01 November 2024
If you are covering Amazon’s Q3 results, please find a comment below from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Amazon delivered a strong set of third quarter numbers with revenues accelerating 11%, ahead of expectations, online sales and international growth both proved strong, while AWS remained steady. Much of the online success is as a result of consumers continuing to be price cautious. Amazon held various Prime events in the quarter and this drove both sales and Prime subscriptions. Coupled with better efficiency in deliveries, Amazon was able to expand its margins across the board.
“In the international business, margins have now reached 3.6%, the highest since 2021, with strength in established countries such as the UK and Germany. The meaningful margin expansion comes from a growing advertising business and lowering cost to serve. Management continues to reiterate that different regions are at different points of scaling, but longer-term expectations mirror the margin trajectory in North America which has been incredibly successful.
“Meanwhile the cloud business came in in line with expectations with revenue up 19%. AWS is benefiting from AI budgets being implemented by businesses, with demand currently exceeding capacity, and while traditional workload migration also remains healthy. Margins expanded quarter-on-quarter to 38%, reflecting good expense management and productivity.
“Importantly, and in line with its cloud peers, Amazon’s capex continues to go up (up 30% to $75bn this year). This shouldn’t come as surprise given the AI arms race we are seeing and the fact Amazon is still playing catch up. However, it is also looking to build out its fulfilment centres which will help with further growth.
“All in all, this was a positive update from Amazon and investors seemed to agree with the stock trading well in the after hours. Given softer numbers earlier this year it is good to see Amazon bounce back and live up to expectations once again.”
