Amazon says its advertising business is now worth $2.2bn

This beat out analysts’ expectations of US$2.1bn and overall, it reported its largest ever second quarter profit of US$2.5bn,

Amazon's advertising business grew by 132%, from $945m to $2.2bn, in the first quarter of 2018 according to its latest earnings report.

This beat out analysts’ expectations of $2.1bn and, overall, it reported its largest ever second quarter profit of $2.5bn for its ad business, together with its other businesses like retail, e-commerce and cloud computing.

In April, the company had announced that it had earned over $2bn from advertising services during the first quarter of 2018.

Numbers at a glance

  • Profits of $2.5bn - best ever Q2 performance
  • Third consecutive quarter of surpassing $1bn in profits
  • Sales up 37% from YOY from $38bn to $52.9bn,
  • Cloud revenue up from $4.1bn to $6.1bn YOY
  • Advertising revenue up from $945m to $2.2bn YOY
  • Subscription revenue up 57% to $3.4bn

"A big contributor to the quarter and the last few quarters obviously have been strong growth in our highest profitability businesses and also advertising," Brian Olsavsky, chief financial officer at Amazon told the media.

"We’ve seen a greater-than-expected efficiency in a lot of our spend in things like warehouses, data centres, marketing."

Emarketer’s principal analyst Andrew Lipsman noted that Amazon’s powerful commerce engine is ‘chugging along’ and is finally beginning to drop more to the bottom line. T

he market research company estimates that Amazon's global net digital ad revenue will grow 58% in 2018 to reach $3.37bn, which will give Amazon a 1.2% share of the worldwide digital ad market, up from a 0.9% share in 2017.

Meanwhile, it estimates that Amazon's mobile ad revenue will grow 122% in 2018 reaching $1.08bn, which will give Amazon a 0.6% share of the worldwide mobile ad market, up from 0.3% in 2017.

“The bigger story coming out of earnings is the significant margin expansion being driven by the acceleration in the cloud and advertising businesses," said Lipsman.

"There’s still a lot of runway for both of these higher margin businesses, and with the rest of the business continuing to fire on all cylinders, the question now is whether we’ll see Amazon hit a $1trn market cap sooner rather than later."

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