Though Amazon.com’s stock soared after the company reported earnings in July, shares have more than given back their gains since, hurt by a market selloff and recent selling pressure in the shares of tech giants.
Bulls are hoping Amazon (AMZN) will once more surprise to the upside on Thursday afternoon. Among analysts polled by FactSet, the consensus is for the e-commerce and cloud giant to report third-quarter revenue of $127.39 billion (up 15% annually) and GAAP EPS of $0.22 (down 29%).
Amazon provides quarterly sales and operating income guidance in its reports. For the seasonally big fourth quarter, the company’s revenue consensus stands at $155.09 billion (up 13%) while its GAAP operating income consensus stands at $5.05 billion (up 46%).
Eric Jhonsa, Real Money’s tech columnist, will be live-blogging Amazon’s report, which is expected after the bell on Thursday, along with an earnings call scheduled for 5:30 P.M. Eastern Time.
Please refresh your browser for updates.
6:16 PM ET: Amazon's call has ended. Shares are down 12% after-hours to $97.65 after Amazon posted Q3 sales and op. income numbers that were a little below consensus estimates and (more importantly) issued below-consensus Q4 sales and op. income guidance, with revenue guidance of $140B-$148B falling short of a $155.09B consensus.
Also apparently weighing on shares: AWS revenue of $20.54B fell short of a $21.2B consensus, with Y/Y growth slowing to 27% from Q2's 33%.
On the call, CFO Brian Olsavsky noted some AWS clients are eager to optimize their cloud spend in the current environment, that macro pressures (particularly in international markets) and forex are both headwinds for Amazon's retail ops, and that large AWS investments and high wage/energy inflation are margin headwinds. He forecast Amazon's capex would be roughly flat this year at ~$60B, with fulfillment and transportation capex falling by ~$10B and AWS capex rising by a similar amount.
A couple of bright spots: Amazon's gross margin (benefiting from a continued mix shift from product sales to services) came in at 44.7%, up 140 bps Y/Y and a little better than expected, and the AWS contract backlog rose 57% Y/Y to $104.3B.
Thanks for joining us.
6:05 PM ET: A question about how quickly Amazon can get back to historical North America segment operating margins. And one about AWS' growth trajectory.
Olsavsky says Amazon was aiming for $1.5B in operational cost improvements in Q3, but ended up with $1B. Notes Prime Day and high inventories were headwinds. "My message is that we have work to do in 2023 that we are aware of and working on today," he says.
Regarding AWS growth, Fildes just says the mid-20s AWS growth rate Amazon saw exiting Q3 informed its Q4 sales guidance.
6:02 PM ET: A question about holiday season demand. And one about cost cuts.
Olsavsky says Amazon is well-positioned to meet holiday season demand. Adds that Amazon is optimistic but realistic about holiday season sales, given macro pressures. Says there are a range of outcomes the company is preparing for.
Regarding costs, he says Amazon made good strides with productivity, but has more work to do. Also says Amazon is looking to obtain more fixed-cost leverage with fulfillment/transportation capex. Notes inflation remains a wild card.
5:58 PM ET: Another question about AWS demand. Also one about AWS backlog.
Fildes says AWS backlog rose 57% Y/Y in Q3 to $104.3B (that's well above revenue growth of 27%).
Olsavsky suggests financial services clients were particularly looking to optimize their AWS spend, and notes AWS provides a variety of ways to do that. Adds that this flexibility is a selling point in a tougher macro environment.
5:54 PM ET: A question about AWS margins and International losses being worse than expected.
Olsavsky says AWS margins will fluctuate as Amazon makes investments and renegotiates deals. Also notes wage inflation and higher energy costs are headwinds for AWS' profits.
For International, he notes higher energy costs in Europe were a margin headwind, as were higher device sales.
5:51 PM ET: A question about Amazon's plans for improving free cash flow.
Olsavsky says Amazon still has work to do to improve its operational cost structure. Also suggests Amazon has elevated product inventories in some areas that will eventually be pared, and that it's working to improve capex efficiency.
5:48 PM ET: First question is about the Q4 revenue guide, and the impact of AWS cost optimization and U.S. consumer spending.
