This compares to Q2 operating income of $3.3 billion. For AWS, these quarter-over-quarter increases are primarily driven by higher infrastructure investments to support continued strong customer growth, including larger depreciation on a growing fixed asset base. We also expect increased energy costs as we continue to see volatility in utility prices around the world in operating our AWS data centers. Our guidance incorporates the order trends that we’ve seen to date and what we believe today to be appropriate assumptions. This guidance also reflects our estimates to date regarding the impact of the COVID-19 pandemic on our operations, including those discussed in our filings with the SEC.
- Q2 last year was also when vaccines have become more available, particularly in the United States, and we began to see more normal shopping patterns.
- On the first point, we expect this challenging year-over-year comp will have ended in Q2.
- And then also, when you think about margins, the 35% for AWS in 1Q going to 29% in 2Q.
- Prime Day also occurred in Q2 last year and contributed about 400 basis points to our Q year-over-year revenue growth rate.
- In our emerging locations, there’s a healthy amount of investment we’ve done to drive expansion, and we expect to continue to do that given the strong competition across many of these markets.
Q2 last year was also when vaccines have become more available, particularly in the United States, and we began to see more normal shopping patterns. Prime Day also occurred in Q2 last year and contributed about 400 basis points to our Q year-over-year revenue growth rate. This year’s Prime Day sales event occurred on July https://bigbostrade.com/ 12 and 13 and is incorporated into our third-quarter guidance. So on the Prime fee increase earlier in the year, we’re happy with the results we’re seeing in the Prime program. I think that change has been above our expectations positively. And I think the benefit of the program continues to get better and better.
Amazon.com, Inc. (AMZN) Q2 2022 Results – Earnings Call Transcript
We see that pattern every year, but we don’t see that magnitude and that’s where a lot of our wage inflation is for particularly our technical employees. So there’s a certain amount of conservatism always built into this because we are in a very difficult macroeconomic state potentially. Again, we’re not seeing it hit our businesses directly. In fact, we’re seeing strong growth in sales through the quarter in Q2.
And it’s – we’ve got to work our way out of the condition we are in and we are making good progress in Q2 and expect to keep pressing on that in the second half of the year, but saw strength in the seller results in Q2, as we mentioned on the percentage mix. So I think, seller business remain strong in an integral part of our customer offering. In our emerging locations, there’s a healthy amount of investment we’ve done to drive expansion.
So you called out just the 3P mix being a kind of highest level, maybe talk about your focus to increase the mix to 3P and how that fits into plans for improved efficiency? And then secondly, on international, how much of the weakness in the margin sequentially was FX-driven? On the company’s earnings call, CFO Brian Olsavsky touted the company’s advertising business, noting that it has grown while others have begun to see slowdowns.
In our established international locations, U.K., Germany, Japan, over time, we’ve continued to improve the profitability of that business as we build out and establish stronger customer relationships and work on the cost structure and how we serve folks. A lot of that, of course, is driving improvements through our key pillars with price selection and convenience and working with vendors on commercial terms. It’s going to be always a factor of new investment and things like the sales force and new regions and infrastructure capacity, offset by infrastructure efficiency gains that we see, pricing issues as we extend contracts. We’ve seen really good progress with our customer base, longer and longer commitments, really committing to the cloud, some of that comes with credits to help them make their conversion to the cloud.
The company’s share price rose by as much as 10 percent in after-hours trading with the company projecting net sales of between $125 billion and $130 billion, up double digits from the same quarter a year ago. The company has been grappling with inflationary pressures and logistics issues related to the pandemic. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. We’re happy with the results we’re seeing in the Prime program.
Amazon.com Announces Second Quarter Results
At this time, we’ll now open the call up for questions. Our first question comes from Brian Nowak with Morgan Stanley. “When companies are looking to optimize or streamline their advertising spend, we think our products compete very well in that regard,” he added. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
- So we’re certainly diligent on that and making sure we have a good workplace and an environment that will attract employees.
