazon Channels in the UK and Germany. The company also noted its launch of the 25th Prime Air airplane and the hiring of 30,000 new employees.

Details from the Quarter

Results according to Amazon’s new breakdown, which was introduced in 1Q17, were as follows (all figures are excluding currency effects):

• Retail products (product sales and digital media content) revenue was $23.8 billion, up 18% year over year.
• Retail third-party seller services (commissions, related fulfillment and shipping fees, and other third-party seller services) revenue was $7.0 billion, up 40%.
• Retail subscription services (annual and monthly fees associated with Amazon Prime membership as well as audiobook, e-book, digital video, digital music, and other subscription services) revenue was $2.2 billion, up 53%.
• AWS revenue was $4.1 billion, up 42% year over year.

Operating profit of $628 million comprised:

• North America: $436 million
• International: $(724) million
• AWS: $916 million

On a segment basis:

• Revenue from North America was $22.4 billion, up 26.6% year over year.
• Revenue from International was $11.5 billion, up 30.3% year over year.
• Revenue from AWS was $4.1 billion, up 42.1% year over year.

Outlook

For 3Q17, Amazon expects:

• Net sales of $39.25–$41.75 billion, up 20%–28% year over year, which includes a negative impact of $125 million from unfavorable exchange rates. The consensus estimate is $40.0 billion.
• Operating income of $(400)–$300 million, compared with $575 million in the year-ago quarter and below the $931 million consensus estimate. This translates to EPS of roughly $(0.83)–$0.44, well below the $1.11 consensus estimate.