Amazon’s value surpasses Wal-Mart after surprise 2Q profit

Amazon generated operating cash flow of $8.98 billion during this quarter, and earned net income of $92 million, or $0.19 per diluted share, compared with net loss of $126 million, or $0.27 per diluted share, in second quarter 2014.

The overall changes in the financial picture were quickly assimilated by investors as Amazon’s share prices rose sharply and increased its market value by $40 billion. Amazon said the Prime Day promotion helped drive 18 percent more sales than last year’s Black Friday – typically the busiest day in retail.

So analysts couldn’t resist the question: With AWS contributing so much to Amazon’s newfound profits, will the company keep cutting prices in what the tech industry calls the “race to zero”?

Amazon, which celebrated its 20th birthday on 16 July, started life in a garage in Seattle. Analysts had predicted a loss of 14 cents on $22.39 billion in revenue.

“Growth has been fuelled in large part by Prime growth and also (item) selection growth so it’s been a huge driver both in North America and worldwide segments”, Olsavsky said in a separate call for reporters.

The firm celebrated a number of highlights over the quarter, including the opening of new global locations, continuing strong performance for its web services business, the addition of features to paid-for Prime services, more enterprise options, and the success of consumer-facing paid TV services.

The growing share of cloud computing may require investors to “rethink what Amazon’s core business actually is”, Forbes points out.

The “race to zero” is a term for the unsafe price-war game that the biggest cloud-computing companies are playing especially Amazon, Microsoft, and Google.

That led to profits of $464 million, way ahead of Wall Street estimates of $257 million. That’s a net sale of between $23.3 billion and $25.5 billion, also above analysts’ forecast. Boosted by the report, shares of the company soared 18.21% in pre-market trading on Friday to $570.00 by 09:44 GMT.

Amazon also has plans of deploying commercial drones to speed up delivery to customers.

In response to Amazon’s overtaking Wal-Mart, the bricks-and-mortar store giant introduced unlimited shipping service at $50 a year.

On top of the better-than-expected revenue growth, Amazon posted an unexpected profit during the quarter.

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