Amazon Q3 Earnings: Beats Expectations Without Prime Day

The increasing reliance on online shopping, particularly accelerated by the COVID-19 pandemic, has continued to benefit Amazon significantly. The company exceeded expectations on Thursday, announcing a net income of $6.3 billion for the third quarter, equating to $12.37 per diluted share. This represents a substantial increase compared to the $2.1 billion net income, or $4.23 per diluted share, reported during the same quarter of the previous year. 

Total revenue reached $96.15 billion, a 37.4% increase from the $69.98 billion generated in the corresponding period last year. Notably, Amazon achieved these results despite the postponement of Prime Day, its annual major shopping event typically held in July. This event is a key factor in attracting new Prime subscribers and, consequently, driving revenue. 

Financial analysts surveyed by Yahoo had predicted earnings per share of $7.41, an increase from the $4.23 recorded last year. Revenue forecasts averaged $92.7 billion, up from $69.98 billion in the year-ago quarter. 

While the third-quarter performance surpassed projections and Amazon’s cloud computing division, AWS, continued its expansion, it is important to observe a deceleration in the year-over-year rate of net sales growth.

AWS reported $11.6 billion in sales for the third quarter, a 7.4% increase from the prior quarter and a 29% increase year-over-year. Although positive, this growth rate is lower than the 35% year-over-year sales growth experienced by the segment during the third quarter of 2019. Nevertheless, AWS generated its highest revenue to date in absolute terms this quarter, as highlighted by CFO Brian Olsavsky during an analyst call.

The financial results released on Thursday also demonstrated growth compared to the second quarter of this year, which was widely considered an exceptionally strong period. Revenue increased by 8% and net income rose by 21% from the second quarter, indicating that consumer demand for delivered goods remains robust.  

Amazon also reported a 56% increase in operating cash flow, reaching $55.3 billion for the trailing 12 months, compared to $35.3 billion for the trailing 12 months ending September 30, 2019. Free cash flow, calculated as operating cash flow less capital expenditures, also improved to $29.5 billion in the third quarter, up from $23.5 billion in the trailing period ended September 30, 2019. 

Looking forward, Amazon anticipates continued sales growth, but acknowledges that costs associated with COVID-19 may impact operating income. The company forecasts sales growth between 28% and 38% in the fourth quarter compared to the same period in 2019, projecting revenue between $112 billion and $121 billion, boosted by the rescheduled Prime Day event.

Amazon projects operating income to be between $1 billion and $4.5 billion, compared to $3.9 billion in the fourth quarter of 2019. This forecast incorporates approximately $4 billion in costs related to COVID-19.