Amazon shares jump after profit surprise

A worker at the Amazon.com fulfilment centre in Poznan, Poland. Amazon shares jumped as much as 19 per cent after it reported on Thursday that second-quarter revenue rose 20 per cent to US$23.2 billion (S$31.8 billion).
A worker at the Amazon.com fulfilment centre in Poznan, Poland. Amazon shares jumped as much as 19 per cent after it reported on Thursday that second-quarter revenue rose 20 per cent to US$23.2 billion (S$31.8 billion).PHOTO: BLOOMBERG

SAN FRANCISCO • Amazon.com reported a surprise second-quarter profit on top of sales that beat analysts' estimates, showing investors - as it has done before - that the United States Web retailer can make money when it puts the brakes on investments.

Shares in Amazon jumped as much as 19 per cent after it reported on Thursday that revenue rose 20 per cent to US$23.2 billion (S$31.8 billion), helped by a fast-growing cloud-computing business and initiatives to lure more customers.

Net income was US$92 million, or 19 cents a share. Analysts projected, on average, a loss of 14 cents on sales of US$22.4 billion.

Chief executive Jeff Bezos is pushing the Web retailer, which he founded two decades ago, beyond sales of books, electronics and household items as the firm matures. While Mr Bezos has focused on pouring profits back into growing Amazon's business, he has periodically pulled back on spending to show Amazon can be profitable.

"They are showing investors that if they want to deliver profits, they can," said Mr Michael Pachter, an analyst at Wedbush Securities, who has the equivalent of a buy rating on the stock. "Amazon is a dominant online retailer, well on its way to becoming one of the world's largest retailers."

Operating expenses grew slower than sales, rising 17 per cent to US$22.7 billion, Seattle-based Amazon said. Spending on marketing and fulfilment centres were both unchanged as a percentage of sales compared with a year earlier, according to Mr Brian Olsavsky, Amazon's chief financial officer.

The firm's shares surged after the close of trading in New York, helping to push Amazon's market capitalisation to about US$267 billion, more than Wal-Mart Stores, the world's largest retailer.

Amazon's cloud-computing division, which offers Web data storage and computing services and includes customers such as Pinterest and Netflix, had sales of US$1.82 billion, up 81 per cent from a year earlier. The Amazon Web Services Group reported a revenue gain of 49 per cent in the first quarter.

The cloud-computing effort has disrupted traditional technology companies as customers buy less hardware and software, instead renting computers from Amazon.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 25, 2015, with the headline 'Amazon shares jump after profit surprise'. Print Edition | Subscribe