Amazon’s sales fell short of Wall Street’s estimates but profits exceeded expectations in the company’s second quarter results, released Thursday afternoon for the three months ended June 30, 2024.
The tech giant reported a 10% increase in second-quarter revenue, to $147.98 billion, shy of expectations of $148.56 billion. Profits were $13.5 billion, or $1.26 per share, nearly double Amazon’s profits in the same quarter a year ago, and surpassing expectations of $1.03 per share.
Speaking with reporters on a conference call, Brian Olsavsky, Amazon’s chief financial officer, said average selling prices (ASP) are declining amid cautious consumer spending. Unit sales growth was strong, he said, and an increase in shipping speeds is prompting growth in purchasing of everyday essentials.
“What we’re seeing is really around ASP, and lower ASP in products selected by customers,” Olsavsky said. “They are continuing to be cautious with their spending, trading down to lower ASP products. And even on the higher-ticket items … there’s certainly a drop-off from probably more of a steady-state, thriving economy.”
Amazon is reportedly planning to launch a new storefront with lower-priced items and slower shipping, directly from Chinese suppliers, to compete with emerging rivals including Temu and Shein. Olsavsky declined to comment directly on those reports in response to a question on the media call.
In addition, Olsavsky said Amazon experienced a $1 billion headwind from foreign exchange rates, which was about $300 million higher than the company expected.
In the realm of artificial intelligence, Amazon is spending significant sums to expand its Amazon Web Services cloud infrastructure. Amazon’s capital expenditures and equipment finance leases amounted to $30.5 billion for the first half of the year, and the number is expected to grow in the second half of the year, Olsavsky said.
“The majority of the spend will be to support the growing need for AWS infrastructure, as we continue to see strong demand in both generative AI and non-generative AI workloads,” he said.
Highlights from the company’s business segments:
- AWS revenue was $26.3 billion, up 18.7%, with operating profits of $9.4 billion.
- Sales in the company’s largest segment, online stores, rose 5% to $55.4 billion.
- Revenue from third-party seller services was up 12% to $36.2 billion.
- The biggest percentage growth came in advertising, up 20% to $12.8 billion.
In its guidance for the current quarter, which began July 1, Amazon said it expects net sales between $154 billion and $158.5 billion, which translates into a midpoint of $156.25 billion, below the average estimate of $158.24 billion.
Olsavsky said the current quarter was proving especially challenging to predict, due in part to consumers becoming distracted by news events, elections, and the Olympics, among other factors.
Shares fell 4% in initial after-hours trading.
