Amazon stock price jumps 10% after defying expectations

The world's biggest e-commerce company just sent a message to all the doubters with this second-quarter result.

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The Amazon.com Inc (NASDAQ: AMZN) stock price is bounding higher after reporting its latest quarterly figures early this morning.

In after-hours trading, shares in the global e-commerce and cloud computing company are up 9.5% to US$141.10 a piece. Meanwhile, fellow US tech giant Apple Inc (NASDAQ: AAPL) is seeing its share price slide following the release of its quarterly results overnight.

Amazon stock price rallies on solid second-quarter results

Here are the headlining numbers from Amazon's second quarter:

  • Net sales up 11% compared to prior corresponding period to US$134.4 billion
  • Operating income increased from US$3.3 billion to US$7.7 billion
  • Net income swung from a US$2.0 billion loss to a US$6.7 billion profit
  • Free cash flow for the trailing 12 months swung from a US23.5 billion outflow to a US$7.9 billion inflow
  • Cash and cash equivalents finished at US$49.5 billion, down from US$53.9 billion

A double beat on both revenue and earnings is spurring a sensational rise in the Amazon stock price in after-hours. If the strength is retained upon the market opening tonight, the company's shares will reach their highest level since August 2022.

Heading into results, consensus estimates for revenue and earnings per share (EPS) were US$131.50 billion and 35 US cents per share. The world's fifth-largest listed company blew away EPS expectations, delivering a figure 85.7% above what analysts had pencilled in.

What else happened in the quarter?

If the mantra of Amazon's second quarter could be boiled down into a single phrase, it would be 'bigger and better'. Many achievements were made during the three months, including delivering the largest selection of products to US prime members at the fastest speeds — ever!

Amazon saw a swathe of new customers migrating to its AWS cloud platform in Q2. New customers and commitments included Royal Philips, 3M Health Information Systemsis, Omnicom, Sumitomo Corporation, and Acciona — some of which plan to utilise Amazon's generative AI application called Bedrock.

Advertising was the company's fast-growing segment by revenue in the quarter (excluding 'other'), increasing 22% to US$10.7 billion in net sales. From there, third-party seller services experienced the second most significant increase, rising 18% year-on-year US$32.3 billion.

The segment responsible for the largest portion of net sales, Amazon's online store segment, saw a modest 4% increase in net sales compared to the prior corresponding period, as shown above.

What's next for Amazon?

The tech giant is forecasting net sales of between US$138 billion and US$143 billion in the third quarter. This would suggest top-line growth ranging from 9% to 13% compared to the prior comparable period.

Similarly, management is guiding for operating income between US$5.5 billion and US$8.5 billion in Q3 2023. For context, Amazon posted US$2.5 billion in operating income in the third quarter of 2022. This would indicate a potential 180% improvement in operating income at the midpoint.

Amazon stock price snapshot

Despite climbing 50% in 2023, Amazon shares have underperformed many of its big tech peers, as shown below.

The poor performance may partly be attributable to the high price-to-earnings (P/E) ratio the company trades on, at 312 times. Or, investors might consider Amazon more directly exposed to economic weakness than others.

Nonetheless, the Amazon stock price has outperformed the Nasdaq Composite Index (NASDAQ: .IXIC) by 15% this year.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler has positions in Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon.com and Apple. The Motley Fool Australia has recommended Amazon.com and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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