Why Amazon’s Latest Quarterly Earnings Only Spell the Best for the Company
Everyone seems to be lost in the hullabaloo of Amazon not being able to beat analysts’ expectations of their quarterly earnings. Yes, the company has not been able to post amazing numbers, as they have done so in the past few quarters.
But why do we forget; amazon has posted a quite healthy rise in profits and even if it hadn’t Amazon has never been about posting unprecedented profits.
The Quarterly Report for Amazon
Here are the important numbers from Amazon’s report on Thursday:
- It made $252 million in net income.
- That equals to $0.52 per diluted share.
- In 2015, the same income was $79 million, or $0.17 per diluted share.
- The revenue amounted to $32.71 billion.
Amazon Continues to Invest Heavily in Fulfillment
If Amazon had to choose between profits and expansion, it’ll always choose the latter. Taking money from the huge profits it has rolled out since the past few quarters, Amazon invested heavily in making even the remotest areas more accessible for their Amazon sellers.
It opened a whopping eighteen new fulfillment centers, out of the 26 it had pledged for 2016. Automatically, costs went up 35% but so did access to goods on Amazon, faster delivery and smoother shipping procedures.
Web Services are still Making Loads
Web Services – the amazon tool for cloud solutions (and much more) – continued to make big numbers in the third quarter as well. AWS saw a growth of 55% – more than almost everything else under Amazon. Money from AWS is often reinvested in other areas of the company.
Bezos’ goal for AWS’s total earnings for 2016 was $10 billion. The cloud platform is all set to earn much more by the end of this year.
Shipping is still at the Forefront
Since new fulfillment centers opened, new shipping routes have started off, as well. Therefore, costs have gone up. However, to make things smoother in the shipping process, Amazon has been looking to take over major parts of the procedure.
The company has leased trucks, bought planes, d is investing even more in drones to be more competitive with firms like UPS and FedEx. If I had to take a guess, I’d say that eventually, Amazon plans to make shipping a standalone business. Once they have all shipping routes under their control, they won’t have to rely on third-party deliverers, bringing shipping costs down, eventually.
Bezos Loves India
Jeff Bezos has repeatedly mentioned his hopes for Amazon India and what it can do for the main Amazon branch, eventually. Amazon has been pretty open about the kind of investment they’re doing in that region.
Not only is it planning to expand its streaming service in July, it also introduced its Prime service in the country. Initiatives to get more and more amazon India sellers on the platform are taking up a lot of investment money, but eventually pay off once amazon is an established marketplace in the region.
All in all, the future looked great for Amazon. Profits fell because of increased investment – which has always been the secret of success for the company.