Amazon reports blowout profit, beats on sales and issues optimistic guidance

Amazon reported second-quarter earnings on Thursday that sailed past analysts’ estimates and issued guidance that points to accelerating revenue growth. The stock rose almost 7% in extended trading.

• Earnings: 65 cents a share vs. 35 cents per share expected, according to analysts surveyed by Refinitiv
• Revenue: $134.4 billion vs. $131.5 billion expected, according to analysts surveyed by Refinitiv

Wall Street is also watching other key numbers in the report:

• Amazon Web Services: $22.1 billion vs. $21.8 billion in revenue, according to StreetAccount
• Advertising: $10.7 billion vs. $10.4 billion in revenue, according to StreetAccount

It was Amazon’s biggest earnings beat since its report for the fourth-quarter of 2020. The blowout profits indicate that CEO Andy Jassy’s ongoing cost-cutting efforts are beginning to bear fruit. Amazon initiated the largest layoffs in its history, cutting 27,000 jobs since last fall. The company froze corporate hiring, and Jassy has looked to trim expenses in units across the company.

For the third quarter, Amazon expects sales of between $138 billion and $143 billion, or growth of between 9% and 13%. Analysts were expecting revenue of $138.25 billion, according to Refinitiv.

Amazon has returned to double-digit growth after expansion was mired in the single digits for five of the past six quarters. Jassy attributed some of the improvement to AWS, which had previously been seeing clients slow their spending due to economic uncertainty.

“Our AWS growth stabilized as customers started shifting from cost optimization to new workload deployment,” Jassy said in a statement.

Sales in Amazon’s cloud unit climbed 12% in the second quarter to $22.1 billion, above the $21.8 billion projected by Wall Street. Still, that marks a deceleration from the prior quarter, when sales expanded 16%.

AWS accounted for 70% of Amazon’s $7.7 billion in operating profit.

The company reported net income of $6.7 billion, or 65 cents a share, after recording a loss of $2 billion, or 20 cents a share, a year earlier. The year-ago loss was the result of a markdown on the company’s investment in electric vehicle company Rivian.

Amazon’s report, along with Apple‘s on Thursday, wraps up earnings season among the mega-cap tech companies. Apple’s results topped Wall Street expectations for both earnings and sales, driven by the services business.

While growth remains below historical standards for most of the group, results are starting to rebound after a tough 2022, and cost-cutting measures are bolstering profitability. Also, everyone is focused on artificial intelligence.

In its earnings release, Amazon said AI products from AWS are being used by numerous customers, and it named Royal Philips, 3M, Old Mutual and HSBC.

Advertising continues to be a booming business for Amazon, with quarterly revenue jumping 22% in the period to $10.7 billion. Google‘s ad revenue rose just 3.2% in the second quarter and Facebook’s rose 12%.

Executives will discuss the results with analysts on a conference call beginning at 5:30 p.m. ET.