Amazon Q3 earnings suggest it’s ‘pulling various levers’ to please investors

Amazon.com Inc (NASDAQ: AMZN) is marginally down in extended hours even though it reported better-than-expected results for its fiscal third quarter.

AWS was in line with expectations in Q3

Shareholders seem iffy because Amazon Web Services – traditionally the strongest segment of the tech behemoth jumped 12% year-on-year to $23.1 billion which was about in line with expectations only.

AWS, however, generated $7.0 billion in operating profit for Amazon in its recently concluded quarter versus $5.4 billion a year ago. On CNBC’s “Closing Bell: Overtime”, Paul Hickey – the Co-Founder of Bespoke Investment Group said:

It’s a very big part of Amazon’s business. You want to see that strength, especially since they discussed that in their last earnings call. They were talking about seeing a pickup in that.

Last month, Amazon.com Inc announced a $4.0 billion investment in Anthropic to expand its footprint in artificial intelligence as Invezz reported here.

Amazon did not issue an impressive guidance

Investors are a bit concerned also because the future guidance was not particularly exciting.

Amazon is now calling for $160 billion to $167 billion in sales in the fourth quarter versus analysts at $167.2 billion. Still, JMP Securities analyst Nick Jones told Yahoo Finance today:

They have a focus on cost control and they’re really utilizing their infrastructure. Operating income margins look really good … eCommerce continues to gain share.

Outlook for operating income of $7.0 billion to $11 billion in Q4 did surpass the Street estimates, though. Amazon stock is currently up close to 40% year-to-date.

Notable figures in Amazon’s Q3 earnings release

• Earned $9.9 billion versus the year-ago $2.9 billion
• Per-share earnings also soared from 28 cents to 94 cents
• Revenue went up 13% year-on-year to $143.1 billion
• Consensus was 59 cents a share on $141.5 billion revenue
• Operating income more than quadruple to $11.2 billion

Note that FTC came together with 17 states in September to file a complaint against Amazon (read more). According to Nick Jones, though:

I don’t think [investors should be very concerned. We don’t see any of Amazon’s practices as illegal. We think the [accusations] are overdone.

He doesn’t see a consumer slowdown as much of a threat for Amazon either.

Ads business performed well in the third quarter

Advertising continued to be a solid business for Amazon in Q3 – bringing in $12.1 billion in sales versus $9.6 billion in the same quarter last year.

Experts, in comparison, had called for $11.6 billion instead, as per the earnings press release. JMP Securities’ Jones added:

Advertising continues to outperform, which delivers a lot of margin upside. They’re pulling various levers to give investors what they’re looking – which is better operating margin.

Other notable figures in the earnings release include a 7.0% annualised growth in online store sales to $57.3 billion and a 14% increase in subscription services revenue to $10.2 billion.