Amazon's stock fell by 5.70%

Amazon (AMZN.US) saw a 5.70% drop in post-market trading in the U.S. The Q2 results were in line with consensus estimates, but they fell short of investors' elevated expectations. Consequently, the stock fell to $173.50 per share, extending today's decline. Despite this, the company's year-over-year performance shows notable improvement and reaffirms a positive growth trend.

• Revenue: USD 148 billion, up 10.2% year-on-year, below estimates by USD 760 million.
  Sales in the North American region: USD 90 billion, up 9% year-on-year.
  
• AWS segment sales: USD 26.3 billion, up 19% year-on-year.
  
• Operating profit: US$14.7bn, more than doubled from US$7.7bn in Q2 2023.
  
• AWS operating profit: $9.3bn, up from $5.4bn in Q2 2023.
  Net profit: $13.5bn ($1.26 per share), up from $6.7bn ($0.65 per share) in Q2 2023.
  
  

Amazon Stock Drops After Q2 Revenue report

Amazon Web Services (AWS), a crucial component of Amazon's business, demonstrated strong growth and made significant contributions to the company's overall performance. AWS sales surged by 19% year-over-year to $26.3 billion, with operating income rising to $9.3 billion from $5.4 billion the previous year. CEO Andy Jassy noted the sustained high demand for AWS, driven by growing needs for cloud services and generative AI models. AWS continues to draw customers with its extensive functionality, security, operational efficiency, and advanced AI capabilities, including SageMaker, Bedrock, Trainium, and Q.

Looking ahead to the next quarter, Amazon has provided cautious but optimistic guidance. The company forecasts net sales between $154 billion and $158.5 billion, reflecting an 8% to 11% increase compared to Q3 2023, though it anticipates a negative currency impact of 90 basis points. Operating income is expected to range from $11.5 billion to $15 billion, up from $11.2 billion in Q3 2023. While Amazon's management acknowledges potential risks from economic fluctuations, currency impacts, and shifting customer demand, they remain confident in their strategic direction and market positioning.

Prime video commercials

In April, Amazon President and CEO Andy Jassy revealed that Prime Video had exceeded 200 million monthly viewers and highlighted the introduction of advertising, which is enabled by default unless users opt to pay an additional fee. The company has also recently updated the Prime Video user interface to enhance engagement with the streaming service.

Advertising continued its upward trajectory, though at a slightly slower pace, growing by 20% to $12.8 billion. This growth outpaced that of all other revenue streams.

Prime Video had a noteworthy quarter, featuring the release of "Fallout," which became the second-most-viewed original series in its history. Additionally, Prime Video held its first upfront presentation to advertisers, marking a significant step as it introduced commercials into its original programming in January, creating valuable advertising opportunities. The company has also made substantial progress in live sports, highlighted by an 11-year rights agreement with the NBA announced after the quarter ended, building on its existing success with NFL broadcasts.

Cloud benefits from AI chip demand

AWS once again demonstrated the strongest performance among Amazon's business segments, achieving a 19% growth year-over-year. Nonetheless, investors might observe that AWS's growth rate is slower compared to its main competitors in the cloud sector, Google LLC and Microsoft Corp., both of which reported around 29% growth in their latest financial statements. It's worth noting that these figures might differ slightly since they encompass additional services beyond just public cloud infrastructure.

On a positive note, AWS increased its share of Amazon’s total revenue to 17.8%, up from 17.5% three months ago and 16.5% a year earlier. This percentage has been on a consistent upward trajectory since the COVID-19 pandemic, when cloud computing accounted for just 10% of Amazon’s total sales in Q4 2020.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.