Amazon posted a big profit beat but came up just short on revenue for its earnings during the second quarter that were released on Thursday. Amazon shares were up 3% during extended trading.
Amazon’s earnings per share reached $5.07 in comparison to analyst estimates of $2.50 per share. Revenue for the online giant topped out at $52.9 billion which was just short of the projected $53.4 billion.
Net income at Amazon ended at $2.5 billion equal to a 12-fold increase from the same period one year ago. It was the third straight quarter in which profits have surpassed $1 billion. Quarterly profit at Amazon topped the threshold of $1 billion for the first time during the 2017 fourth quarter.
The growth in profit is primarily driven by growth in the high-margin businesses of Amazon, such as advertising and cloud. During his conference call CFO at Amazon Brian Olsavsky said that advertising and cloud were a huge contributor to growth in profit, as the traditional retail business for Amazon operates with very thin margins.
The CFO also credited the better efficiencies in the data centers and warehouses of Amazon, along with growth of its third party higher-margin marketplace.
The cloud service for Amazon re-accelerated sales growth for the third consecutive quarter, to 49% compared to the same period last year, despite having more competition from Google and Microsoft. Its revenue of $6.1 billion was only 11% of total sales for Amazon, but its operating income that reached $1.6 billion represented 55% of that total.
The other revenue at Amazon, which is comprised mostly of advertising sales ended with $2.2 billion equal to an increase of 132% from the same period last year. This was the second consecutive quarter that advertising revenue exceeded $2 billion.
The total revenue at Amazon, which includes Whole Foods sales, was up 39% in comparison to the same time one year ago. Its revenue in North American was up 44% ending at $32.1 billion, while sales internationally increased by 27% to end the quarter at $14.6 billion.
Guidance for revenue in the third quarter came up short of estimates on Wall Street. Amazon is expecting revenue to be between $54 billion and $57.5 billion during the third quarter, which is slightly less than Wall Street projections of between $55.6 billion and $62.2 billion.
Sales generated on Prime Day, which was in July, will be applied to the third quarter for Amazon.