Amazon delivers strong Q4, ups revenue outlook

Summary:Amazon cruised by estimates with better-than-expected second quarter results as the company said that demand for its Kindle 3G with Special Offers has been surging.

Amazon cruised by estimates with better-than-expected second quarter results as the company said that demand for its Kindle 3G with Special Offers has been surging.

The company also raised it outlook for the third quarter.

Amazon reported second quarter earnings of $191 million, or 41 cents a share, on revenue of $9.91 billion, up 51 percent from a year ago. Excluding a foreign exchange gain, sales would have been up 44 percent.

Wall Street was expecting earnings of 35 cents a share on revenue of $9.38 billion.

As for the outlook, Amazon projected third quarter sales between $10.3 billion and $11.1 billion, up 36 percent to 47 percent from a year ago. Operating income will be between $20 million and $170 million, a wide range that reflects a hefty decline from a year ago.

Amazon has maintained that it is investing for future growth.

On a conference call with analysts, CFO Tom Szultak said:

We need both fulfillment capacity as well as infrastructure capacity. This is something that we've been doing really since our inception. I look at it as a high quality problem. We have if you back out cash from our securities you'll see that we have a high ROIC. I'm not saying that certainly is a historical performance. It's not a predicted performance but I do feel very good about those investments. Those are something that we've done before and it's something that we've been working to perfect really since we opened our doors back in the mid 90s. In terms of there's another set of investments, certainly you're seeing we're investing in the conversion from physical to digital, we think we have good assets to do that. We're very focused on the customer experience and that comes in a number of different forms. We feel very good about those investments in terms of the traction we're getting from a customer standpoint and we're certainly optimistic about our ability to generate good Free Cash Flow while having high returns on invested capital, and then we have some newer businesses.

Shares surged in afterhours trading.

By the numbers for the second quarter:

  • The Kindle store has 950,000 books with 800,000 less than $9.99.
  • North America sales were $5.41 billion, up 51 percent from a year ago.
  • International sales were $4.51 billion, up 51 percent from a year ago.
  • Media sales were $3.66 billion, up 27 percent from a year ago.

  • Electronics and other general merchandise revenue was $5.89 billion, up 69 percent from a year ago.
  • Technology and content costs were $698 million, up from $408 million a year ago.
  • Amazon's "other" revenue line, which includes Amazon Web Services, was $359 million, up from $203 million a year ago.
    • The company ended the quarter with $2 billion in cash and equivalents.
    • The company ended the quarter with 43,200 employees.

    Topics: Banking, Amazon, Enterprise Software

    About

    Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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