Amazon today reported earnings for its second fiscal quarter of 2020, including revenue up 40% to $88.9 billion, net income of $5.2 billion, and earnings per share of $10.30 (compared to revenue of $63.4 billion, net income of $2.6 billion, and earnings per share of $5.22 in Q2 2019). North American sales were up 43% to $55.4 billion, while international sales grew 38% to $22.7 billion.
These results are highly anticipated as they encompass the company’s first full quarter during the coronavirus pandemic, and Amazon’s leadership position in online retail and the cloud makes is seen as a bellwether. In the previous quarter, Amazon’s guidance noted “$4.0 billion in costs related to COVID-19.” In Q2 2020, Amazon expects another “$2.0 billion of costs related to COVID-19.” In short, the company does not want to be seen as benefiting too much from the pandemic.
Analysts had expected Amazon to earn $81.53 billion in revenue and report earnings per share of $1.46. The retail giant thus easily beat on both. The company’s stock was up less than 1% in regular trading and up 6% in after-hours trading. Amazon gave third quarter revenue guidance in the range of $87.0 billion and $93.0 billion, compared to a consensus of $86 billion from analysts.
COVID-19 impact on the quarter
Amazon CEO Jeff Bezos, who testified during the virtual antitrust hearing yesterday, provided a longer-than-usual statement in the first quarter. He did the same again in Q2, which is no surprise given the company’s role during the pandemic and the coronavirus’ impact on its bottom line. Bezos highlighted what Amazon did with regards to COVID-19 in the quarter talked up the company’s broader impact including job creation:
This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe. As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.
Going forward, Amazon wants to keep spending money, not just making money, in response to the pandemic. The company’s released said it had donated more than $10 million of personal protective equipment, including 4.4 million masks and thousands of contactless thermometers, to Direct Relief and Feeding America.
AWS sees sub-30% growth
In Q1, Amazon Web Services (AWS) passed the $10 billion milestone, even as growth continued to slow down. In Q2 2019, AWS growth fell to 37% — the first sub-40% growth rate since Amazon started breaking out AWS numbers. Then growth slipped to 35% in Q3 2019, 34% in Q4 2019, 33% in Q1 2020, and now 29% in Q2 2020. It would appear that COVID-19 has accelerated the trend.
AWS is the cloud computing market leader, ahead of Microsoft Azure and Google Cloud. High-percentage growth cannot continue unabated. And for a market leader, growth of 29% in sales to $10.8 billion is still impressive. But it’s certainly not the good news that Amazon was hoping for. AWS accounted for about 12.1% of Amazon’s total revenue for the quarter, which is on the lower end.
More to follow