Amazon earnings skyrocket on cloud computing

San Francisco: Amazon.com Inc forecast strong fall sales and posted a profit that was double Wall Street targets on Thursday thanks to the retailer’s younger, higher-earning businesses, including cloud computing and advertising.
Shares rose more than 3 per cent in after-hours trade. The report was a relief to investors in the US technology sector, still reeling from a profit warning by Facebook Inc on Wednesday that plunged its stock 19 per cent.
Amazon’s report shows how the world’s largest online retailer has increasingly learned to compensate for the high costs of fast package delivery and video streaming by controlling expenses and building up higher-profit businesses. It was the first mover in the business of selling data storage and computing power in the cloud, a bet that continues to reap rewards and give it the leeway to invest in grand projects.
For instance, the company is working to ship food from Whole Foods Market stores across the United States, in an ambitious attempt to bring groceries into the age of online retail.
Amazon’s spending typically climbs in the summer quarter, pressuring profits as the company prepares for Christmas and the winter holidays, its peak sales period each year.
Yet, the company said it expects an operating profit between $1.4 billion and $2.4 billion, up from $347 million a year earlier. The company also reported a second-quarter profit of $2.5 billion, its largest ever.
“A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising,” Brian Olsavsky, Amazon’s Chief Financial Officer, said on a call with media.
“We’ve seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing.” — Reuters