Amazon’s Q2 Earnings Beat Expectations, But Stock Drops on Soft Guidance

Amazon (NASDAQ:AMZN) reported second-quarter earnings that exceeded analyst expectations, yet its stock fell more than 8% in Friday’s premarket trade due to softer-than-anticipated guidance for the third quarter.

Key Financial Highlights

• Adjusted Earnings per Share (EPS): Amazon posted an adjusted EPS of $1.26 for the quarter ended June 30, 2024, surpassing the analyst estimate of $1.03.
• Revenue: The company reported revenue of $148.0 billion, slightly below the consensus estimate of $148.68 billion but up 10% year-over-year (YoY) from $134.4 billion in the same quarter last year.
• Third-Quarter Revenue Guidance: Amazon’s revenue guidance for Q3 is between $154 billion and $158.5 billion, falling short of the analyst expectation of $158.2 billion.

Segment Performance

• Amazon Web Services (AWS): AWS reported sales of $26.3 billion for Q2, up 19% YoY. Andy Jassy, Amazon President & CEO, highlighted the continued reacceleration in AWS growth as a significant positive for the company.
• North America Segment: This segment saw a 9% increase in revenue to $90.0 billion.
• International Segment: Revenue grew by 7% to $31.7 billion, or 10% excluding foreign exchange impacts.

Operational Metrics

• Operating Income: Amazon’s operating income more than doubled to $14.7 billion from $7.7 billion in the second quarter of 2023.
• Online Sales and Third-Party Seller Performance: Both metrics fell short of consensus expectations by 0.3% and 1.2%, respectively. Despite strong volume, lower average selling prices (ASPs) offset gains.

Conclusion

While Amazon’s Q2 earnings surpassed expectations, the softer guidance for Q3 and ongoing consumer trends towards lower-priced items contributed to the decline in stock price. The company’s strong performance in AWS and other segments indicates resilience, but investor concerns over future growth and economic conditions continue to weigh on the stock.