Source: PaxForex Premium Analytics Portal, Fundamental Insight
Amazon reported impressive results for the second quarter of 2020 after the market closed yesterday. Shares rallied by 4.8% yesterday as of 17:27 EDT.
Investors' delight is understandable as the leader in e-commerce, and cloud computing surpassed all Wall Street consensus estimates on both the top and bottom lines. The third-quarter profits also exceeded analysts' expectations. We offer you an overview of the e-commerce giant quarter together with its guidance.
Revenue grew by 40%
Amazon's net quarterly sales grew 40% year on year to $88.9 billion, easily surpassing Wall Street's expectation of $81.5 billion. Excluding the negative impact of foreign currency exchange, revenues grew by 41%.
For comparison, in the first quarter Amazon showed a 26% year-on-year profit growth (27% in constant currency) to $75.5 billion.
The company's e-commerce business, especially in North America, benefited from a massive tailwind caused by the pandemic.
Operating profit increased by 89%
Operating profit increased by 89% year-on-year to USD 5.8 billion, reducing Amazon's operating loss forecast of USD 1.5 billion to USD 1.5 billion. It was particularly impressive given that the company incurred more than $4 billion of additional COVID-19-related expenditures as planned. (It was focused on "approximately $4 billion" of extra costs associated with the pandemic.)
All three segments performed well, with the AWS cloud computing service having a particularly profitable quarter. The pandemic caused a spike in Internet traffic, with many more people working from home. This phenomenon has become a tailwind for cloud computing service providers.
While North America performed very well with the pandemic in mind, its operating revenue was not as strong as would have been expected based on a 37% annual growth rate. Segment-wide operating income was significantly adjusted for the year as Amazon spent money on upgrading its foremost free Prime delivery system from two to one day.
EPS increased by 97%
Net profit doubled over the year to $5.2 billion. It led to a 97% increase in earnings per share (EPS) to $10.30. Wall Street expected earnings per share to be $1.46, so Amazon's result broke those expectations.
Operating cash flow grew 42% in the last 12 months.
Operating cash flow jumped 42% year on year to $51.2bn in the last 12 months. Free Cash Flow increased by 28% to $31.9 billion.
Profit is expected to increase by 24% to 33% in the third quarter.
In the third quarter, Amazon focused on net sales in the range of $87 billion to $93 billion, a 24% year-on-year increase to 33%. This forecast exceeded Wall Street's estimate of $86.3 billion.
The company expects an operating margin of $2 to $5 billion compared to $3.2 billion for the year. This forecast assumes more than $2 billion in COVID-19-related expenses.
In short, Amazon had a fantastic quarter.