Amazon Q3 revenue of $143.1 billion, net profit of $9.9 billion, up 241% year-on-year

On October 27th, local time in the United States, retail giant Amazon released its financial report for the third quarter of 2023 as of September 30th on Thursday. According to the financial report, Amazon's revenue in the third quarter was $143

On October 27th, local time in the United States, retail giant Amazon released its financial report for the third quarter of 2023 as of September 30th on Thursday. According to the financial report, Amazon's revenue in the third quarter was $143.1 billion, a year-on-year increase of 13%, with an average analyst expectation of $141.56 billion; The operating profit was 11.2 billion US dollars, a sharp increase of 348% year-on-year, with an average analyst expectation of 7.71 billion US dollars; The net profit was 9.9 billion US dollars, a year-on-year increase of 241%; Diluted earnings per share were $0.94, a year-on-year increase of 236%, with an average analyst expectation of $0.58.

Here are the key points of Amazon's third quarter financial report

Divided by business

Divided by region

Executive comments

Amazon CEO Andy Jassy: "Our performance in the third quarter was strong as our service costs and delivery speed of our store business took another step forward, our AWS growth continued to stabilize, advertising revenue was also growing strongly, and overall operating profit and free cash flow growth were significant

He continued: The benefits of expanding from a single national distribution network in the United States to eight different regions have exceeded our most optimistic expectations, and perhaps most importantly, this has enabled us to provide Prime customers with the fastest delivery speed in our 29 year history. The AWS team continues to innovate and deliver quickly, especially in the field of generative artificial intelligence. Our customized artificial intelligence chips and Amazon Bedlock are used to build and deploy generative artificial intelligence applications The simplest and most flexible approach to the program, combined with our coding partner (CodeWhisperer), enables enterprises to have experienced engineers who understand all their proprietary code, which has driven the development momentum of our customers, including Adidas, Booking.com, GoDaddy, LexisNexis, Merck, Royal Philips, and United Airlines, They all started running generative artificial intelligence workloads on AWS. Between the AWS re: Invent conference and our 29th holiday shopping season, this is a particularly exciting time of the year for Amazon, and we are excited about the upcoming events

Interpretation of financial reports

Amazon's net sales and profits in the third quarter exceeded analysts' expectations. Net sales increased by 13% in the third quarter, indicating that the company's business is accelerating again after experiencing a surge in inflation and rising interest rates in 2022.

Over the past year, Amazon has been in a cost cutting mode because it expanded too quickly during the pandemic. Since last autumn, the company has laid off 27000 employees and cut many unprofitable bets.

Amazon CEO Andy Jassy took over the helm from founder Jeff Bezos in mid-2021. He stated that these tightening measures are still achieving results.

Amazon's core e-commerce business sales continued to recover, increasing by 7% year-on-year, compared to a 4% increase in the previous quarter. The third quarter included the PrimeDay promotion in July of this year, which Amazon described as its "largest ever" promotion.

Net profit increased by more than twice from $2.9 billion and $0.28 per share in the same period last year to $9.9 billion, or $0.94 per share, respectively. The net profit for the third quarter included a pre tax valuation gain of $1.2 billion from the company's investment in electric vehicle company Rivian.

Prior to Amazon's financial report, Google's parent company Alphabet and Facebook's parent company Meta both reported better than expected results earlier. However, the stock prices of both companies fell after the financial reports were released. Alphabet investors are concerned about disappointing revenue from Google's cloud division, while Meta's sell-off is due to the escalating conflict in the Middle East and cautious comments about the advertising market.

Amazon's stock price has fallen by more than 6% in the past two trading days, as data released by Alphabet and Meta have also dragged down the stocks of other technology giants.

Digital advertising remains a major highlight of Amazon's third quarter performance, as third-party sellers and major brands have increased advertising spending to increase their visibility in the increasingly competitive market. Advertising revenue increased by 26% compared to the same period last year, which is far faster than Google's 9% advertising revenue growth and also exceeds Meta's 23% growth rate. Snap's advertising revenue has only increased by 5%.