Olsavsky says forex will still be the biggest headwind in Q4. Notes forex is a slight tailwind for op. income due to lower international costs. Indicates Amazon's e-commerce ops saw a bigger slowdown in international markets than in the U.S., and highlights Europe as a place where macro has become a major headwind.
Regarding AWS, he says customers are looking for ways to cut costs. Notes growth is still strong on an absolute basis. Indicates that while AWS saw 28% constant currency growth for the whole of Q3, growth has slowed to the mid-20s range.
5:44 PM ET: The Q&A session is starting.
5:43 PM ET: Olsavsky says Amazon expects to spend ~$60B on capex in 2022, broadly in-line with what it spent in 2021. Fulfillment/logistics capex is now expected to decline by ~$10B, while AWS capex is expected to rise by a similar amount.
He adds macro conditions have weighed on Amazon's sales growth, and that the company saw moderating growth for many businesses and greater forex headwinds as Q3 progressed. Says Amazon has paused hiring at cut costs for certain businesses.
5:40 PM ET: Olsavsky says Amazon generated $1B in operational cost improvements in Q3, but adds it was a little less than what Amazon planned for. Says Amazon has identified areas for improvement.
Also notes Amazon saw an uptick in Prime video marketing costs, and that the company is making large AWS-related investments.
5:37 PM ET: Olsavsky talks up third-party seller volume growth and the July Prime Day event. He also says AWS "has seen an uptick" in the number of customers looking to control costs (this echoes what Microsoft said this week about Azure customers).
5:34 PM ET: Olsavsky notes forex hurt Q3 revenue by $900M more than what Amazon anticipated when it guided in July.
5:33 PM ET: Olsavsky is talking.
5:31 PM ET: The call is starting. In recent quarters, Amazon's call has featured prepared remarks from CFO Brian Olsavsky, after which Olsavsky and IR chief Dave Fildes take questions from analysts.
5:26 PM ET: Hi, I'm back to cover Amazon's earnings call, which should start in a few minutes.
Shares have pared their losses a little more: They're now down 12.4% AH.
5:03 PM ET: I'm taking a short break, but will be back to cover Amazon's call, which starts at 5:30 PM ET.
Shares are down 17% AH to $92.08 after Amazon posted mixed Q3 results (revenue slightly missed, while EPS beat with the help of a Rivian accounting gain), issued below-consensus Q4 sales and operating income guidance, and disclosed AWS' Y/Y revenue growth slowed to 27% from Q2's 33%.
5:00 PM ET: Amazon ended Q3 with $58.7B in cash/equivalents and $58.9B in debt. Unlike in Q1 and Q2, no stock was repurchased in Q3.
The unearned revenue balance, which includes Prime fees and AWS revenue Amazon has collected but not yet recognized as revenue, totaled $12.63B at the end of Q3, up from $10.97B a year ago.
4:55 PM ET: Amazon has pared its losses a bit: Shares are now down 15% AH. And Apple is now close to unchanged.
4:54 PM ET: Amazon's capex growth has slowed, but spending is still high in absolute terms. Purchases of property and equipment totaled $16.38B in Q3, up slightly from $15.72B in Q2 and $15.75B a year ago.
CFO Brian Olsavsky said on the Q2 call that Amazon's total capex would grow slightly in 2022, with fulfillment/logistics capex declining and AWS capex growing.
4:49 PM ET: Amazon's Q3 expenses:
Shipping costs +10% Y/Y to $19.94B
Fulfillment +11% to $20.58B
Technology and content +36% to $19.49B
Sales and marketing +37% to $11.01B
G&A +42% to $3.06B
The tech/content and sales/marketing figures are what really stand out here. While Amazon has slowed its fulfillment/logistics spending pace, the company is clearly still investing aggressively in R&D, sales and content (also, the closing of the MGM deal earlier this year provided a boost to content spend).
4:38 PM ET: Amazon is now down 20% after-hours. Together with Apple's 4.7% AH drop, this has led the Invesco QQQ Trust to drop 1.7% AH.
