
Amazon.com Announces Second Quarter Sales Up 20% - cs702
https://ir.aboutamazon.com/news-releases/news-release-details/amazoncom-announces-second-quarter-sales-20-634-billion
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carlsborg
Two interesting points:

1) Close to 70% of Amazon operating income once again can be attributed to
AWS.

Consolidated operating income: $3,084 m AWS operating income: $2,121 m

2) AWS revenue was $8.3B for the quarter, 37% more than the same quarter last
year.

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ajross
What's interesting isn't the fact that they "make" more from AWS, it's that
AWS gets premium margins where their store is running right at cost (and has
been, basically forever -- it's their thing, sorta).

The interesting number you left out was the non-AWS revenue, which in 2018
(too lazy to correlate with today's announcement) was _$230B_ , literally 30x
higher. AWS is a tiny drop in the bucket, no matter what the profit details
say.

Which then prompts the question of why AWS gets that kind of margin, when it
would _seem_ like a pretty commoditized field at this point. Linux VMs are an
open and very portable deployment platform. You can get them from any number
of top tier providers and a huge horde of little ones. You'd expect to see a
ton of competition driving prices down, but we don't. I genuinely don't know
why.

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spenczar5
I don’t think it’s commoditized. AWS has moved past being just EC2.
Virtualization is a small piece or the picture, and building and operating
DynamoDB or S3 or SQS are all very tough tasks.

~~~
ethbro
It's not commoditized at the scale Amazon operates it at.

And from an AWS / profit perspective, running the rest of Amazon is
essentially what gives them a base consumer to get them to that scale.

~~~
jjeaff
Which is the strange part. Because it is rather commoditized on the level that
95% of their customers are by themselves.

It's that aggregate of so many individual clients that makes it difficult. So
why aren't all the small clients getting picked off by the hundreds of small
competitors?

My take is that the sheer scale of AWS has hit a point where engineers (the
ones making infrastructure decisions) and moving from one company to another
are just more likely to be familiar with AWS at this point. The same concept
makes hiring easier.

My other guess is that lots of engineers are like me and just got sick of
their hosting company getting bought out and constantly having to deal with
console changes and migrations.

I am with GCP now, one of the reasons I picked GCP is because they are very
large and have reasons to continue offering cloud services even if it becomes
commoditized and unprofitable. The same is true for AWS.

Also, of course "no one ever got fired for choosing AWS".

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sharkweek
Proof I have no idea how the stock market works:

“Wow, that’s insane, their stock must have popped back over 2k because of this
news!”

 _checks ticker_

“Down 2.5% after hours...?”

~~~
mythz
As always, it's due to the results being below Wall St estimates that are
already priced into the stock which is still trading at an insanely expensive
100 P/E ratio.

~~~
brlewis
Price/Sales is 4.01, lower than GOOG, FB or MSFT. They are going for growth,
not profit. No valuation metric is perfect, but P/E is particularly useless
for this company.

~~~
mythz
They're not a Startup, they've been "going for growth" for a 1/4 of a century,
eventually you need to make a profit to justify your Market Cap. Just because
profit isn't a goal for AMZN doesn't mean it's not a vital financial metric.

~~~
nicoburns
I don't understand why companies don't just let there stock price fall. This
makes no material difference to the operating of the company, right?

~~~
changoplatanero
Rising stock price is helpful for retaining high value employees that are
compensated with stock

~~~
nicoburns
I guess. You could just pay them more though.

~~~
allthecybers
> I guess. You could just pay them more though.

This is a good idea. Stop the stock game and just pay a set base salary = to
comp + stock.

But we can’t do that because that would take all the fun out of seeing part of
your potential income fluctuate with the whims and buffoonery of Wall Street.

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rednerrus
What a life, sales are up 20% and there are frowns all around...

~~~
TAForObvReasons
Obviously not literally what happened, but selling a dollar for 90 cents would
help boost the sales figures but hurt the bottom line. Sales alone doesn't
tell the whole story.

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vikramkr
They actually missed wall street expectations on profit, this isn't a
victorious quarter for then.

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Willson50
Stock is down 3% after hours.

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dfps
Does anyone feel lile commenting on why stock price fell after this?

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adventured
Effectively zero net income or operating income growth ($2.6b vs $2.5b; and
$3.1b vs $3.0b), despite 20% sales growth. The market generally dislikes it
when margins contract.

Plus, AWS growth dropped to 37% from 49%, year over year. I consider that a
great number given their size is approaching that of Oracle. However, every
headline likes to hang on the persistent decline in AWS growth. It's a very
large part of what's propping up the enormous AMZN valuation. As goes AWS, so
goes the AMZN stock.

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gringoDan
$14B in goodwill! Crazy.

~~~
mruts
That doesn't sound super unreasonable to me. Imagine if Amazon suddenly was a
different company with a different name, holding everything else the same. How
would this affect cashflows and sales? The difference in sales between this
hypothetical company and Amazon is essentially what goodwill is. $14B sounds
okay when you think about it like this.

~~~
mediaman
Goodwill is the accounting balance recorded when a company buys another
company for more than the value of its assets.

If you have $1bn in assets, and you sell to my company for $2bn, $1bn is
recorded as the assets bought and the other $1bn has to be recorded somewhere
- and that somewhere is 'goodwill.'

Later, if the acquisition turns out to have been a bad idea, and what I bought
from you was worth only $1.2bn, I will record an $800mm 'goodwill impairment'
that would be a loss on my income statement and 80% of that goodwill would no
longer be recorded as an asset.

~~~
anbop
And “assets” as accountants define them are an almost useless metric for
knowledge-based companies.

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grecy
But they still need tax breaks if you want them to build in your city!

~~~
fooey
Of course they don't _need_ it, but if states are willing to bribe them
billions of dollars, they're happy to run up a bidding war.

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newsreview1
How would it be, to be able to self declare something like "prime day" and
make more than black Friday sales?

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canada_dry
To put this in some global perspective... Alibaba's one day sales event
"Singles Day" last November grossed almost half that amount (i.e. $30B).

Note: Alibaba's operating margins are approx. 30%.

~~~
endorphone
Yet Alibaba's revenue for all of 2018 was $55B USD, compared to $232B USD for
Amazon.

I see that one day sale thing appear in many mentions of Amazon and it might
be a little...misleading.

~~~
mcintyre1994
Am I missing something or are Alibaba seriously making more than half their
annual sales in one single day?

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ABeeSea
Alibaba’s revenue is (primarily) only the fees and commission they charge
their sellers. They did $30B of gross sales on that day but probably only
collected $1-3B in reportable revenue. Amazon does the same thing for it’s
third-party sellers; only the fees and commission make it to Amazon’s top line
revenue number for seller sales.

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vernie
LOL so just forget any changes to inventory commingling and counterfeit
merchandise.

~~~
mruts
Why would you think that your comment is relevant to their sales going up 20%?
Maybe they would have gone up more if they didn't have a counterfeiting
problem, or maybe they would have gone up less, I dunno.

But fundamentally sales going up has nothing to do with counterfeit goods.

