Amazon's Latest Quarterly Earnings Show Strong Results

On Thursday, Amazon announced its Q3 earnings, including revenue of $56 billion, up 34% year-over-year (YoY). That growth was led by the company’s Amazon Web Services (AWS) unit and its advertising business. Let’s dive in to see what those units contributed to this quarter’s impressive numbers.


Amazon's Latest Quarterly Earnings Show Strong Results
Amazon's Latest Quarterly Earnings Show Strong Results


What happened

Amazon reported strong results on Thursday. Its revenue was up 56% over last year’s results, while earnings per share were up 56%. The company’s cloud computing business is surging; Amazon Web Services saw a 65% increase in operating income, or $2.2 billion for Q4 alone.

Amazon's Latest Quarterly Earnings Show Strong Results This year should see further growth for AWS—and it already makes up 12% of Amazon’s overall revenue. Meanwhile, its ad business also performed well: it accounted for 14% of overall revenue and saw 96% growth over last year. Overall, things are looking very rosy for Amazon as it heads into 2022.


Why this is good news

Amazon’s AWS cloud unit is bigger than its e-commerce business. Cloud computing helps companies store and process data, rather than servers in their own data centers.


This means that companies don’t have to invest in their own infrastructure (such as building a new data center), which can be expensive and time-consuming. According to Statista, Amazon accounted for 31% of worldwide cloud infrastructure service revenue in 2022. AWS is often seen as one of the biggest threats to Microsoft’s Azure cloud computing service and Alphabet’s Google Cloud Platform.


Why this is bad news

While Amazon stock soared on Thursday after-hours, some analysts say that these latest results don't bode well for Wall Street. The company continues to invest heavily in its AWS and ad businesses, which are both losing money. Last quarter, Amazon lost $824 million compared to $397 million a year ago. These continuing losses could make it harder for Amazon stock to recover in 2022 if profits continue to fall short of expectations.


Implications for the long term


Amazon's Latest Quarterly Earnings Show Strong Results
Implications for the long term

  • This shows that AWS is still a major catalyst for Amazon, and that should support strong earnings and cash flow growth over time.
  • Another important takeaway from today’s results is that even as ads become a bigger part of Amazon’s business, its core e-commerce platform isn’t suffering.
  • In fact, revenues in North America hit $30.6 billion for Q1 2022, up 39% year-over-year (YoY) and accounting for 73% of total revenues.
  • That suggests people aren’t going to avoid Amazon just because it has an ad business – indeed, it looks like they might actually be using its products more often because they are also spending money on advertising via its platform.

SOURCE : Yasoquiz




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