Amazon said its net profit plummeted 77 percent in Q2 despite a stronger-than-expected rise in revenue, as growing losses in its international operations pushed up expenses. The decline in profit was more than a dollar short of Wall Street’s estimates.
Revenue at the online retailer rose 24.8 percent to $37.6 billion, while net income declined to 40 cents a share from $1.87 a share a year ago. Analysts were expecting Amazon to see revenue of $37.2 billion and net income of $1.42 a share in the quarter. The company also forecast an operating income of $300 million to a loss of $400 million for the current quarter.
Amazon has been expanding into countries like India, which has been taking its toll on margins. The operating loss of its international operations rose more than fivefold to $742 million, while international revenue rose by only 16 percent. Revenue in North America, by contrast, rose by a more robust 27 percent.
In a statement, Jeff Bezos didn’t discuss the disappointing earnings, falling back instead on the company’s long-standing commitment to bringing its customers value. “Our teams remain heads-down and focused on customers,” Bezos said, before outlining a list of new products and services for the company.
Amazon launched initiative after initiative in the past quarter, including Prime Wardrobe, which lets Prime subscribers order clothes with free returns; a partnership allowing Nike to set up its own store on Amazon.com; an Echo Look device, which adds a camera to its popular voice assistant, as well as Echo Show, with a display screen; and a social shopping feature, called Spark, to its iPhone app.
In its statement, Amazon didn’t mention a topic that has been a big focus among investors: its planned $13.7 billion purchase of Whole Foods Market. Since announcing the proposed transaction, Amazon has seen its stock rise by 8.3 percent and Whole Foods by 26.4 percent.
Much of the rise in revenue came from Amazon Web Services, which rose 42 percent to $4.1 billion. A year ago, AWS revenue was growing at a 56-percent rate. While cloud revenue has been slowing over the past year, AWS still made up 70 percent of Amazon’s overall operating profit.
Buttressing retail sales in the quarter was Prime Day on July 11, which delivered 60 percent more revenue from Prime Day in 2016. Amazon didn’t give a revenue figure for the day, but said it topped the sales it saw on Black Friday and Cyber Monday last year, although Prime Day typically stretches over a 30-hour period. In 2017, Amazon extended Prime Day to China and India.
While none of these added materially to its second quarter, taken together the new initiatives paint a picture of Amazon as a company that refuses to sit still, even if its innovations threaten companies ranging from Walmart to Facebook. Amazon’s stock had risen 39 percent so far this year on expectations of its future growth, more than double the Nasdaq’s 18 percent gain.
The surge in Amazon’s share prices briefly led CEO Jeff Bezos to surpass Bill Gates as the wealthiest person in the world this morning, with a net worth of $92.3 billion. As tech stocks in general declined through Thursday trading, however, Gates once again took the lead. Amazon shares closed the official trading session down 0.65 percent at $1046.00. In after hours trading, Amazon was down about 2 percent.