Amazon posts Q3 earnings that blow away estimates; COVID-19 effect boosts sales

Melody Hahm
·West Coast Correspondent
·4-min read

Amazon (AMZN) reported a blockbuster third-quarter after the bell on Thursday, with sales skyrocketing 37% year-over-year as the tech giant further entrenched itself as one of the biggest beneficiaries of the coronavirus pandemic.

Here’s how the company fared, compared to analyst estimates compiled by Bloomberg:

  • GAAP earnings per share: $12.37 vs. $7.55 expected

  • Revenue: $96.1 billion vs. $92.7 billion expected

  • Adjusted net income: $6.3 billion vs. $6.2 billion expected

However, the stock fell in after hours trading, as its forecast for the crucial fourth quarter trailed market expectations. The company expects revenue to fall between $112 and $121 billion, representing 28% to 38% growth. The fourth quarter will include its Prime Day event and holiday shopping sales — but are being clouded by the recent rise in coronavirus infections worldwide.

Already its highest-margin business, Amazon Web Services grew 29% year-over-year, indicating a slight moderation from its accelerated trajectory. The second quarter was the first time AWS growth fell below 30% since breaking out the unit numbers. Meanwhile, its burgeoning advertising unit, which falls under the “other” category, made $5.4 billion in revenue, a 51% increase from a year ago.

The stock has surged 76% so far in 2020, compared to the S&P’s gains of 3.2%. In Thursday’s trading, shares rallied along with other major tech stocks, which have taken a beating this week as COVID-19 cases soar worldwide.

Analysts are overwhelmingly bullish on Amazon’s stock, with 53 recommending it as a buy, two as a hold and only one sell rating.

"We believe the market continues to underestimate the long-term value of the Amazon platform as the leader in both the movement of retail online and compute into the cloud. Therefore, we continue to believe Amazon represents the best risk/reward in the Internet sector," Goldman Sachs, which has a buy rating on the stock, said in a note to clients.

Last quarter, Amazon also blew past expectations when it reported earnings on July 30 — a day after CEO Jeff Bezos testified before Congress for the first time amid concerns about monopolistic behavior. Amazon had reported $5.2 billion in quarterly profit in Q2. It just surpassed that record, logging $6.3 billion in profit for Q3, marking a 200% year-over-year increase.

Its core retail business will continue to grow, analysts say, with Americans largely stuck at home during the pandemic. Just this week, Amazon announced plans to hire 100,000 seasonal workers to support the holiday shopping season.

The company has embarked on a massive hiring spree, picking up 175,000 employees in March — and an additional 100,000 just last month to keep up with customer purchases. Amazon boasted of starting entry level workers at $15 per hour, a key demand of labor advocates seeking higher pay for front line workers.

Amazon has created over 400,000 jobs since the start of 2020, according to Bezos. “We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season,” he said in a statement.

The holiday season and its 2020 Prime Day event, which normally takes place in July, was pushed back to the second week of October because of the outbreak. During the two-day event, Amazon heavily marketed its own devices like the Echo, Eero and Ring (unsurprisingly, the Echo Dot was the most popular product this year).

While the company did not disclose total sales figures from the event, the company packaged the event as a win for mom-and-pop sellers.

“Third-party sellers—most of which are small and medium-sized businesses—surpassed $3.5 billion in sales on Prime Day—a nearly 60% year-over-year increase, growing even more than Amazon’s retail business,” the company wrote in a blog post.

Last year, Amazon called Prime Day the “largest shopping event” in its history, with sales surpassing the previous Black Friday and Cyber Monday numbers combined.

This post is breaking. Please check back for updates.

Melody Hahm is Yahoo Finance’s West Coast correspondent, covering entrepreneurship, technology and culture. Follow her on Twitter @melodyhahm.

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