Amazon Q3 2017: Sales Up 34%, AWS Breaks $4B Revenue
The e-commerce giant had a very good quarter, thanks to Whole Foods and its cloud business. And it's not done yet.
Amazon has been busy this quarter, picking up grocery chains, hunting for a second headquarters and launching services that put couriers inside customers’ homes — that is, when it’s not cranking out new devices and fashion deals. Now, the world finds out how all of that has affected the e-commerce company’s bottom line.
Revenue during its action-packed third quarter showed a major jump: The online retail giant brought in $43.7 billion, beating expectations of $42.19 billion and showing a 34 percent growth over the same quarter last year.
What a difference a few months can make: Amazon missed expectations in the second quarter, and Wall Street reacted by dropping its stock 3 percent, dipping to $1,017. This time, the results sent the company’s stock soaring north of $1,040 in after-market trading.
“In the last month alone, we’ve launched five new Alexa-enabled devices, introduced Alexa in India, announced integration with BMW, surpassed 25,000 skills, integrated Alexa with Sonos speakers, taught Alexa to distinguish between two voices, and more,” said Jeff Bezos, Amazon founder and chief executive officer, in a press statement.
Alexa, Amazon’s marquee voice assistant, relies on the AWS cloud, and Bezos pointed out that this allows new features to roll out to all Echo devices, “not just those who buy a new device,” he said. “And it’s working — customers have purchased tens of millions of Alexa-enabled devices…and active customers are up more than five times since the same time last year.”
Amazon Web Services, the cloud computing department that powers much of today’s Internet and online commerce, had a solid showing and, in fact, broke $4 billion in revenue for the first time. Its $4.6 billion revenue represents a 34 percent growth from $3.2 billion this time last year.
Next quarter, which includes the holiday season, will be critical. Amazon expects net sales to land somewhere between $56 billion and $60.5 billion. If it hits the mark, it would represent 28 to 38 percent growth, compared with the same time last year. However, it’s worth noting that this guidance assumes “that no additional business acquisitions, investments, restructurings, or legal settlements are concluded,” according to the press release. Amazon hasn’t picked the location for its second campus, and it will still need to construct it. Meanwhile, the tech company continues building out warehouses, fleshing out content for its Prime Video service, and fully integrating Whole Foods into the Amazon way of life.
The fashion sector may want to keep tabs on the new acquisition. One thing the company has always been good at is establishing various pieces — whether devices or services — and tying them into its e-commerce platform to create an extremely attractive proposition for consumers. That was its approach with the Echo product line, and it’s doing that now with groceries. If Amazon’s movements in the food space portend how it may link its various apparel tactics into a cohesive strategy, then the fashion industry should eye what happens to Whole Foods and the other services carefully.
On the earnings call, numerous questions about Amazon’s Whole Foods business came up, which connects into Amazon’s seeming fascination with brick and mortar: “We do see a lot of opportunity with Whole Foods,” said Dave Fildes, director of investor relations. “There will be a lot of work together between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site and Amazon lockers at the Whole Foods stores.”
When it comes to sheer size, Amazon also put its numbers into focus: Its headcount grew 77 percent year-over-year in the quarter, including the supermarket chain. Without such factors, Amazon, at the base level, grew 47 percent, a 42 percent increase from the second quarter. “A lot of the additional pickup in Q3 was tied to our ramp up for the holidays,” the company said. “[But] we continue to hire a lot of software engineers, we continue to hire a lot of sales reps, and it’s tied directly to our major investment areas of AWS Prime Video and devices.”
Amazon doubled down on its pledge to offer more conveniences for consumers, whether delivering a box inside a customer’s house, offering Sunday delivery and extending cut-off times beyond 3 p.m.: “It results in incremental sales and also builds that trust that when you need something, Amazon is going to be there for you.”