As one of the largest online retail marketplaces in the world, Amazon had what founder and CEO Jeff Bezos called a “highly unusual quarter” because of the coronavirus pandemic. In Amazon’s second quarter financials released yesterday, the online retailer reported net sales of $88.9 billion, a 40% increase compared to net sales of $63.4 billion for the same period last year. For the period ended June 30, Amazon had net income of $5.2 billion, or $10.30 per diluted share, compared to $2.6 billion, or $5.22 per diluted share, for the second quarter of 2019.
Bezos shared highlights in his comments in a news release.
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe. As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners,” said Bezos.
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“We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, fulltime positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS,” Bezos added.
Other financial highlights include operating cash flow of $51.2 billion, a 42% increase, and free cash flow was $31.9 billion. Operating income for the quarter was $5.8 billion, compared to $3.1 billion for the same period last year.
During the second quarter, Amazon invested in some of the communities it serves. Highlights include:
- Amazon donated more than $10 million in personal protective equipment, including 4.4 million masks and thousands of contactless thermometers, to Direct Relief and Feeding America.
- Amazon Business delivered more than 200 million essential health and safety products to healthcare and government organizations in tens of thousands of U.S. locations.
- Amazon partnered with food banks and schools to deliver more than 6 million meals in 25 U.S. cities and communities in Australia, Japan, Singapore, Spain and the U.S. It will deliver another 1 million by the end of the summer.
- Amazon partnered with Boys & Girls Clubs of America to create Camp Prime, a free summer camp designed to keep kids engaged.
- Amazon will donate $10 million to 12 organizations who are working on social justice and trying to improve the lives of Black and African Americans. Amazon matched 100% of $8.5 million in donations by Amazon employees, bringing total donations to $27 million.
- Amazon launched The Climate Pledge Fund with an initial $2 billion investment to help support companies whose products and service innovation will help us transition to a zero carbon economy. In related news, the company secured the naming rights to the new WNBA and NHL arena in Seattle, calling it Climate Pledge Arena.
- Amazon intends to run on 100% renewable energy by 2025, five years earlier than originally planned.
Shopping and entertainment highlights
With millions of Americans at home during the COVID-19 pandemic, Amazon was among the retailers that provided grocery delivery services. During the second quarter, the company increased grocery delivery capacity by 160% and it tripled the number of grocery pickup locations. Online grocery sales tripled compared to the second quarter of 2019.
In terms of entertainment, Prime Video launched Watch Parties to allow Prime members to watch the same program simultaneously and chat on desktop computers. They also introduced Prime Video Profiles, so customers could create up to six profiles within one account. In addition, Amazon premiered several new series including Upload and Regular Heroes, along with Homecoming, season 2, and Bosch, season 6.
Alexa and Amazon Web Services highlights
Amazon has expanded the Alexa-enabled devices and features available to customers around the world. Among the integrations are those with automotive brands including General Motors, Volkswagen, Toyota and Lexus. Amazon is always working on improvements to Alexa, and this quarter was no different. Customers can set reminds that play across all devices, ask Alexa for nutrition tips, get announcements on mobile devices and broadcast a response to an announcement.
Many customers, including the World Health Organization (WHO), have used AWS to support impacts created by COVID-19. WHO, for example, launched an app to support health workers care for their patients while staying safe. Zoom, who uses AWS to support its network, began offering free access to more than 100,000 schools to help them educate students remotely. UNC Health built a chatbot on AWS to help support increased call volumes due to the coronavirus.
Third quarter guidance
For the third quarter, Amazon provided the following guidance.
- Net sales between $87.0 billion and $93.0 billion, representing growth between 24% and 33% compared to the third quarter of 2019
- Operating income between $2.0 billion and $5.0 billion, compared to $3.2 billion Q3 2019
Due to Amazon’s huge role in supporting individuals, businesses and communities during COVID-19, these numbers should not be a surprise, but they are significant. The company spent millions to support employees, health care workers, organizations and communities, while also spending billions on climate change efforts. At the same time, the company grew net sales by 40% and its net income doubled over this time last year. As of 6:18 p.m. EDT yesterday, investors were not overly impressed. Within an hour of the release of the financial report, Amazon stock – valued at $3,051.88 per share as of 6:18 p.m. EDT yesterday – had risen less than 1%. Perhaps everyone just expected Amazon to do what it does well.