Amazon Q2: net sales up 29%, net income down 96%

Amazon Q2: net sales up 29%, net income down 96%

I was going to wait until after the conference call, but it’s not working for me right now…I’m not hearing anything, and the slide hasn’t changed.

Here’s the press release on Amazon’s 2nd Quarter (Q2) financial report:

press release

Let’s see if I can give you a good analogy…

“Hey, Sweetie, how did the lemonade sales go?”

“Great! Last week, I sold 100 glasses…this week, I sold 129 glasses!”

“Wow! That’s a lot more! Let’s put your money in the piggy bank.”

“Okay.”

“Let’s see…last week, you had $5. That was one hundred glasses at a nickel apiece. Where is your money from this week?”

“Here it is.”

“Honey, where’s the rest of it? This is only twenty cents.”

“That’s all there is.”

“What happened? Did someone take it?”

“No. I spent it.”

“You spent it? On what?”

“I bought some movies for people to watch while they bought the lemonade. I also bought some books that they can borrow to read while they drink it.”

“Well, that explains why you had more customers, I guess.’

“Yes, and they really like it! I’m sure they’ll come back next week!’

“Is that all you bought?”

“No…I bought a robot.”

“You bought a…why did you do that?”

“The robot puts the lemonade in the glasses for me, so I don’t spill any.”

“Okay, honey…but really, I don’t know how I’m going to get any more money to buy lemons for you when you keep spending all of it like this.”

“But next week, I’ll make loads of money!”

:)

It’s always been true that Amazon stockholders have to be made of sturdy stuff.   They have to wait years to see results sometimes. Amazon literally bought a robot company, and that cost a lot of money…but it’s likely to save a lot. Amazon bought videos for Prime streaming (well, licensed them), and pays for every book borrowed through the Kindle Owners’ Lending Library.

Overall, I don’t think this is going to surprise people much. We’ll see, though…

Update: I listened to the recording. I had suggested they might tease new hardware, and there was mention of liking the “road map” for the Kindle Fire (and the question had included hardware, I believe). There was a lot of talk about sales tax, and they answered as they usually do, in terms of economic impact: they already collect sales tax or VAT (Value Added Tax) on something like half of their sales, and are still able to compete well.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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4 Responses to “Amazon Q2: net sales up 29%, net income down 96%”

  1. Harold Delk Says:

    No problem; what we lose on every sale we make up in volume.

    • Bufo Calvin Says:

      Thanks for writing, Harold!
      :)

      Amazon does lose some money on direct sales, I’m sure, but my guess is that it’s largely the investments they are making in robots, streaming video, and such which is really cutting into the margins. That, and the expense of Prime, although that might be made up somewhere else. I think the drop is in overall net income, not specifically profit on sales…

  2. Edward Boyhan Says:

    I too had the exact same problem: got the first slide, and no sound. Whatever it was, it killed sound across the board on my system — had to reboot — took about 20 minutes to fiddle around, but eventually listened to the last half.

    Some comments:

    They were lucky in a sense as today was also the first time that Facebook reported earnings as a public company — they reported a loss, and the financial and technical press has been all over that with nary a mention (yet) of Amazon’s results :D.

    Somewhere in there a comment was made that the robot company contributed a $96 million dollar loss to the bottom line — I hope that’s a one time event.

    Much talk about Q3 guidance and that Amazon will be investing heavily in ramping up for a blowout Q4. Q3 will therefore be as bad or worse than Q2. Reading between the lines of all their Q3 ramp-up talk leads me to think we won’t be getting any product announcements until towards the end of Q3.

    18 new fulfillment centers will be built this year of which so far only 6 have opened — so still a big cash flow hit to come there.

    • Bufo Calvin Says:

      Thanks for writing, Edward!

      It was reported in March that Amazon was paying $775 million dollars for Kiva, the robot company. I think it’s going to take a while before they compensate for that. :)

      As to the Q3/Q4 guidance…I still think we could get an announcement soon.

      Last year, they announced on September 28th, and shipped on November 15 and November 21.

      I think that might have shorted the sales cycle a bit…holiday sales are certainly under way nowadays in October. This year, my guess is that they are going to feel more prepared. I felt like there was a bit of a rush to get the tablet in the market. This time, they have an established product that they are expanding…on both the tablet and RSK (Reflective Screen Kindle) front, unless they introduce a color RSK.

      There is also a real possibility of two waves of announcements. They could announce something on Tuesday (frontlit RSKs and lowering the Fire price?) and say that they may have another announcement later in the year…even give a date for a second announcement. That would hype a second announcement when we are more in the season.

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