4:36 PM ET: Amazon's Q3 GAAP gross margin was 44.7%. That down from 45.2% in Q2, but up from 43.3% a year ago and a little above a 44.2% consensus.
The margin tailwind from Amazon's ongoing mix shift towards services revenue streams (seller services, subscriptions, ads, AWS) is offsetting the headwind from high depreciation expenses related to heavy capex.
4:32 PM ET: With seller services comfortably outgrowing online stores, 58% of Amazon's paid unit sales came from third-party sellers. That's up from 56% a year ago and represents a new high.
4:28 PM ET: Q3 sales by business:
Online stores (direct e-commerce) +7% Y/Y to $53.49B, below a $54.28B consensus
Physical stores (dominated by Whole Foods) +10% to $4.69B, slightly below a $4.71B consensus
Third-party seller services (commissions, fulfillment, etc.) +18% to $28.67B, above a $27.93B consensus
Subscription services (Prime fees, content subscriptions, etc.) +9% to $8.9B, below a $9.09B consensus
Ads +25% to $9.55B, slightly above a $9.48B consensus
"Other" revenue (credit cards, content licensing, etc.) +163% to $1.26B, above an $843M consensus
4:22 PM ET: Andy Jassy on Amazon's spending plans: "We’re also encouraged by the steady progress we’re making on lowering costs in our stores fulfillment network, and have a set of initiatives that we’re methodically working through that we believe will yield a stronger cost structure for the business moving forward. There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets. What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season."
4:20 PM ET: Amazon's total GAAP costs/expenses rose 18% Y/Y in Q3 to $124.58B, outpacing revenue growth of 15%. That compares with 12% growth in Q2.
4:17 PM ET: Amazon is still down 18.9% AH. Shares are at their lowest levels since March 2020.
4:16 PM ET: Whereas Amazon's headcount fell by 99K Q/Q in Q2, it rose by 21K in Q3 to 1,544,000. Annually, headcount was up 5%.
4:13 PM ET: Amazon notes forex had a $5B impact on Q3 revenue. Revenue rose 15% Y/Y in dollars and 19% in constant currency.
For Q4, Amazon says its sales guidance assumes forex will be a 460 bps headwind.
4:10 PM ET: Q3 revenue by segment:
North America +20% Y/Y to $78.84B, above a $77.24B consensus
International -5% to $27.72B (+12% exc. forex), below a $29.00B consensus
AWS +27% to $20.54B, below a $21.20B consensus
Along with the Q4 guide, the AWS miss is likely weighing on Amazon's shares.
4:06 PM ET: Q3 op. income, which excludes the impact of the Rivian stake, was $2.53B, below a $2.95B consensus albeit in-line with guidance of $0 to $3.5B.
4:04 PM ET: Q4 op. income guidance of $0 to $4B is below a $5.05B consensus.
4:03 PM ET: Importantly, Amazon guides for Q4 revenue of $140B-$148B, below a $155.09B consensus.
Shares are down 19.9% AH.
4:02 PM ET: Results are out. Q3 revenue of $127.1B slightly misses a $127.39B consensus. GAAP EPS of $0.28 beats a $0.22 consensus, but includes a $1.1B gain related to the valuing of Amazon's stake in Rivian.
4:00 PM ET: Amazon closed down 4.1%. The Q3 report should be out shortly.
3:58 PM ET: Along with its top-line numbers, Amazon's opex and margin figures will get close attention. Many investors are looking for signs of meaningful cost-cutting, following two years of massive warehouse/logistics capacity expansion.
3:54 PM ET: Amazon's stock is down 34% YTD going into earnings, and has sold off this week amid a broader rout in the shares of tech giants. That might spell relatively low expectations heading into the report.
3:51 PM ET: The FactSet consensus is for Amazon to report Q3 revenue of $127.39B and GAAP EPS of $0.22.
Q4 sales and op. income guidance might have a bigger impact on how Amazon moves post-earnings, given Q4's seasonal importance. The Q4 revenue consensus is at $155.09B, and the op. income consensus is at $5.05B.
3:47 PM ET: Hi, this is Eric Jhonsa. I'll be live-blogging Amazon's earnings report and call.
