Big Tech Earnings Surge as Economy Slumps: Live Updates
Buoyed by a pandemic-induced surge in online shopping, Amazon on Thursday reported record sales and profits in the latest quarter.
Amazon had $88.9 billion in quarterly sales, up 40 percent from a year earlier. Profit doubled, to $5.2 billion, even though the company invested heavily to improve the safety in Amazon’s warehouses.
Analysts expected the company to have $81.4 billion in sales and $665 million in profit, according estimates compiled by FactSet, a financial data firm. Shares in the company jumped more than 6 percent in after-hours trading.
“Simply put, Covid-19, in our view, has injected Amazon with a growth hormone,” Tom Forte, an analyst at the investment bank D.A. Davidson Company, wrote in a recent note to investors.
The profit came even as Amazon invested $9 billion in expanding warehouses and other capital expenditures to increase its capacity. “It’s a good problem to have,” Brian Olsavsky, the company’s finance chief, said on a call with reporters.
In April, Jeff Bezos, Amazon’s chief executive, told investors to expect no operating profit, and maybe even a loss, as the company planned to spend about $4 billion on coronavirus-related expenses, including temporary pay increases, declines in warehouse efficiency because of social distancing and $300 million for testing its work force for the virus.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” he said at the time.
Amazon had been paying workers an extra $2 an hour, but that benefit expired in May. At the end of June, it announced one-time “thank you” bonus of $500 for full-time associates in its warehouses.
But even those costs did not compare to the immense surge in demand, with online retail sales up 48 percent. As Americans have stayed home during the virus, they have flocked to online shopping.
“E-commerce is off the charts right now,” said Guru Hariharan, a former Amazon employee whose company, CommerceIQ, helps major consumer brands manager their Amazon business. The initial shock of panic buying has subsided, but “demand is starting to stabilize, at a much higher level,” he said. Mr. Olsavsky said customers returned to buying more profitable products, like clothing, versus lower-margin groceries and cleaning suppliers.
One of the biggest challenges Amazon had expected was keeping up with demand, as the virus flared among its workers and the communities where they live. Mr. Olsavsky said the company was able to fulfill more orders than it had previously expected. The number of products it sold grew 57 percent, but the number of employees it had was up just 34 percent.
On the call with reporters, Amazon declined to say if it would be paying its warehouse workers more in the current quarter. It said that pandemic-related expenses would fall to $2 billion in the quarter.
Sales at Amazon’s lucrative cloud computing business, whose customers range from major corporations to start-ups, grew 29 percent, to $10.8 billion, falling short of analyst expectations, though it was more profitable than they expected.
Article source: https://www.nytimes.com/live/2020/07/30/business/stock-market-today-coronavirus