Amazon makes more revenue than expected, but forecast leaves investors in doubt

Amazon's sales in the past quarter were significantly higher than its own forecasts and those of observers. In addition, growth has picked up again following a recent slowdown. However, the retail group is being somewhat cautious in its outlook for the current quarter, meaning that investors are also reacting cautiously. The stock market is also expecting the billions invested in artificial intelligence to pay off financially. Amazon's share price has therefore fallen slightly in the aftermarket.

In the second quarter ended June, Amazon increased its turnover by 13 percent year-on-year to 167.7 billion US dollars. Market observers had expected 162.1 billion dollars, and the company itself had also forecast total sales of between 159 and 164 billion dollars in May, when Trump's tariffs clouded the Amazon outlook. This would have corresponded to growth of 7 to 11 percent, which the retail giant was then able to significantly exceed.

Cloud segment shows strongest growth

The AWS (Amazon Web Services) cloud segment reported the strongest growth, according to Amazon. Its turnover increased by 17.5 percent to 30.9 billion dollars compared to the previous year. Amazon is the market leader in this sector, but the competition is catching up. Microsoft Azure and Google Cloud have recently grown by 39 and 32 percent respectively. However, Google in particular is still lagging far behind Amazon and Microsoft in terms of cloud sales, most recently reaching 13.6 billion dollars. This is another reason why Alphabet is investing more billions in AI.

In Amazon's core business, the trading platform, North America remains by far the biggest revenue driver. The Group generated 100.1 billion dollars in sales in this region, 11 percent more than in the previous year. Although the rest of the world was able to grow by 16 percent in the same period, it only achieved sales of 36.8 billion dollars. Amazon was also able to transfer the higher revenue to its profits. Operating profit rose by a total of 30.6 percent year-on-year to 19.2 billion dollars, with the international business even increasing operating profits more than fivefold – from 273 million dollars in the previous year to 1.5 billion dollars. Group-wide net profit has increased by 34.8 percent to 18.2 billion dollars.

Amazon also recorded significant growth in the advertising business, where sales rose by 23 percent year-on-year to 15.7 billion dollars in the second quarter. This also exceeded the expectations of the stock market, which had anticipated 14.99 billion dollars. This division is relatively small compared to the stores and the cloud, but delivers regular revenue and is now the world's third-largest advertising platform after Meta Platforms and Alphabet , according to CNBC.

AI investments and cautious forecast

Earlier this year, Amazon announced that it would be investing 100 billion dollars in AI infrastructure, and analysts are already waiting for this to pay off financially. Amazon CEO Andy Jassy then addresses this in his comments on the latest business figures. "Our belief that AI will change every customer experience is starting to pay off," said Jassy, referring to Amazon's new assistant Alexa+, for example, which can do more thanks to AI. However, this is just the beginning, according to Jassy: "Our AI progress across the board continues to improve customer experience, speed of innovation, operational efficiency and business growth, and I'm excited about what lies ahead."

For the third quarter, which began in early July, Amazon expects sales of between 174 and 179.5 billion dollars, which would correspond to growth of between 10 and 13 percent compared to the previous year. Operating profit is expected to be between 15.5 and 20.5 billion dollars, compared to 17.4 billion dollars last year. As observers had expected 19.5 billion dollars this year, investors are somewhat disappointed by this rather modest forecast. Amazon's share price fell by almost 7 percent in after-hours trading.

(fds)