Amazon Q2 earnings exceed expectations, shares surge 9%

Amazon.com Inc. has surpassed Wall Street's expectations in its Q2 2023 earnings report. The company's sales growth and profit exceeded estimates as it accelerated delivery speeds and reduced costs for shoppers. Amazon's shares surged by 9 per cent, adding over $120 billion to its stock market value during after-hours trading.

The e-commerce giant has remained resilient amid challenges, retaining its position as the world's largest cloud provider and online retailer. To compete with rivals like Google and Microsoft, Amazon launched its own AI-powered services, attracting thousands of customers and highlighting its technological offerings, including ChatGPT.

A major contributing factor to Amazon's success is its cloud-computing division, Amazon Web Services (AWS). While AWS had faced some headwinds due to businesses reviewing cloud expenses, it experienced a resurgence as major companies renewed their interest in cloud services. AWS beat estimates, reporting second-quarter cloud sales of $22.1 billion, a 12 per cent increase.

Amazon's revenue for the second quarter reached $134.4 billion, an 11 per cent growth that surpassed Refinitiv's analyst poll estimate of $131.5 billion. CFO Brian Olsavsky noted that faster delivery speeds have led to increased shopping activity among Prime loyalty customers.

AI powering Amazon

CEO Andy Jassy revealed that AI initiatives are flourishing within Amazon, with each business segment actively involved in generative AI projects to improve customer experience and optimise costs. AWS has invested significantly in AI technology, contributing to the company's capital investments projected to exceed $50 billion in 2023.

Looking forward, Amazon anticipates a boost in sales from its successful Prime Day event, the largest sales day in the company's history. Despite consumer caution due to tight household budgets, the company expects healthy consumer sales both within and outside Amazon for the remainder of 2023.

As part of its growth strategy, Amazon aims to increase its yearly gross business-to-business e-commerce sales from $35 billion to an impressive $100 billion.

To achieve this goal, Amazon has implemented cost-cutting measures, including layoffs affecting approximately 9 per cent of its workforce, or 27,000 employees out of 300,000. Additionally, the company is streamlining operations at Amazon Fresh stores and refining its grocery strategy.

Amazon reported a quarterly profit of $6.7 billion, almost double the analysts' expectations.

(With Reuters inputs)