Amazon tripled its net earnings to $9.9 billion and reported a 12.5% increase in revenues to $143.1 billion during the third quarter of 2023, compared to the prior-year’s third quarter, benefitting from a boost in advertising sales, the company reported Thursday.
The revenue results slightly surpassed Wall Street’s estimates of $141.6 billion and also came in just above the company’s own forecast of between $138 billion and $143 billion, which they offered up during the prior quarterly earning call.
The retail and tech giant also declared an operating income of $11.2 billion, coming in way above the company’s guidance of between $5.5 billion and $8.5 billion. Net income rose 244% to $9.9 billion, or $0.94 per diluted share, compared to $2.9 billion in the third quarter of 2022, or $0.28 per diluted share. Zacks consensus estimates were for Amazon to earn $0.58 per diluted share.
Amazon shares, which closed the day at $119.57 per share, were mostly unchanged in after-hours trading as of 2 p.m. PST.
The company credited a boom in advertising-related revenue and profit as a key driver for the upswing. While the superstore’s profits dropped in 2022 due to inflation and higher wage costs, they have joined their competitors over the last year in cutting costs —including through layoffs — to reduce overhead and increase profits.
Meanwhile, Amazon Web Services segment sales increased 12% year-over-year to $23.1 billion. Concurrently, free cash flow improved to an inflow of $21.4 billion for the past 12 months, compared with an outflow of $19.7 billion for the past 12 months ended Sept. 30, 2022.
“We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” Amazon Chief Executive Andy Jassy said in a statement announcing the results.
While Amazon boasts an A-level streaming platform and purchased MGM in early 2022 for $8.5 billion, there was almost no reference in the earnings statement to their entertainment platforms or distribution models.
However, during the earnings call, Prime Video was touted as one of the top two reasons customers gave for signing up to become Prime members.
Nonetheless, while the legacy studios and Netflix see Prime Video as a streaming rival, the self-described biggest store on Earth can treat its movie and television production and distribution channels as a line item in a massive conglomerate of revenue streams.
Wall Street has been disappointed with the results from big tech companies this week, with shares of Alphabet and Meta dropping. This has been credited to dissatisfaction with profits and revenue related to cloud services. While profits related to those services for Amazon have been judged merely okay, time will tell if the sheer size of the earnings reveal will mitigate that overall concern for the sector.
For the fourth and final quarter of 2023, Amazon projects net sales between $160 billion and $167 billion, which would be a year-to-year growth between 7% and 12%. Operating income is projected to be between $7 billion and $11 billion, compared to $2.7 billion in the final quarter of 2022.
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