Amazon Makes Its Payday – WSJ



Amazon.com


AMZN -2.09%

as a profit machine is an encouraging—if slightly disconcerting—prospect.

The e-commerce giant pulled off two relatively rare moves with its second-quarter results Thursday afternoon. Overall revenue, while up 39% to $52.9 billion, actually missed Wall Street’s consensus forecast by 1%. But the company managed operating income of nearly $3 billion, up nearly five-fold year over year and soundly beating Wall Street’s projection. That is more money than Amazon has ever made in a single quarter.

Investors were relieved. Amazon’s share price had surged 59% for the year before a 3% selloff on Thursday ahead of the results.

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bombshell of a report a day earlier served as a sharp reminder of what can happen to hypergrowth tech stocks whose growth numbers disappoint.

But Amazon’s surging bottom line is also a nice change for investors long-accustomed to the company’s razor-thin margins. Amazon’s shares rose more than 3% following the results, essentially making up for the regular day’s losses.

The sharp profit gains are the latest sign that Amazon simply has a lot going its way right now. Earnings at the company’s AWS cloud service surged 79% to a record of $1.6 billion. But the company’s much larger North America retail segment also posted record profit of $1.8 billion with an operating margin of 2.9%—the highest for that segment in years.

Whole Foods Market played a strong part. Amazon reported $4.3 billion in physical store sales mostly stemming from the high-end grocer it acquired last year. That’s up 16% from what Whole Foods reported as a stand-alone company for the same period last year.

The ambitious Amazon has also typically followed big jumps in profit with big investments in new projects, so investors shouldn’t treat the latest results as a new normal. But the company’s past big investments have produced the very services that are now paying off. That means Amazon is likely to stick to what works. It is hard to blame it.



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