First look: Amazon stock slides after projections for 3Q revenue

Amazon’s earnings, released after the market close Thursday, were notable on several key points. Among them:

• Wall Street’s reaction was decidedly negative. At about 4:40 p.m. EDT, Amazon (NASDAQ: AMZN) stock was down about 4.4%, to $175.94. It had been down 1.56% on the day to $184.07. The decrease occurred even though its earnings per share under GAAP measurements of $1.26 beat consensus forecasts by 23 cts/share, according to SeekingAlpha.
• The negative stock market reaction was reported to be primarily driven by the company’s guidance. Amazon said it expected net sales to be between $154 billion and $158.5 billion in the third quarter. But news reports said analysts had been forecasting third quarter net sales at $158.4 billion, citing Bloomberg data.
• One piece of data not in the earnings but will likely be in the company’s 10Q, yet to be filed, is a significant gain on its shares of electric vehicle maker Rivian (NASDAQ: RIVN), according to Tomi Kilgore of Marketwatch. Kilgore, in a commentary on Amazon’s earnings, noted that Amazon owns more than 158 million shares of Rivian Automotive Inc. That stock at the end of the second quarter was $13.42, up 22.6% from where it closed at the end of the first quarter, $10.95. Kilogore noted that Amazon did disclose earlier this week that its investments in publicly traded companies were $2.525 billion at the end of the quarter. That was up from $2.117 billion at the end of the first quarter, and  Rivian’s increase in price has been a key contributor to the rise in that asset line, according to Kilgore.

• Among the operating highlights cited by Amazon in its prepared earnings statement, the company said it “delivered to Prime members at its fastest speeds ever in the first half of the year.”
• Key measurements showed significant growth compared to the prior year. Net product sales for Amazon were up 4.3%. Net service sales, which includes AWS, rose 4.7%. Operating income was up 91% and consolidated net income almost doubled, to $13.5 billion. 
• In North America, net sales exclusive of AWS rose to $90 billion from $82.5 billion. News reports said CFO Brian Olsavsky, in a conference call with reporters after the release of the earnings, said Amazon “did come in a little short on revenue growth in North America vs. our internal estimates.” According to the reports, the CFO said consumers were ratcheting down what they were willing to pay and were buying cheaper products. “What we’re seeing is really around ASP and lower ASP in products selected by customers,” Olsavsky said, according to the products. “They are continuing to be cautious in their spending and trading down to lower (average selling price) products.” 
• AWS net sales jumped to $26.3 billion from $22.1 billion a year ago, and with operating expenses holding relatively steady, operating income climbed to $9.33 billion from $5.36 billion a year ago. 
• In the prepared statement that had few quotes from management in it, AWS and its adoption of AI stood out. “We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” Andy Jassy, president and CEO of Amazon said. “As companies continue to modernize their infrastructure and move to the cloud, while also leveraging new Generative AI opportunities, AWS continues to be customers’ top choice as we have much broader functionality, superior security and operational performance, a larger partner ecosystem, and AI capabilities like SageMaker for model builders, Bedrock for those leveraging frontier models, Trainium for those where the cost of compute for training and inference matters, and Q for those wanting the most capable GenAI assistant for not just coding, but also software development and business integration.”

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