- Amazon stock surged 11% on Friday after investors cheered its second-quarter earnings results and a better-than-expected third-quarter sales outlook.
- The e-commerce giant posted strong annual revenue growth of 33% in its AWS cloud segment.
- "Despite potential macro pressures, we're encouraged that AMZN will continue to accelerate revenue growth," JPMorgan said.
Amazon stock surged 11% on Friday, adding nearly $150 billion in market value after the e-commerce giant reported second-quarter earnings results that were better than what investors expected. The online retailer's third-quarter sales outlook also came in above forecasts.
Strong growth in Amazon's AWS cloud and advertising business helped drive the company's bottom line, while solid retail operations helped ease investor fears of an imminent economic recession and worries about the strength of the consumer.
Here were the key numbers:
Revenue: $121.2 billion, versus analyst estimates of $119.5 billion
Earnings per share: -$0.20, versus analyst estimates of $0.12
North American sales: $74.4 billion, versus analyst estimates of $70.5 billion
"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," said Amazon CEO Andy Jassy.
While Amazon's net loss was impacted by its stake in Rivian, its underlying results showed that the e-commerce giant can quickly contain costs amid a period when high gas prices can take a toll on the underlying profitability of its retail operations.
The company said its headcount fell by about 100,000 people, and Jassy made it clear that Amazon is focused on reducing the size of some of its operations as COVID-19's growth spark begins to fade.
Looking forward, Amazon reassured investors that it was on track to continue its growth, forecasting that it will generate third-quarter revenue of between $125 billion and $130 billion, representing annual growth of up to 17%.
"Despite potential macro pressures, we're encouraged that AMZN will continue to accelerate revenue growth in the back half on more favorable comps & focused execution in both Retail & AWS. We also believe that 2Q may represent the trough in OI as AMZN continues to gain leverage in productivity & fulfillment, w/greater margin expansion in 2023," JPMorgan said in a note to clients.
The bank, which calls Amazon a "top pick" and raised its price target to $185, also talked up the stickiness of its Prime membership, which is set to include a reboot of the popular Lord of the Rings franchise and access to Thursday Night Football games.
"Suffice to say, Middle-earth, the NFL, and high profile talent do not come cheap, but we also can't remember a more anticipated period of content for Prime Video, which should pay dividends in terms of Prime members & retail sales," JPMorgan said.
Amazon's Friday gain helped push the Nasdaq 100 higher by nearly 1% and marks the end to mega-cap tech earnings this quarter.