Amazon stock rallies after company swings to second-quarter net profit

The world's biggest e-commerce company earned a net profit of $6.7bn between April and June

Amazon's second-quarter revenue increased 11 per cent on an annual basis to $134.4 billion. Bloomberg

Amazon shares surged almost 9 per cent in extended trading on Thursday, after the e-commerce company swung to a net profit of $6.7 billion in the second quarter compared to a loss of $2 billion in the same period last year.

It was up 109 per cent on a quarterly basis as the company earned a net profit of $3.2 billion in the March quarter.

The April-June net profit also included a pre-tax valuation gain of $2 million included in non-operating expense from the common stock investment in electric vehicle maker Rivian Automotive, the company said in a statement on Thursday.

That compared to a pre-tax valuation loss of $3.9 billion from the investment in the second quarter of last year.

The Seattle-based company’s revenue during the second quarter increased 11 per cent on an annual basis to $134.4 billion, topping analysts' average estimate of $131.5 billion, Refinitiv reported.

This was the 11th consecutive quarter with more than $100 billion in sales.

Amazon's operating income increased to $7.7 billion in the second quarter, up from $3.3 billion during the same period in 2022.

The company's stock, which is up about 50 per cent since that start of this year, was nearly 0.55 per cent higher at $128.91 at the close of trading on Thursday. It surged to $139.13 a share in after-hours trading.

In 2022, Amazon’s share price dropped more than 50 per cent. It was the biggest decline since 2000, when it tumbled almost 80 per cent.

“It was another strong quarter of progress for Amazon,” said Andy Jassy, the company's chief executive.

“We continued lowering our cost to serve in our fulfilment network, while also providing Prime customers with the fastest delivery speeds we have ever recorded.”

North American market sales, which increased almost 11 per cent year on year to $82.5 billion in the June quarter, contributed more than 60 per cent to the overall sales of the company.

But the international markets sales surged 10 per cent annually to $29.7 billion. They added more than 22 per cent to overall sales.

"Amazon's improving margins display an entirely different company from what we saw just a year ago," Thomas Monteiro, senior analyst at Investing.com, told The National.

“One of the keys to the turnaround has been the ingenious inventory management strategy which, combined with pricing and fast deliveries, drove a phenomenal quarter for the giant."

Amazon Web Services, the company’s subsidiary that provides on-demand cloud computing platforms to other businesses, also had good momentum in sales.

AWS revenue reached $22.1 billion in the second quarter, exceeding analysts’ expectations of $21.8 billion, and rising annually by more than 12 per cent.

“Our AWS growth stabilised as customers started shifting from cost optimisation to new workload deployment,” Mr Jassy said.

“AWS has continued to add to its leadership position in the cloud with a slew of generative AI releases that make it much easier and more cost-effective for companies to train and run models, customise large language models to build generative AI applications and … write code much more efficiently."

The company earned $10.7 billion from advertising in the previous quarter, compared to $10.4 billion expectations, according to StreetAccount.

In its third-quarter sales guidance, Amazon expects revenue to hover between $138 billion and $143 billion, jumping 9 per cent to 13 per cent compared with the same period a year earlier.

Operating income is expected to be between $5.5 billion and $8.5 billion, compared with $2.5 billion in the third quarter of last year.

”The future guidance, which not only showed that the company remains committed to financial efficiency but also sees room to keep growing in what is shaping up to be a tough quarter for S&P 500 earnings in general,” Mr Monteiro said.

Amazon said it held the biggest Prime Day event ever on July 11 and 12, in the third quarter, as Prime members worldwide bought more than 375 million items and saved more than $2.5 billion.