Amazon reassures Wall Street by posting strong revenue and guidance

Amazon has reported strong revenue and guidance, reassuring Wall Street with an upbeat forecast for the remainder of the year.

The company’s shares rose over 10% in after-hours trading after the company reined in costs and benefitted from an increased demand in its cloud computing service, AWS.

Amazon said it expected to return to double-digit quarterly revenue growth now that the year-on-year comparisons with the coronavirus pandemic-affected quarters in 2020 and 2021 had passed.

In order to reflect the new adjustments in demand, Amazon said it would invest more on building its cloud infrastructure than on its ecommerce logistics for the rest of 2022.

Overall revenue for the current quarter was expected to land between $125 billion and $130 billion, which would represent growth of 13-17%.

It included sales from Prime Day, which was Amazon’s most successful to date, shipping over 300 million items worldwide.

Overall sales increased 7% year-on-year to $121.2 billion, beating analysts expectations of $119 billion, according to data from FactSet.

AWS revenue boomed 33% year-on-year to reach $19.7 billion, slightly up from Wall Street expectations.

Amazon’s investment in electric vehicle maker Rivian has cost the company $3.9 billion in non-operating costs, with overall net loss coming in at $2 billion.

Amazon Prime
READ MORE: Amazon Prime price hike: Is the subscription service still worth it?

Amazon has beaten the market consensus once again – continuing to grow despite the overall economic slowdown,” Publicis Sapient head of retail Julian Skelly told Charged.

“This success is in no small way due to the stickiness of the Prime offering and their ever-strengthening distribution capabilities.

“Even with its expansion into Pharmacy and the success of AWS, Ecommerce remains Amazon’s focus.  Prime drives loyalty with online shoppers though a compelling mix of services, experience and price.  It is this loyalty that keeps customer coming back – driving the 7% growth in net sales.

Despite this, the inflationary pressures and a general slow-down in spending is effecting Amazon.  Growth is slower this quarter than before.  In almost all of the last 101 quarters, Amazon’s top-line growth has been greater than 10% – but not this quarter.

Skelly argued whether this was the correct time for Amazon to increase the price of its popular Prime subscription service.

“Is this the right time for Amazon to push through its plans to hike the price of Prime subscription?  In the UK, the annual subscription cost will jump by more than 20% – from £79 to £95,” he said.

“This move underlines confidence that Amazon has Prime customers locked into the habit of spending with them.  For a few customers, the incremental cost will outweigh the value of Prime, but for most it will be a cost they’ll bear to keep the benefits.  With this Amazon is forecasting net sales will return to historical growth of between 13% and 17% in Q3.”

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