Amazon Soars Above $1,000 After Smashing Expectations

Amazon has done it again, and following a lukewarm second quarter and with Goldman warning not to get too excited going into earnings, Amazon is back to its short-crushing ways, reporting both revenues and EPS which blew away expectations. In Q3, Amazon reported EPS of 52 cents, beating not only consensus estimates of 4 cents, but printing above the highest sellside estimate on net sales of $43.7 billion, also well above the $42.19 billion consensus estimate.It was also above the high end of the company’s own range, which topped out at $41.75 but did not include Whole Foods, which deal closed on August 28.

The closely followed AWS segment reported net sales of $4.58 billion, a Y/Y growth of +42% (slightly less than the 43% Y/Y increase last quarter), and above the $4.51 billion expected. AMZN reported AWS operating income of $1.171 billion, which was a modest miss to the $1.1 billion expected. AWS margin in Q3 was 25.5%, fractionally below the 26.6% reported a year ago.

Putting AWS in context, whereas AMZN’s total operating income was $347 million in Q3, AWS $1.171 billion of this or nearly 4 times the total. While the division has been facing tougher competition from both Microsoft and Google, prompting some concerns about whether the growth can continue on pace, especially amid price wars, so far it has yet to materialize.

Looking forward, AMZN sees the following revenue and operating income:

Net sales are expected to be between $56.0 billion and $60.5 billion, or to grow between 28% and 38% compared with fourth quarter 2016. This compares to sellside expectations of $58.75 billion. This guidance includes approximately 1,000 basis points of impact to our year-over-year growth rate from Whole Foods Market. This guidance also anticipates a favorable impact of approximately $1.2 billion or 270 basis points from foreign exchange rates.

Operating income is expected to be between $300 million and $1.65 billion, compared with $1.3 billion in fourth quarter 2016. Sellside called for $1.85 billion so a little weak here.