Amazon Q2 2022 Earnings Report Recap

^{Source: Predictions based on analysts' consensus from Visible Alpha}

Amazon (AMZN) Financial Results: Analysis

Amazon.com, Inc. (AMZN) reported mixed results in its Q2 FY 2022 earnings report. Earnings per share (EPS) were -$0.20, while analysts predicted positive EPS. It was the second consecutive quarter in which Amazon reported a net loss, and only the second such quarter in at least four and a half years. Net losses include a pre-tax valuation loss of $3.9 billion included in non-operating expense from the company's investment in Rivian Automotive Inc. (RIVN). Amazon's revenue beat analyst forecasts by a margin of more than $2 billion. Amazon Web Services (AWS) revenue also exceeded consensus estimates, though by a smaller margin.

AMZN AWS Revenue

AWS, Amazon's high-margin cloud computing business, grew by 33.3% year-over-year (YOY) to reach $19.7 billion, beating analyst predictions. Amazon said that AWS received new commitments and migrations from companies across a wide variety of industries, including Delta Air Lines Inc. (DAL), Jefferies Financial Group Inc. (JEF), and Italy-based multinational energy company Eni S.p.A (E), among others.

Amazon's AWS business generates much higher margins than its e-commerce business. In FY 2021, Amazon's global retail sales- and subscription-based business segments generated about 87.5% of the company's total revenue, while AWS accounted for a mere 12.5%. However, AWS accounted for nearly two-thirds of total operating income for the year, making it Amazon's main profit generator. AWS was the only one of Amazon's segments to report positive operating income for Q2 FY 2022.

AMZN Outlook and Stock Performance

Amazon said it expects net sales in the range of $125.0-$130.0 billion for Q3 FY 2022, a YOY improvement of 13%-17%. Operating income is expected to be from $0 to $3.5 billion, down from $4.9 billion in Q3 FY 2021.

Amazon shares shot up by about 12.4% in after-market hours trading following the company's earnings release. Overall, the company's stock has underperformed the broader market. Amazon shares have provided a 1-year trailing total return of -32.6% compared with -7.5% for the S&P 500, as of July 28.

Amazon's next earnings report (for Q3 FY 2022) is expected to be released on Oct. 27, 2022.