Amazon.com (AMZN 3.89%) reported blowout second-quarter 2018 results after the market close on Thursday. As it has in the last two quarters, the e-commerce and cloud-computing giant demolished Wall Street's earnings expectations.
Shares were up 3.2% in after-hours trading on Thursday -- and have taken out their all-time high. These massive earnings beats have helped propel the stock to a nearly 80% gain over the one-year period through the regular trading session on Thursday, versus the S&P 500's 16.8% return.
Here is an overview of Amazon's fantastic quarter, using six metrics -- along with the company's guidance for the third quarter:
Image source: Amazon.
1. Revenue surged 39%
Amazon's net sales jumped 39% year over year to $52.9 billion. This was a tad short of the $53.3 billion Wall Street was expecting, though it was above the midpoint of Amazon's guidance range of $51 billion to $54 billion.
Excluding the $760 million gain from foreign exchange, revenue increased 37%. This includes a $4.3 billion boost from physical stores that weren't part of the company in the year-ago period. (These are primarily those of organic grocer Whole Foods, which Amazon acquired in the third quarter of last year.)
All segments experienced strong revenue growth.
|
Segment |
Revenue Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
North America |
$32.2 billion |
44% |
|
International |
$14.6 billion |
27% |
|
Amazon Web Services (AWS) |
$6.1 billion |
49% |
|
Total |
$52.9 billion |
39% |
Data source: Amazon.
AWS revenue growth is accelerating -- a great sign, since it's historically been the company's profit engine. In constant currency, the cloud-computing service's revenue increased 49% in the second quarter, versus 48% in the first quarter, 44% in the fourth quarter of 2017, and 42% in both the second and third quarters of 2017.
Breaking out revenue other ways:
- Online retail sales grew 14% year over year to $27.2 billion.
- Physical-store sales increased 100% to $4.3 billion.
- Third-party seller commission and fulfillment fees rose 39% to $9.7 billion.
- Subscription services (Prime and other) soared 57% to $3.4 billion.
- AWS sales surged 49% to $6.1 billion.
- Other sales were $2.2 billion.
2. Operating income skyrocketed 378%
Operating income more than quadrupled year over year to $3.0 billion, crushing Amazon's guidance of $1.1 million to $1.9 billion. Operating income has been growing faster than revenue in recent quarters, driven by increased operational efficiencies in North America and AWS.
|
Segment |
Operating Income Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
North America |
$1.8 billion |
321% |
|
International |
($494 million) |
Loss narrowed by 32% |
|
AWS |
$1.6 billion |
79% |
|
Total |
$3.0 billion |
378% |
Data source: Amazon.
The quarter's big story is North America's torrid operating-income growth. This segment -- by far the largest by revenue -- contributed more to total operating income in the quarter than did AWS, which is the long-standing champ in this realm. AWS's profitability, however, continues to be tops. It had a 26.9% operating margin in the quarter.
International has been posting operating losses largely because that business isn't as established as North America. But as one positive, the segment's operating loss narrowed in the quarter.
3. EPS soared 1,168%
Net income increased more than 12 times to $2.5 billion. On a per-share basis, results soared 1,168% to $5.07, crushing Wall Street's EPS consensus of $2.50.
4. Operating cash flow increased 22% over the trailing 12 months
Amazon's operating cash flow grew 22% year over year to $21.8 billion for the trailing 12-month period through the end of the quarter. Smart investors keep an eye on cash flow, as metrics such as operating income and earnings are just accounting measures. Operating cash flow is the better metric of Amazon's performance, as the company's free cash flow can fluctuate greatly because of all the investments it's making in growth.
The Echo Spot. Image source: Amazon.
5. Alexa can control more than 13,000 smart-home devices
Amazon's artificial-intelligence powered Alexa virtual-assistant business continues to grow rapidly. CEO Jeff Bezos said in the press release that "the number of Alexa-enabled devices has more than tripled in the past year," with the tally now more than 13,000 different devices from more than unique 2,500 brands.
Notably, Amazon was the first mover in the smart-home speaker space, with its Alexa-enabled Echo line, and it has maintained its leadership position in this rapidly growing market.
6. Operating income growth of 303% to 592% is expected in Q3
For the third quarter, Amazon guided for net sales of $54.0 billion to $57.5 billion, representing growth of 23% to 31% year over year. It expects operating income of $1.4 billion to $2.4 billion, representing growth of 303% to 592%.
In short, Amazon turned in another fantastic quarter, and continues to have many catalysts for growth on the horizon.
