In the third quarter of 2023, Amazon.com (NASDAQ:AMZN) reported earnings of 94 cents per share, a substantial increase from 28 cents per share in the same period the previous year. The company’s adjusted earnings of 85 cents per share exceeded the Zacks Consensus Estimate by 46.55%.
Amazon’s net sales for the quarter reached $143.1 billion, marking a 12.6% year-over-year increase and surpassing the Zacks Consensus Estimate by 1.1%. When excluding favorable foreign exchange effects of $1.4 billion, the revenue growth remained robust at 11%.
Product sales, which accounted for 44.1% of total sales, saw a 6.5% year-over-year increase to $63.17 billion, while service sales, representing 55.9% of total sales, grew by 17.9% to $79.91 billion.
Geographically, North America led the way, with revenues of $87.89 billion, a year-over-year increase of 11.5%, slightly beating the consensus estimate by 0.59%. International revenues stood at $32.14 billion, a 15.9% increase compared to the previous year, surpassing the Zacks Consensus Estimate by 4.22% (excluding forex, revenues still increased by 11%).
Amazon Web Services (AWS) generated $23.06 billion in revenues, making up 16.1% of total sales, showing a 12.3% year-over-year growth. While AWS growth lagged slightly behind the consensus estimate by 0.55%, it remained a significant contributor to Amazon’s overall earnings.
The company’s collaboration with third-party sellers also delivered strong results, with sales from these services increasing by 20% year-over-year to $34.34 billion, surpassing the Zacks Consensus Estimate by 2.98%. Furthermore, advertising services sales saw a substantial increase of 26% year over year, totaling $12.06 billion, outperforming the consensus estimate by 5.44%.
Amazon’s physical store sales grew by 6% year-over-year, reaching $4.96 billion, albeit slightly behind the consensus estimate by 1.17%. Online store sales amounted to $57.27 billion, showing a 7% year-over-year increase, which was attributed to an uptick in online shopping activities, exceeding the Zacks Consensus Estimate by 0.33%.
The company also noted the strength of its Prime membership, with a 14% growth in subscription services sales, totaling $10.17 billion in the quarter, outperforming the consensus estimate by 0.46%.
During the same period, Amazon hosted its most successful Prime Day event ever, with Prime members making over 375 million purchases worldwide and saving more than $2.5 billion on millions of deals across the Amazon store.
Amazon introduced a new feature, Buy with Prime, which integrates with Shopify, enabling merchants to streamline their businesses on their own websites, with inventory, pricing, and promotions automatically synchronized in one place.
Operating Details
Operating expenses for the quarter amounted to $131.9 billion, a 5.9% year-over-year increase. As a percentage of revenues, operating expenses decreased by 580 basis points (bps) to 92.2%.
Costs related to sales, fulfillment, technology and infrastructure, and sales and marketing, as well as general and administrative expenses, increased by 6.8%, 8.4%, and 8.8% year-over-year, to $75 billion, $22.3 billion, and $21.2 billion, respectively. Sales and marketing, as well as general and administrative expenses, decreased by 4.2% and 16.3% year-over-year, amounting to $11.01 billion and $3.06 billion, respectively.
The operating income for the quarter surged to $11.19 billion, a significant increase from the $2.53 billion reported in the same period the previous year. AWS’ operating income amounted to $6.98 billion, marking a 29.1% year-over-year increase.
In terms of operating income by segment, the North America segment reported an operating income of $4.31 billion, compared to an operating loss of $412 million reported in the previous year. The International segment reported an operating loss of $95 million, a significant improvement from the $2.47 billion loss in the prior year.
Balance Sheet & Cash Flow
As of September 30, 2023, Amazon held $49 billion in cash and cash equivalents, slightly down from $49.5 billion at the end of June 2023. Marketable securities amounted to $14.6 billion, up from $14.4 billion in June. The company’s long-term debt decreased to $62 billion, down from $63.1 billion as of June 30.
Amazon’s cash flow remained strong, with $21.22 billion generated from operations in the third quarter, a significant increase from $16.5 billion in the second quarter. On a trailing 12-month basis, operating cash flow totaled $71.65 billion, and free cash flow reached $21.43 billion.
Guidance
For the fourth quarter of 2023, Amazon expects net sales to be in the range of $160 billion to $167 billion, representing a 7-12% year-over-year growth. The Zacks Consensus Estimate for net sales is approximately $167.01 billion, indicating an 11.93% year-over-year growth. The company anticipates a favorable foreign exchange impact of 40 bps. Operating income is projected to be between $7 billion and $11 billion.
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