Last Thursday, Amazon [NASDAQ: AMZN] reported net sales of $56.6 billion, a 29 percent increase year-over-year, in the third quarter for the period ended September 30, 2018. For the same period last year, Amazon reported $43.7 billion. The company reported net income of $2.9 billion for the third quarter, or $5.75 per diluted share, compared to $256 million, or $0.52 per diluted share, for the third quarter of 2017.  

“Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries,” said Jeff Bezos, Amazon founder and CEO, in an October 25 news release. “And we’re not slowing down – Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100. These organizations are choosing Amazon Business because it increases transparency into business spending and streamlines purchasing, with increased control. The team is doing a fantastic job building and innovating for customers.”

Other financial highlights for the quarter include:

• Operating cash flow was $26.6 billion for the previous 12 months, a 57 percent increase.
• Free cash flow was $15.4 billion, compared to $8.0 billion in Q3 2017.
• Operating income was $3.7 billion, compared to $347 million in Q3 2017.
• Total operating expenses were $52.9 billion, compared to $43.4 billion in Q3 2017.

Operational highlights for the third quarter include:

• Amazon announced that it would raise the minimum wage to $15 per hour, effective November 1.
• Amazon launched new Echo devices, companion devices, the Fire HD 8 tablet and the new Kindle Paperwhite.
• Amazon announced its Fire TV Recast, a DVR that allows users to watch and record live TV at home or on their mobile devices without monthly fees.
• Amazon and Ring partnered to offer a new, indoor-outdoor Stick Up Cam.
• There are now 20,000 Alexa-compatible smart home devices from 3,500 brands.
• Amazon introduced new Alexa experiences for the car including integration with Audis.
• Prime Video and Comcast have partnered to launch Prime Video on Comcast’s Xfinity X1 DVR.
• NFL broadcast on Amazon Prime Video for a second season, reaching more than 8 million viewers worldwide during the first four games.
• Amazon Prime Video debuted Tom Clancy’s Jack Ryan and The Romanoffs, and it released season 3 of The Man in the High Castle.
• Amazon launched Prime Book Box to Prime members in the U.S. The service is a curated children’s book subscription service.
• Amazon launched Whole Foods grocery delivery via Prime Now. It is now available in more than 60 cities across the U.S., including Albuquerque, Birmingham, Boise, Charleston and Colorado Springs. Grocery pick-up through Prime Now is also available in 10 U.S. cities.
• Amazon Go expanded into five new locations in Seattle, Chicago and San Francisco, giving consumers a checkout-free shopping experience.
• Amazon and American Express joined forces to launch the Amazon Business American Express card.
• Amazon helped support communities affected by Hurricanes Florence and Michael by deploying more than 30 trucks donating over 600,000 disaster relief items including bottled water and supplies for children. Also, via Wish Lists, Alexa and Amazon Pay, Amazon customers donated money and disaster relief items.
• Amazon Web Services (AWS) received new customer commitments from Door Dash, Hubspot, Yelp and Samsung Heavy Industries.
• Amazon acquired PillPack, an online pharmacy with pre-sorted prescription medications delivered to customers’ homes, for $1 billion.
• The same day financials were released, Amazon also announced that AWS plan to open an infrastructure region in South Africa in 2020.
• Amazon Business will launch new business Prime benefits in the U.S., Germany and Japan.

Amazon offered the following guidance for the fourth quarter of 2018, which will include the 2018 shopping season.

• Net sales between $66.5 billion and $72.5 billion, growth of 10 percent to 20 percent
• Operating income between $2.1 billion and $3.6 billion, compared to $2.1 billion the fourth quarter of 2017

After the initial release of financials on October 25, Amazon stock went from $1,664.20 on October 24 to $1,782.17 on October 25 but dropped to $1,642.81 on October 26. According to Business Insider, while the earnings report was $2 more per share than anticipated, revenue was lower than forecast and investors were not impressed with the fourth quarter forecast.

Insider Take:

Amazon delivered another solid quarter with earnings being quite a bit higher than forecast. However, the stock market is fickle and was not significantly impressed, driving stock down between Thursday and Friday. That said, Amazon continues to expand its services, launch new products and add improvements to existing products and services all the time. This stock dip is merely a blip on the Amazon radar. While fourth quarter estimates may not yet impress investors, with the holiday shopping season coming up, Amazon could surprise Wall Street with solid sales and earnings exceeding expectations.