How Amazon Broke Tech's Q2 Bad News Streak as Its Revenue Increased

The tech industry reported earnings this week, and things look quite grim. However, there was one notable exception- Amazon. The e-commerce giant's second-quarter revenue was more than US$ 121 billion. It was a 7% increase that cleared the $119 billion mark estimated by analysts. The company didn't report a profit as earnings per share were at a loss of 20 cents. Soon after the revenue was reported, the stock of Amazon performed well. Here, we analyze how Amazon broke tech's Q2 bad news streak and increased its revenue.

The Key Factors

Many key factors helped Amazon perform well. Though the company's online sales dropped, the brick-and-mortar sales increased to US$ 4.72 billion, which is a 12 percent jump year-over-year.

The Trend

It seems that the decrease in online sales is the new trend. In an Ipsos survey by Publicis Sapient and Salesforce, 37 percent of retail decision makers revealed that their e-commerce business isn't meeting profitability goals. A quarter of the respondents also admitted it didn't make a profit. About 27 percent even blamed their e-com side for hurting their overall profitability.

46 percent of the businesses involved in brick-and-mortar and web sales admitted that online sales were less profitable than physical retail.

Amazon's physical retail efforts in grocery, fashion, and other categories are still fledgling operations. The e-commerce giant reported that the merchant community had posted a strong performance during the quarter.

Third-party vendor services are a US$ 27 billion business. They saw an increase of 9% in sales. In an earnings call, Chief Financial Officer Brian Olsavsky claimed that "third-party sellers represent 57 percent of all units sold on Amazon. [the second quarter] – Highest percentage ever."

He also mentioned that Amazon had added jobs at the slowest rate since 2019 and now employs over 1.52 million part and full-time workers. The brand's total workforce was about 100,000 less than the previous quarter, and capital expenses on warehouses and transportation were reducing.

Olsavsky also highlighted AWS. He said, "We know AWS is a huge opportunity," and governments and companies are still early on the demand curve. AWS and its online advertising business managed to beat previous expectations and pulled in US$ 19.7 billion and US$ 8.76 billion, respectively.

The latter is quite impressive in a quarter when online ad sales undercut platforms like Twitter, Snapchat and Meta falter and caused a wave of disappointing second-quarter results

Chief Executive Officer Andy Jassy talked about cost control and enhancing productivity. Jassy said, "Despite continued inflationary pressures in fuel, energy, and transportation costs, we're making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network."

The Rising Subscription Costs

Amazon also chose to increase the price of Prime membership in February in the US. It also chose similar hikes in Europe a few days back. As a result of these changes, the subscription revenue had increased 14 percent to reach US$ 8.72 billion.


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