Have Amazon’s Chickens Come Home To Roost?

Amazon’s Q3 earnings announcement is a tale of two companies.

One year ago, Amazon’s quarterly results were so bad that even The New York Times was mocking the company with its report, which kicked off with a snarky lede: “The chickens are not coming home to roost at Amazon just yet, but they are checking the flight schedule to Seattle.”

And rightfully so. Amazon’s 2014 Q3 earnings showed an operating loss of $544 million, despite having $20.58 billion in sales. The loss was more than 20 times that of the $25 million in 2013’s third quarter earnings.

One year later, it appears those chickens have come home to roost. Which, for Amazon, means turning a profit — and the eCommerce giant did so for the second quarter running.

So, the question is: Has a new Amazon arrived? 

Earnings beat expectations as Amazon posted a profit of $79 million on a revenue of $25.36 billion. This is a stark contrast from the company’s previous operating losses.

Earnings were boosted by particularly strong sales in the U.S., which were up 23 percent on the year to $25.4 billion. Operating income was $406 million in the third quarter. Cloud computing also gave the eCommerce giant a boost for the quarter. Amazon’s strong results shot its stock up 10 percent on Thursday (Oct. 22) during after-trading hours, where it closed at $618.70/share.

This quarter’s strong results followed a strong Q2 when Amazon posted a quarterly profit of $92 million (a nice change of pace from the $126 million loss a year prior). During that quarter, Amazon’s stock price closed up almost 19 percent during after-trading hours and secured its place as the world’s biggest retailer by market cap, knocking Walmart out of the position it held for a very long time.

While the focus of many analysts’ questions during the earnings call were inquires about Amazon Prime numbers and growth figures, Amazon remained tight-lipped on actual figures and wouldn’t reveal anymore than the figures announced at the end of 2014, which was that Prime subscription rates rose by 50 percent in the U.S. in 2014 and 53 percent worldwide. 

What Amazon would speak about is how Prime remains part of its overall innovation and growth strategy as it relates to various segments of the company.

“This quarter showed a lot of innovation, a lot of new products and features and a lot of investment … Globally, we are investing very heavily in our Prime platform, both in North America and international,” said Brian Olsavsky, Amazon Senior VP and CFO. “Prime Now has been expanded to 14 metro areas. We’ve had same-day delivery now in 16 metro areas. We’ve built 14 new fulfillment centers. We’ve launched multiple devices (Echo, Dash Button) … So, there’s a lot of investment going on, and there will be continued, especially related to Prime.” 

And in perhaps a nod to what’s next, or to provide air cover, he added: “Innovation and investment will continue and can be lumpy.

Now that sounds like the Amazon we know.

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