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Amazon keeps profits running, but misses sales expectations at Pandemic First

Amazon..

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com Inc. reports strong financial results demonstrating its superiority, despite a slight slowdown in e-commerce sales, highlighting the challenge of maintaining unrestricted growth recorded during a pandemic. Did.

Seattle-based tech giant has made about $ 30 billion in profits over the past year as millions of consumers have moved online to meet their shopping, entertainment and work needs. I did. Amazon’s cloud computing business accelerated after slowing growth, and the advertising business continued to grow rapidly.

But like other large tech companies, investors are beginning to wonder if they can sustain that momentum. Amazon’s second-quarter sales were $ 113.1 billion, just below the $ 115.4 billion forecast by FactSet polled analysts. Profit was $ 7.8 billion, or $ 15.12 per share, which exceeded analysts’ expectations of $ 12.28 per share.

In after-hours trading on Thursday, stock prices fell about 7%. According to the company, sales for the quarter are expected to be $ 106 billion to $ 112 billion and operating profit is expected to be $ 2.5 billion to $ 6 billion.

Amazon’s chief financial officer, Brian Orsavsky, said Thursday that he expects sales to continue to decline as the economy opens further and sales stabilize from the initial pandemic’s large-scale growth. ..

“People go out and do something more than shopping,” Orsavsky said in a phone call with reporters. Amazon continues to hire at a rapid pace, adding 64,000 workers in the second quarter. Acknowledging the difficulty of hiring workers in a tough labor market, the company’s recent wage increases represent “one of the bigger factors of inflation in our business today.” Said.

Amazon’s online store sales, which had achieved double-digit high growth, settled at 16% year-on-year growth in the quarter. Even when Amazon raised the date of its annual Prime Shopping event, the decline happened. And it usually takes place in the third quarter.

The results reveal that it will be difficult for Amazon to get a consistent result from 2020 when shopper avalanches turned to online options during the blockade. Amazon has previously signaled that such demand is sustainable.

Amazon founder and former CEO Jeff Bezos has successfully completed the first manned mission of the Blue Origin New Shepard spacecraft. In this video, the WSJ looks back at the amazing careers of the wealthiest men in the world.Photo: Joe Raidle / Getty Images

Still, some analysts said slowdowns may be unavoidable.

“We expect this to happen because of the unusual situation last year,” said Ron Josie, an analyst at JMP Securities.

Other tech companies have also received a warm welcome from investors this week, even after making record profits.Apple Ltd

iPhone sales were strong, with profits surpassing $ 21 billion, a record high for the spring quarter, but the next day its share declined slightly.Microsoft Ltd

Despite a 51% year-on-year sales growth in the Azure cloud computing segment, after-hours trading declined.

From April to June, Jeff Bezos marked the last quarter of Amazon as Chief Executive Officer. The founder of the company resigned from that role on July 5 and became chairman. Andy Jassy, ​​an Amazon consumer who headed Amazon Web Services, a cloud computing unit, is expected to bring ultra-detail-oriented management style to the company’s top position, the Wall Street Journal said earlier this month. Reported to.

Olsavsky said the company is monitoring the epidemic of the Covid-19 Delta variant and is focused on helping employees vaccinate. Amazon does not require staff to receive the Covid-19 vaccine to return to the office, but it does need to prove that there is no mask in the corporate office.

The company continued to expect workers to return to their offices in September, saying they generally need to be on campus three days a week.

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The demand for computing power has long supported Amazon’s bottom line. These needs increased during the pandemic as more companies considered increasing server capacity and software tools. Amazon Web Services, which provides such tools, generates a significant portion of Amazon’s operating profit. Its sales, which had slowed in the last quarter, recovered earlier this year. Cloud Unit sales totaled $ 14.8 billion in the second quarter, up 37% year-over-year.

Amazon has also become the dominant force in advertising behind Google and Facebook Ltd

The company’s advertising unit continues to expand in the high double digits. In the second quarter, it increased 87% year-on-year.

Amazon’s $ 1 trillion valuation did not stop Amazon from adding business to its empire, even though its power received more scrutiny from policy makers. Amazon announced in May that it had agreed to acquire Hollywood Studios MGM for a transaction worth $ 8.45 billion. The acquisition is being considered by the Federal Trade Commission.

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The FTC has also begun investigating a wide range of antitrust laws regarding Amazon’s business practices. In addition, Amazon is fighting various legislation in Congress aimed at curbing market power for big tech companies. Amazon has partially defended its competitive practices by claiming to offer products and services that benefit its customers.

Aside from regulatory concerns, Jassy faces internal challenges as Amazon’s new CEO. The company said last week it began an investigation on Amazon Web Services after an employee petition alleged that the cloud unit systematically discriminates against women and minority groups. The Washington Post first reported on the investigation and petition and collected hundreds of signatures.

In an email to the author of the petition reviewed by the journal, AWS CEO Adam Seripsky said Amazon would hire an external research firm to review the findings.

Write to Sebastian Herrera at Sebastian.Herrera@wsj.com

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Amazon keeps profits running, but misses sales expectations at Pandemic First

Source link Amazon keeps profits running, but misses sales expectations at Pandemic First

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