Amazon Profit Hits Over $2 Billion For The First Time, As Cloud Sales Growth Continues

Amazon To Lay Off Over 18,000 Workers

The brown Amazon packages landing on doorsteps are starting to throw off plenty of green.

The Seattle retail and technology giant on Thursday reported a record profit of $2.5 billion, the latest sign of the company’s success in tapping new markets even as it deepens its dominant position in e-commerce.

Amazon, which for most of its lifetime relied on its core online retail business, and tended to post losses or only slim profit, has impressed investors in recent quarters with the strength of earnings generated by other units.

The company during the most recent three quarters pulled in $6 billion in net income, a sum nearly equal to its $6.1 billion profit during the prior 21 years.

Driving much of that profit is the fast growth of the Amazon Web Services cloud-computing group, the company’s advertising division, and Marketplace, as Amazon calls its venue for other companies that sell their own wares on Amazon websites.

“Their most profitable businesses are growing the fastest,” said Tom Forte, an analyst with D.A. Davidson who tracks the company. “I have felt recently that people weren’t paying [enough] attention to the profitability story at Amazon.”

Investors are starting to take notice. Amazon’s shares are up about 50 percent in 2018, a rise that has made founder and Chief Executive Jeff Bezos — who still owns more than 16 percent of the company — the world’s richest man.

Amazon’s stock climbed 3.1 percent in after-hours trading. Shares had slumped by 3 percent during the regular session, a move some attributed to investor caution toward high-flying technology companies after Facebook warned that its growth was slowing.

The social networking firm, which reported quarterly earnings after the market close on Wednesday, slumped by 19 percent Thursday.

It wasn’t just growing businesses driving Amazon’s profitability. The famously frugal company has spent much of this year trying to keep a lid on costs, and extract efficiency gains from investments in personnel and facilities, Amazon Chief Financial Officer Brian Olsavsky said on a call with reporters.

Coming off a “very high investment period” last year, Amazon was “looking at our fixed headcount, and how can we move people to our new investment areas,” he said.

That’s led to more internal transfers between teams at the company, and less new hiring from outside, he said.

Amazon’s workforce, 575,700 people worldwide at the end of June, increased by 1.7 percent from the start of the year. In percentage terms, that’s the slowest growth for the first half of the year since the depths of the financial crisis in 2009.

Now, Olsavsky said, the company will “reset and evaluate where we still need to add people.”

Hiring lull aside, Amazon stayed busy during the quarter, announcing a $1 billion deal to scoop up online pharmacy PillPack and continuing to integrate Amazon-owned Whole Foods Market with its Prime membership program and other areas of Amazon’s business.

The company also raised the cost of Prime in the U.S., to $119 a year, a change that took effect for new members in May, and for customer renewals in June.

Amazon uses that fee to help pay for the growing cost of shipping packages, as well as the cost of building out members-only digital offerings like original films, television shows and streaming music.

Amazon’s revenue from Prime and other subscription services totaled $3.4 billion during the quarter, up 57 percent from 2017.

Amazon Web Services, the leader in the fast-growing market for providing rented computing power and developer tools to other companies, earned $6.1 billion, up 49 percent.

Amazon’s “other” category, a catch-all the company says is primarily advertising sales, pulled in $2.1 billion, more than double the $945 million a year earlier.

Overall, Amazon reported sales of $52.9 billion, up 39 percent from a year earlier. That comes out to $5.07 a share, up from 40 cents a share during the same period in 2017 and more than double what outside observers had anticipated.

Wall Street analysts had forecast Amazon’s earnings at $2.50 a share, and revenue of $53.3 billion.

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