Amazon: its fourth straight quarter of over $1 billion in profits - Auxiliary Tech

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Thursday, October 25, 2018

Amazon: its fourth straight quarter of over $1 billion in profits

Amazon  is expected to report third-quarter profit of $3.09 per share, or roughly $1.5 billion, according to FactSet. That would be up from the 52 cents per share reported a year earlier, and the fourth straight quarter that Amazon has topped $1 billion in profit — a remarkable milestone for a company once known for losing money because of its heavy investments.
The widening profits are largely driven by the growth of Amazon's high-margin businesses, including its cloud, advertising and third-party seller services. Investors will keep a close eye on how those business units performed in the third quarter.
"Focus will likely remain on the strength of Amazon's high margin business lines that are now driving robust margin expansion," Evercore analyst Anthony DiClemente wrote in a note published earlier this month.
A minimum wage hike for its hourly workers, which was announcedearlier in October, will not be included in the third-quarter results because it goes in effect on Nov. 1. Investors will look to fourth-quarter guidance to see what kind of impact the wage increase will have on Amazon's overall business.
Here are some of the most important topics that could get discussed during the earnings call:
  • High-margin businesses: Amazon is seeing greater contributions from its high-margin businesses, such as its cloud, advertising and third-party seller services, which is helping expand profitability to record levels. Investors are particularly interested in Amazon's advertising business, which some estimate to be on pace for $10 billion in annual revenue.
  • Fourth-quarter forecast: The fourth quarter is the biggest sales period for Amazon because of the holidays. But the all-important quarter could see a cut in revenue forecast because of the minimum wage increase announced this month, as well as an accounting rule change that will likely reduce Prime sales figures.
  • Physical stores: Amazon has doubled down on its physical store expansion in recent months, opening multiple cashierless Go stores and the first 4-Star store. The third-quarter also marks the first full year since Whole Foods' business has been included in the company's earnings. Amazon now breaks out physical store sales, but most of it comes from Whole Foods.

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