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Amazon growth slows in Q2

These are the first quarterly results to be published under the helm of new CEO Andy Jassy, who took over from Jeff Bezos, who transitioned to the role of executive chair

While sales in Amazon’s second quarter soared by 27% to $113bn (£81bn) against 2020, growth slowed down from a 44% climb in the first quarter, as Wall Street had forecast sales of $115bn (£83bn).

The deceleration is expected to continue, according to Amazon, as it guided for a 10% to 16% sales rise in the third quarter to $106bn (£76bn) to $112bn (£80bn), with operating income down to $2.5 (£2bn) to $6bn (£4.3bn), down from $6.2bn (£4.5bn) last year. This includes $1bn (£719m) of Covid-19 related costs.

Despite this, net income still rose by 48% to $7.8bn (£5.6bn) in the period ended 30 June, as the retail giant “enjoyed a boom in trading” during the pandemic as people continued to shop more online throughout lockdowns. 

These are the first quarterly results to be published under the helm of new CEO Andy Jassy, who took over from Jeff Bezos, who transitioned to the role of executive chair. 

Nicholas Hyett, analyst at Hargreaves Lansdown, said: “Amazon is increasingly bumping up against the law of large numbers – particularly in US retail. When you’re only selling US$1,000 of product a year, boosting sales by 40% is easy. 

“When your annualised sales reach US$400bn, finding an extra US$160bn of sales is pretty difficult. It means Amazon’s having to spend big to deliver future growth, and capital expenditure is soaring, moving the group to a free cash outflow for the first time in a while.”

He added: “To be fair to Amazon there are considerable Coronavirus related costs weighing on performance at the moment. And growth in service revenues, up 37% this quarter, have the potential to move profits faster than they move revenues – particularly marketing which we suspect is incredibly high margin. The group’s got plenty of irons in the fire for the future, it just needs to hope one of them comes off big.”

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