Jeff Bezos’ Amazon records 40% jump in revenue; sales surge as customers avoid physical stores

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July 31, 2020 8:08 AM

Amazon.com Inc. justified its big investments to keep operating through the Covid-19 pandemic with sales growth and a record profit that far exceeded analysts’ estimates.

Amazon India to hire 20,000 temporary staff in customer service to serve global customersSecond-quarter revenue jumped 40% from a year earlier to $88.9 billion. Earnings were $10.30 a share, beating analysts’ average projection.

By Spencer Soper

Amazon.com Inc. justified its big investments to keep operating through the Covid-19 pandemic with sales growth and a record profit that far exceeded analysts’ estimates, showing that staying open when so many businesses were forced to close was a rare opportunity. The online retail giant spent more than $4 billion in the second quarter to clean warehouses, hire employees and entice them back to work with temporary pay raises while much of the country shut down. That push paid off as customers shifted from buying groceries and emergency supplies early in the pandemic to bigger orders with electronics and housewares to settle in at home for the long haul.

Second-quarter revenue jumped 40% from a year earlier to $88.9 billion. Earnings were $10.30 a share, beating analysts’ average projection of $1.51 per share on sales of $81.2 billion, according to data compiled by Bloomberg. Amazon’s forecast suggests the momentum will continue. Revenue in the current quarter will range from $87 billion to $93 billion with operating income of $2 billion to $5 billion, the Seattle-based company said Thursday in a statement. Analysts estimated operating profit of $3.04 billion on sales of $86.5 billion.

Investors see promise in Amazon’s long-term profitability because the company increased earnings even while spending on Covid-19 safety measures and expanding capacity, said Brian Yarbrough, an analyst at Edward D. Jones & Co. Amazon said its forecast for the three months ending in September included more than $2 billion in expenses related to the coronavirus outbreak.

“Those expenses will start going away once Covid is behind us, which shows us the huge earnings potential of this model,” Yarbrough said. Shares rose about 5% in extended trading, continuing a 65% gain this year that has outperformed the S&P 500 Index. The stock closed at $3,051.88.

As the world’s largest online retailer, Amazon has benefited from a stampede by consumers trying to avoid physical stores during the pandemic. The company has also spent heavily hiring workers to keep up with the spike in online orders as well as on measures — temperature checks, masks, sanitizer — to protect frontline warehouse workers. Amazon said worldwide shipping costs increased 68% to $13.7 billion in the period ended June 30.

“Demand stayed strong with prime members who were shopping more often and with larger baskets,” Chief Financial Officer Brian Olsavsky said, referring to customers who pay monthly or annual fees for access to faster shipping and services such as streaming video. The good news stretched beyond Amazon’s biggest market of the U.S. Its international business, which includes Europe, Japan and India and usually loses money, delivered $345 million in profits. Amazon Web Services, the profitable cloud computing division, had revenue of $10.8 billion and wider profit margins. “This really puts any concerns investors had about profitability to rest,” said RJ Hottovy, analyst at Morningstar Inc. “They are getting more efficient despite Covid-19 and firing on all cylinders.”

Amazon increased its workforce 34% to 876,800 full- and part-time employees at the end of the quarter. The company announced plans to hire 175,000 new workers this year — and temporarily boosted wages — to keep up with Covid-19 related demand.

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