Amazon Posts 11% Rise in Revenue as Growth Improves

All that cost-cutting at Amazon might be paying off. The company isn’t back to the torrid growth of bygone days but managed to beat Wall Street expectations on Thursday.

Revenue in the second quarter rose 11 percent to $134.4 billion, the retailer said, better than the 9 percent it was achieving recently. That was about $3 billion more than analysts had been forecasting.

Net income was 65 cents a share versus expectations of 35 cents. Last year, the company lost 20 cents a share in the quarter because of a slump in the value of its investment in Rivian, the electric truck maker.

Andy Jassy, Amazon’s chief executive, said in a conference call that the results were helped by reconfiguring the company’s delivery network to put merchandise closer to buyers.

“When shipments come from fulfillment centers that are closer to customers, they travel shorter distances, which costs less in transportation, get there faster and is better for the environment,” he said. “There’s a lot of goodness in that equation.”

Fulfillment costs, which are the price of getting the goods from the warehouse to the customer’s house, rose only 5 percent in the quarter.

Amazon shares rose more than 10 percent after the earnings were announced. Traders also liked that the company estimated third-quarter revenue would increase 9 to 13 percent and operating income would double. The third quarter includes special annual sale days that usually boost revenue.

July signified two years since Mr. Jassy took over as chief executive from Jeff Bezos, Amazon’s founder. Mr. Jassy’s stewardship so far has been a period of retrenchment. Amazon flourished during the pandemic, supplying necessities and diversions to millions of suddenly grounded families, and the retailer made the reasonable assumption that the boom would last.

It didn’t. There were layoffs and cutbacks last winter, a time when many big tech companies consolidated swollen operations. The stock fell sharply in 2022 after years of growth. It has since recovered much of the loss but is still below its peak.

Some analysts have worried that Amazon’s recent desire to keep expenses down clashes with its longstanding obsession over making customers happy.

Tom Forte, an analyst with D.A. Davidson, wrote a note last week to investors about several disappointments he had experienced with Amazon, including no longer being able to have a defective product picked up without cost by UPS. Now, he wrote, there is a $7.99 fee.

“In our view, Amazon is playing a ‘game of chicken’ and banking on other e-commerce companies not to offer a superior service, instead of its historical approach of working backwards with a customer-obsessed approach,” Mr. Forte wrote.

One of Mr. Bezos’ last major actions before his departure was to add “Strive to be Earth’s best employer” to the company’s leadership principles. “Leaders ask themselves: Are my fellow employees growing? Are they empowered?” the principle states.

The first Amazon union was formed at a warehouse in Staten Island last year, but the company has refused to negotiate with it and is challenging its validity. The National Labor Relations Board filed a complaint against Amazon in July for refusing to bargain. Meanwhile, employees’ return to the office post-pandemic has been unusually contentious for the company.

Employment appears to have stabilized. Slightly fewer than 1.5 million people work for the company, down 4 percent from a year ago and flat from the prior quarter.

Amazon is so large, with over half a trillion dollars in annual revenue, that it is difficult to move the needle much. In earlier years, the retail division grew like gangbusters. Then the AWS cloud division provided the supercharged growth, and finally advertising pushed the numbers.

It’s hard to see where the next phase of growth will come from. AWS is growing at about a 12 percent annual rate, while online stores were up 4 percent and advertising 22 percent.

Most new programs, like this week’s roll out of grocery service for customers who are not Prime club members, are incremental. Non-Prime members will pay higher delivery fees.

If the second quarter at Amazon was relatively quiet, the current quarter is likely to produce more in the way of headlines. The Federal Trade Commission is widely expected to file a lawsuit against the company accusing it of violating antitrust laws. A resolution could be years away.


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