Technology

Amazon jumps on strong sales

Amazon.com reported revenue that topped estimates and gave a strong sales forecast for the current quarter, allaying investor concerns about potential belt-tightening by inflation-rattled consumers. Shares jumped more than 12% in extended trading.

Sales increased 7.2% to $121.2 billion in the period ended June 30, the Seattle-based company said Thursday in a statement. Analysts, on average, estimated $119.5 billion.

Operating income in the current quarter will range from break even to $3.5 billion on sales that may increase as much as 17% to $130 billion, the Seattle-based company said Thursday. Analysts, on average, projected a profit of $3.83 billion on sales of $127 billion, according to data compiled by Bloomberg.

Even as he focuses on rekindling sales growth, Chief Executive Officer Andy Jassy is determined to unwind a pandemic-era expansion that saddled Amazon with a surfeit of warehouse space and too many employees. The company has been seeking to sub-lease at least 10 million square feet of space, Bloomberg reported in May. Fulfillment expenses increased 14% in the second quarter to $20.3 billion, less than analysts’ projected.

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” Jassy said in the statement.

With costs rising, Amazon in February increased the price of a Prime membership in the US, then followed this week with similar increases in Europe.

“It’s important for Jassy to reinforce their commitment to retail and acknowledge that they need to get spending to be more correlated to revenue growth,” said Michael Pachter, an analyst at Wedbush Securities Inc.

As part of its effort to cut costs, the company added full- and part-time jobs at the slowest rate since 2019. Total employment was more than 1.52 million as of June 30, which was a 14% increase from a year ago, but about 100,000 fewer than the previous quarter. Most of the reduction came from attrition in the warehouse and delivery network, and Amazon will continue to hire selectively for its cloud computing and advertising businesses, Chief Financial Officer Brian Olsavsky said on a call with reporters after the results.

“We will continue to add headcount, but are also mindful of the economic conditions,” Olsavsky said.

With online sales slowing, Jassy is seeking new sources of revenue. Earlier this month, Amazon announced it would buy primary-care company One Medical in a cash deal with an equity value of $3.49 billion. The startup operates clinics in cities across the US and furthers Amazon’s push into the health care industry.

Amazon Web Services, the profitable cloud-computing division, generated sales of $19.7 billion in the quarter, topping analysts’ average estimate of $19.4 billion. “We know AWS is a huge opportunity” and governments and companies are still early on the demand curve, Olsavsky said on a conference call with analysts. Advertising services, another cash cow, increased 14% to $8.76 billion.

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