Amazon has reported a ‘mixed bag’ of financial results for the second quarter as the etailer delivered strong ad growth by also showed signs of vulnerability.
On the bright side, Amazon’s advertising business grew by 37% to $3bn over the period, bolstered by a subscriptions surge (primarily Amazon Prime) which coincidentally also stood at 37% year-on-year to reach $4.7bn.
On the other side of the equation increased spending has eroded profit margins to deliver lower than expected earnings, culminating in net income of $2.6bn – the lowest figure since the second quarter of last year. Heightened competition from Microsoft and Google in cloud computing also led to profits at Amazon Web Services falling short of expectations, slowing by 4% to 37% growth over the period.
eMarketer principal analyst Andrew Lipsman said: “Amazon has a decidedly mixed bag in Q2, with exceptional top-line revenue growth but some cause for concern on the bottom line.”
Sophie Light-Wilkinson, vice president of marketing EMEA at Bazaarvoice added: “The stagnation we’re seeing has been bubbling under the surface for some time. With such a diversified business model, Amazon has been able to lean on different parts of the business for stability. This has meant it’s been able to get by while critical challenges have arisen at the business’s very core – the marketplace. We’ve seen in recent months how consumer trust has been thrown by fake product and fake reviews scandals.
“It has impacted how consumers approached this year’s Prime Day, with major competitors benefiting from an uptick in interest. While Amazon endures for now as the final point-of-sale, it’s clear consumers now look to qualify purchases elsewhere, creating a big opportunity for retailers all over the world.”
The results mean Amazon’s ad business remains on course to exceed income from its cloud computing division by 2021.