AWS boosts Amazon’s results in the second quarter of 2022
Amazon’s financial results for the quarter ended June 30 were hurt by slowing consumer shopping online, like many other retailers and e-commerce platforms.
The company recognized inflation-induced cost pressures, particularly in the supply chain. Additionally, Prime Day was in the second quarter of 2021 but in the third quarter of this year, negating a surge in sales in the second quarter.
Amazon reported sluggish sales and a net loss for the second consecutive quarter. Nonetheless, second-quarter revenue beat analysts’ expectations, coming in at $121.2 billion versus $119.5 billion expected. Revenue for the second quarter of 2021 was $113.1 billion.
While product sales fell, service revenue grew 17.4% from $55.1 billion in the second quarter of 2021 to $64.7 billion in the second quarter of this year, driven mainly by Amazon Web Services.
Net loss for the second quarter of 2022 was $2.0 billion, compared to net income of $7.8 billion in the second quarter of 2021. Net loss includes pretax non-operating impairment of $3.9 billion dollars from the company’s investment in electric car maker Rivian.
Operating expenses rose 12% year over year, from $105.3 billion in the second quarter of 2021 to $118 billion this year. Operating profit fell 57% to $3.3 billion this year from $7.7 billion in the second quarter of 2021.
In its 10-Q, Amazon said the operating loss for North America – $622 million in the second quarter of 2022 – was primarily due to increased shipping, fulfillment and transportation costs. ; high wage rates and incentives; and execution network inefficiencies. The same factors applied to its international unit’s $1.8 billion operating loss.
Nonetheless, North American e-commerce sales grew 10.2% year-over-year from $67.6 billion in the second quarter of 2021 to $74.4 billion this year, while that international sales fell about 12%, from $30.7 billion to $20.7 billion. Much of the overall reduction was due to exchange rates.
Sixty-two percent of Amazon’s overall product sales were made in North America, an increase of 2% over the same period last year. Amazon Web Services contributed 22% of total revenue, compared to 13% in the second quarter of 2021.
Subscription sales, including Amazon Prime, rose 10% to $8.7 billion. Seller services revenue increased 9.1% to $27.4 billion, and advertising sales increased 17.5% to $8.8 billion in year-on-year results other. Third-party sellers accounted for 57% of all items sold on Amazon during the quarter, the highest percentage on record, according to chief financial officer Brian Olsavsky during the earnings call.
Amazon Web Services
Amazon Web Services was the star this quarter, offsetting weak e-commerce growth. Quarterly year-over-year net sales increased 33% from $14.8 billion in Q2 2021 to $19.7 billion in 2022. AWS operating profit increased 36% year-over-year, from $4.2 billion in Q2 2021 to $5.7 billion this year. During the second quarter of 2022, AWS announced new customer agreements with Delta Airlines and British Telecom, among other companies.
On the earnings call, Amazon staff said more than half of capital investment for all of 2022 will be focused on AWS technology infrastructure.
Third trimester orientations
In the call, Amazon staff forecast third-quarter 2022 net sales to be between $125 billion and $130 billion, an increase of 13% to 17% from the third quarter of 2021. Earnings operating expenses will range from 0 to $3.5 billion, compared to $4.9 billion in the third quarter of 2021. The forecast includes an unfavorable impact on foreign exchange rates.
Shopify and Amazon
I reported last week on Shopify’s poor second-quarter performance and followed Wall Street analysts’ responses to both companies. While both suffered losses, analysts had a much more optimistic response to Amazon. The market agreed, with Amazon’s stock price rising 12% after hours trading on the day the company announced its results. Shopify’s stock price fell amid criticism from analysts, though it has since rallied.
Amazon has strengths that Shopify lacks. Amazon is much bigger than Shopify and can handle quarterly losses better. Amazon’s revenue in the second quarter of 2022 was $121.2 billion, while Shopify’s was $1.3 billion. Amazon’s market capitalization is $1.4 trillion, about 3.3 times larger than Shopify’s $44.2 billion. Amazon forecast better results for the rest of 2022, while Shopify forecast continued losses.
Additionally, Amazon is diversified with services like AWS, while Shopify relies entirely on e-commerce. Additionally, Amazon is pursuing health initiatives. In July, the company announced its intention to buy One Medical, a primary care provider with nearly 200 locations in the United States. Additionally, through Amazon Care, the company offers virtual consultations with doctors.