KEY POINTS

  • Amazon.com reported 3Q18 earnings per share (EPS) of $5.75, beating the $3.08 consensus estimate and up sharply from $0.52 in the year-ago quarter. Revenues were $56.6 billion, up 29.3% year over year but missing the consensus estimate of $57.1 billion.
  • Amazon Web Services (AWS) and North America were the fastest-growing segments, growing 46% and 35%, respectively. International revenues grew 13%.
  • For 4Q18, Amazon guided for: revenues of $65.5–$72.5 billion, below the consensus estimate of $73.8 billion; and operating income of $2.1–3.6 billion, below the consensus estimate of $3.9 billion.

3Q18 Results

Amazon.com reported 3Q18 revenues of $56.6 billion, up 29.3% year over year and missing the consensus estimate of $57.1 billion. Sales from online stores increased 10%. Sales from physical stores were $4.2 billion, compared to $1.3 billion a year ago.

EPS was $5.75, beating the $3.08 consensus estimate and up 1,010% year over year.

Results by Segment

  • North America revenues were $34.3 billion, up 35% year over year, posting operating income of $2.0 billion, compared to a profit of $0.1 billion in the year-ago quarter.
  • International revenues were $15.5 billion, up 13% year over year, posting an operating loss of $0.4 billion, compared to a loss of $0.9 billion in the year-ago quarter.
  • AWS revenues were $6.7 billion, up 46% year over year, posting an operating profit of $2.1 billion, compared to $1.2 billion in the year-ago quarter.

Details from the Quarter

Management commented that Amazon Business has now reached $10 billion in annual revenue run rate and serves large educational institutions, local governments and more than half of the Fortune 100 companies.

Other points:

  • New products launched in the quarter include a new family of Echo devices, the new Fire HD tablet and the Fire HD Kids tablet, the new Kindle Paperwhite, the Fire TV Recast and a digital video recorder (DVR). Amazon and Ring announced the Stick Up Cam, an indoor/outdoor home-security HD camera.
  • Year to date, the number of Alexa-compatible smart-home devices quintupled to more than 20,000 devices from over 3,500 brands. Alexa gained new smart-home features, including Alexa Guard, Hunches and Frustration-Free Setup.
  • Amazon expanded grocery delivery from Whole Foods Market through Prime Now, and the service is currently available in more than 60 US cities and offers delivery as fast as in an hour.
  • Amazon launched grocery pickup from Whole Foods Market through Prime Now, allowing customers to place their order via the Prime Now app and pick up their groceries in as little as 30 minutes. This service is currently available in more than 10 US cities and there are plans for continued expansion.
  • Amazon Go recently opened five new stores in Seattle, Chicago and San Francisco. Amazon Go’s Just Walk Out technology—a combination of computer vision, sensor fusion, and deep learning—provides shoppers with a checkout-free experience.
  • In New York City, Amazon launched Amazon 4-star, a physical store that features an assortment of merchandise that is: rated 4 stars or higher; curated by customers; a top-seller or is new and trending on Amazon.com.
  • Amazon introduced Amazon Storefronts in the US, Germany and the UK, which allow customers to shop online for over one million products exclusively from small and medium-sized businesses.
  • Amazon launched Amazon.com.tr in Turkey, which offers customers millions of products across 15 categories from over 1,000 local sellers, with free delivery for orders above 50 Turkish Lira (USD $8.87).
  • Amazon India announced the launch of Amazon.in in Hindi. Customers can now read detailed product information, find deals and discounts, place orders, pay for orders, manage account information, track orders and view order history in Hindi.
  • Amazon Fashion continues to expand and enhance its selection with a variety of styles for customers by: partnering with J.Crew to launch J.Crew Mercantile on Amazon Fashion; bringing Calvin Klein’s re-launch of its new denim assortment to customers; and adding a wide collection from Ralph Lauren’s CHAPS brand.
  • Amazon Business, which is generating $10 billion in annualized sales and is serving customers in eight countries, launched new Business Prime benefits in the US, Germany, and Japan including Spend Visibility and Guided Buying features.
  • Amazon acquired PillPack, an online pharmacy that offers pre-sorted doses of medications and home delivery.

Outlook

Amazon offered the following guidance for 4Q18:

  • Revenues of $65.5–$72.5 billion, below the consensus estimate of $73.8 billion. This figure includes an 80 bps impact of foreign exchange.
  • Operating income of $2.1–$3.6 billion, below the consensus estimate of $3.86 billion.

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