Amazon's quarterly profits break $2bn barrier for first time

Amazon posts record $2.5bn profit fueled by ad and cloud businesses

Amazon.com expects third-quarter revenue of $54-$57.5 billion, which is below analyst estimates of $58 billion.

The AWS division generated US$1.64 billion in operating income for Seattle-based Amazon during the second quarter, compared to US$916 million during the same period of 2017. $18.50 million worth of Amazon.com, Inc.

There still seems to be room for Amazon to grow its advertising business even more.

Using its service as promotional vehicle for Amazon products?

While the company's fulfilment costs surged almost 54% in the quarter, all of its other costs - fulfillment, marketing, technology, administrative - grew much slower than its sales. Amazon even trimmed losses in its global business while funding expansions in India, Australia, the Middle East and Brazil. Both offer higher profit margins than its more traditional consumer-products businesses. Institutional investors own 56.71% of the company's stock. (Amazon lowered its Super Saver Shipping threshold from $49 to $35 to $25, resulting in growth in lower priced items). During an economic slowdown, revenues might fall, but most companies try hard to keep EPS up by reducing costs. But new businesses have helped too. Operating income was $1.84 billion. Advertising is a newer business, but promises similar benefits.

That all means investors no longer shudder when sales growth falters.

While cloud rivals are gaining ground, AWS remains far in front with 31 percent of the fast-expanding market, versus 18 percent for Microsoft Corp (MSFT.O) and 8 percent for Google in the second quarter, research firm Canalys said Thursday. Amazon saw its stock dip almost 3% in trading Thursday, but it rebounded following the earnings results.

For UK customers, Amazon Prime costs £79 a year or £7.99 per month.

According to the research firm eMarketer, Amazon's e-commerce revenue will grow more than 28 per cent this year to reach US$394 billion, and will account for 49 per cent of U.S. online retail sales and almost five percent of all retail spending. Those sales are more profitable for Amazon since it takes a commission along with fees for warehouse storing, packing and delivery - without the risk of buying inventory.

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"We're seeing a lot more third-party transactions, which is why the revenue missed but the profits are so good", said RJ Hottovy, an equity analyst at Morningstar Inc.

At least 16 brokerages raised the price target on the stock with several saying that the high levels of profitability may be a new normal for the company.

Its stock is already up almost 72 percent in the past year, and Amazon is getting closer to surpassing Apple as the world's most valuable company, potentially surpassing the iPhone maker in the race to reach a $1 trillion valuation.

'We want customers to be able to use Alexa wherever they are, ' Mr Bezos said. Swiss National Bank now owns 1,506,441 shares of the e-commerce giant's stock valued at $1,761,738,000 after acquiring an additional 8,600 shares in the last quarter. Its Amazon Web Services unit, which provides cloud computing services to companies and government, has been a strong source of income.

And for $9.99/month, Prime members get access to Amazon Kindle Unlimited - "Unlimited Reading".

Shares of Amazon soared in early Friday trading as the retail giant broke the $2 billion barrier in quarterly profit for the first time in its history.

Prime members spend above average on Amazon.

Hiking the annual USA price of Prime 20 percent in the second quarter appeared to have few negative consequences: Amazon said subscription revenue increased 57 percent to $3.4 billion. First-quarter growth was 56 percent.

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