- And we’re making good progress in Q2 and expect to keep pressing on that in the second half of the year.
- Sellers and vendors are also some of our larger advertising customers as well and helps – that advertising helps them surface new selection to our customer base.
- On the headcount, yes, I think it was more as we mentioned last quarter – last year – excuse me, in Q1, we added – to give you a flavor for it, we added 14,000 workers in Q1, prior year we had reduced our net headcount by 27,000.
- Some of your peers in the cloud space have talked about some slowdown in booking rates just as customers take longer to work through deal terms and duration.
Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. The company is facing tough comparables, as it had robust results in the year-ago period. One factor adding to the challenging comparables is the shifting of the annual Prime Day event from the second quarter of last year to the third quarter of this year. In addition, foreign exchange headwinds likely hurt the second-quarter’s revenue because the U.S. dollar has gained strength against other currencies over the last year.
Amazon Posts $2B Loss, Still Beats Wall Street Expectations
During this call, we may discuss certain non-GAAP financial measures. It’s a dicey time for tech overall, and earnings season has only continued to bear that out. On Wednesday, Facebook-owner Meta Platforms (META) reported its first-ever year-over-year revenue drop and, earlier this week, both Google parent Alphabet (GOOG, GOOGL) and Microsoft (MSFT) reported earnings that didn’t meet Wall Street’s expectations. Although both Microsoft and Google particularly mt5 demo account have their bright spots, this round of earnings season has been relatively brutal for the tech sector. Consolidated earnings per share came in at -$0.2, missing Wall Street consensus of $0.12 by a far cry again due to the ongoing risk-off environment in public markets. Specifically, the results included a $3.9 billion negative impact related to non-operating, mark-to-market losses on its Rivian investment during the second quarter (vs. -$7.6 billion in Q1).
We see great opportunity to continue to make investments on behalf of AWS customers. We continue to invest thoughtfully in new infrastructure to meet capacity needs, while expanding AWS to new regions, developing new services and iterating quickly to enhance existing services. As usual, we will discuss the combination of capex plus equipment finance leases. On the second point, we expect fixed cost leverage to improve in the second half of the year as we continue to grow into our capacity. We have also taken steps to slow future network capacity additions.
But we’re cognizant that things could change quickly and we’ll see and monitor and that’s how we set our forward guidance. As you hit a potential rough patch in the economy, I think the last time we saw this was back in 2008-ish. So on margins in AWS, yes, as you mentioned that is dropping sequentially.
Amazon jumps on revenue beat and rosy guidance for third quarter
So we feel good about the program and the state of the Prime members after a very rough couple years of pandemic turmoil. So on the seller fee again, we added that fee grudgingly in May to compensate for some of the inflationary pressures we’re seeing. I don’t want to give you the idea that either of those fee increases came close to covering our costs. You can see from our operating results, some of it’s internal related, but a lot of it’s external factors that they’re – we are not passing through that at a 100% to external groups.
So you’re right, there will be adjustments to that as we move forward into more holiday level demand. Right now, we see a stabilization in the workforce, maybe we see good hiring rates. And so I think as you remember, there was a very difficult labor period in the second half of last year, and it didn’t arrived kind of quickly out of nowhere. So we’re certainly diligent on that and making sure we have a good workplace and an environment that will attract employees.
Prime member membership and retention is still strong. And when it’s part of FBA, it can also help as being more Prime eligible and available to ship in one, two days or whatever the Prime offer happens to be. So I’d challenge the premise a little bit there about incenting mix or I believe is how I interpret your question. What we’re all about, obviously, is price selection and convenience.
Amazon.com (AMZN) Earnings Date, Estimates & Call Transcripts
So that’s 26 geographic regions, and we’ve got plans for – to launch 24 more of those availability zones across eight regions. And this is Australia, Canada, India, Israel, New Zealand, Spain, Switzerland, UAE, so a lot of different spots. And so continuing to focus on building out to customers, working on that pipeline and building longer commitments, making – finding customers that are making longer commitments is really important to that.