Investors are closely monitoring Amazon's online advertising department, which currently accounts for 7.5% of the global digital advertising market, according to Insider Intelligence. This research company stated that Alphabet remains the leader in the digital advertising market, with a 28.4% share in the global online advertising market, while Meta's share is 20.1%.

The reason why Amazon has made progress in the digital advertising market is partly due to the residual impact of Apple's 2021 iOS privacy update, which has damaged the online advertising business of social media companies such as Meta, Snap, and X. In fact, many retailers have shifted their advertising budgets from Meta to Amazon this year, as Apple's updates have weakened Facebook's parent company's online advertising targeting capabilities.

However, in the field of cloud computing, Amazon seems to be losing some market share and its net sales are also lower than analysts' expectations. Although AWS leads Microsoft Azure and Google Cloud, it only grew by 12% in the third quarter. Earlier this week, Microsoft stated that Azure's revenue increased by 29%. Google claims that its cloud computing business revenue has increased by 22%.

However, Amazon's cloud computing business generated $6.98 billion in operating profit, an increase of 29%, far exceeding analysts' consensus expectation of $5.63 billion. AWS's operating profit margin has also expanded to 30.3%, the highest level in two years.

In recent quarters, AWS's growth has slowed down due to the desire of large enterprises to reduce expenses. After the financial report was released, Amazon Chief Financial Officer Brian Olsavsky stated that the company saw more transaction driven online spending. At AWS, corporate customers continue to seek to optimize their expenses, but have responded positively to Amazon's latest cloud products. He said, "There have been many changes here, but overall, we are very satisfied with the momentum of our development in this field

Amazon has always been striving to promote its efforts in artificial intelligence, and in the process of competing with Microsoft and Google, the company mainly achieves this goal through AWS. In September of this year, Amazon announced that it had agreed to invest up to $4 billion in artificial intelligence company Anthropic. Artificial intelligence startups spend most of their funds on cloud computing costs. Adam Selipsky, CEO of AWS, stated that the department's strategy is to provide as much flexibility as possible for enterprise customers who want to build artificial intelligence capabilities.

Investors stated in an interview that they are cautious and optimistic, encouraged by Amazon's recent surge in recruitment, and are monitoring the recovery of the company's cloud computing business. Andrew Lipsman, an e-commerce researcher at Insider Intelligence, said, "Amazon has gone through several difficult quarters, with a significant portion coming from the negative impact of inflation, but this situation has eased

In recent months, Amazon has faced various challenges. Last September, the Federal Trade Commission (FTC) and 17 states sued the company, accusing it of illegally exercising monopoly power, artificially raising prices, locking independent merchants on its sales platform, and harming the interests of its competitors. Amazon stated that this lawsuit was misleading and looks forward to defending itself in court.

This retailer is still facing new competition in the e-commerce field, and Chinese companies such as Temu and Shein are becoming increasingly popular in the United States by offering cheap goods. Social media giant TikTok is also actively expanding its e-commerce services across the United States. In order to maintain its advantage, Amazon hopes to accelerate delivery speed and has launched a supply chain service for independent sellers.

Performance outlook

Amazon expects net sales and profits to jump in the fourth quarter, boosted by holiday promotions, faster delivery speeds, and improved prospects for its cloud computing department.

Amazon expects net sales in the fourth quarter to be between $160 billion and $167 billion, or an increase of 7% to 12% compared to the fourth quarter of 2022, with analysts generally expecting $166.6 billion. According to the median of the company's guidance range, net sales will reach $163.5 billion, an increase of 9.6% from $149.2 billion in the same period last year. This guideline predicts that the foreign exchange rate will have a beneficial impact of approximately 40 basis points.

The company also expects operating profit to be between $7 billion and $11 billion in the fourth quarter, compared to $2.7 billion in the fourth quarter of 2022.

Changes in stock prices

On Thursday local time in the United States, Amazon closed 1.5% lower at $119.57 per share. But thanks to revenue and profit exceeding analysts' expectations in the third quarter, as of press release, the stock rose nearly 5% in after hours trading.

In the past 52 weeks, Amazon's lowest stock price was $81.43 and its highest was $145.86. Based on Thursday's closing price, Amazon's market value is $1.234 trillion. (Small)