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Amazon share price: muted reaction to Q2 numbers

Amazon share price: muted reaction to Q2 numbers

The tech giant revealed mixed Q2 numbers after the closing bell last night and the reaction of Amazon’s share price was somewhat muted. Revenue increased by 20% on a year-on-year basis to $63.4 billion, compared to the forecast $62.5 billion. 

Amazon’s Q2 results in detail

The group has invested heavily in the Amazon Prime service, with the aim of bringing down the delivery time, and that weighed a little on profit margins. At the same time, quarterly earnings dropped back to the softest level in a year. EPS came in at $5.22, which undershot the forecast of $5.57. 

The company’s cloud business, Amazon Web Services (AWS), registered a 37% rise in sales to $8.38 billion, which narrowly missed forecasts. It’s worth noting that the AWS division’s revenue grew by 41% in the first-quarter, and the cooling growth rate is a little concerning. 

Amazon’s third-quarter operating income projection missed forecasts as the group aims to earn between $2.1 billion and $3.1 billion, while the consensus estimate was $4.4 billion. Overall, the numbers were impressive, but the cloud business is no longer growing at a phenomenal rate across the board. The investment in the Prime service should also pay off in the medium-term, which should be reflected in the Amazon share price. 

Amazon share price: the rise of online retail

The pain felt by high street retail is partially due to the rise of online shopping and to be more precise, Amazon. The group has been a major disruptor to the retail sector and that trend is likely to continue as the fragile consumer climate across a number of major economies will probably lead to consumers becoming savvier, and that should benefit the company and the Amazon share price. 

Amazon are seeking to cut down on their delivery times for Prime members. The Amazon Prime service already offers one-day delivery, and in some cases same-day delivery, but that is only on orders above $35. Now the group is aiming to introduce a next-day delivery service for Prime members, without a minimum price. Such a move should draw in even more clients, which is always good for Amazon’s share price, and in turn could put even more pressure on traditional retailers. 

How will an antitrust probe impact the Amazon share price?

US Treasury Secretary, Steven Mnuchin, has attacked Amazon by stating the group has ‘destroyed retail industry’. It does not bode well for Amazon that they’ve attracted the ire of the Trump administration, and Mr Mnuchin said he is looking forward to the Justice Department’s investigation into the alleged anticompetitive practices. The US government and the EU have become concerned the tech giants are wielding too much power, and have an uncompetitive advantage. Amazon has been criticised for its dual role as competitor in the market place it has created for other vendors. To look at the Amazon share price in action over recent months, you wouldn’t know an antitrust probe is looming over the firm, and this suggests that traders are not that worried about the probe.         

Read our Amazon share price preview article.



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