Amazon reveals record $2.5bn profit jump

Amazon Prime

Amazon has posted a record profit of $2.5 billion (£1.9 billion) for its second quarter of 2018.

Operating income rose to $3 billion (£2.2 billion) in the 12 weeks to June 30, compared with operating income of $628 million (£479 million) for the same period last year.

The business saw a 39 per cent boost in second quarter sales, up at $52.9 billion (£40.3 billion), although this was below analyst expectations of $53.4 billion.

However, thanks to profit coming in at double analyst expectations, Amazon shares have surged by more than three per cent in after-hours trading.

In the UK, Amazon said it would continue to invest heavily in creating new jobs, with 2500 planned for this year alone.

Those will come as part of the retailer’s £9.3 billion investment in its UK operations since 2010.

Amazon also noted that it had launched its Home Services offering in the UK during the period, allowing customers to buy more than four million products that can be installed at home by a trusted professional.

Globally, customer-centric innovations like Home Services appear to be setting Amazon apart from the pack.

Speaking in light of the results, GlobalData Retail managing director Neil Saunders said: “[Amazon’s] strong revenue growth, which saw product sales up by almost 30 per cent over the prior year, underlines its growing grip on the retail market and its ability to persuade an increasing number of customers to buy an increasing array of things from it.

He added: “While Amazon makes growth look easy, its advancement is the result of significant effort on at least three fronts.”

Saunders pointed to Amazon’s innovation, fail-fast ethics and development of offerings that permeate a huge number of people’s everyday lives, such as Prime and Alexa.

Tellingly, Amazon founder and chief executive Jeff Bezos’ comment on the second quarter results focused only on the virtual assistant:

“We want customers to be able to use Alexa wherever they are,” he told press and investors.

“There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year.

Saunders said: “For all the success on the sales line, Amazon used to post fairly anaemic profits. However, that has now changed as previous investments start to bear fruit.”

Crucially, all of Amazon’s profit is currently derived from either its AWS or North American markets, while its international division remains in the red by $494 million (£377 million).

Saunders argued that this underscores Amazon’s potential when it does manage to improve its bottom line in foreign markets.

“Amazon’s behaviour shows no signs of being monopolistic,” he said.

“Its profits are too thin, it innovates too much, and it has nowhere near a monopoly market share. Its growth has been earned through smart thinking and hard work.”

Looking forward, Amazon said it expected net sales to rise to $54 billion-$57.5 billion for the third quarter, growing 23 per cent and 31 per cent respectively year-on-year.

Operating income is expected to be between $1.4 billion and $2.4 billion, compared with $347 million for the same time the year before.

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