Amazon shares jump on surprise 2Q profit

Amazon’s unexpected second-quarter profit has pushed its stock upward, overtaking Wal-Mart Stores Inc.in market value, according to Reuters.

Amazon also forecast third-quarter revenue above estimates.

A strong demand in electronics and general merchandise helped fuel sales in North America, which posted a 25.5 percent increase to $13.8 billion. Amazon’s revenue increased 19.95 percent to $23.19billion as compared to last year second quarter.

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.

Turnover also grew more than expected, up 19.3 % to 23.18 billion dollars (21 billion euro). Analysts had predicted a loss of 14 cents on $22.39 billion in revenue.

But Wall Street is valuing shares of Amazon on a bet that its growth will continue to surge ahead as shoppers become increasingly comfortable buying online. He argued that AWS is actually performing even better than the figures indicate; he noted that in the last year, usage has outgrown sales, and it was the company’s price cuts which obscured this fact.

Amazon shares are now gaining 16.64% in after hours trading after closing the day’s regular trading session at $482.18, down $6.09 or 1.25%. Operating expenses rose 17% in the quarter year over year. If the stock maintains this level on Friday, Amazon s market value would well exceed Wal-Mart s $233.52 billion.

Meanwhile, Amazon is investing in its Prime membership program.

“That, coupled with the continued strong growth in both revenue and margins at AWS, moves us from cautious to optimistic on the next year of growth for Amazon”.

The Amazon spike startled analysts, who were forecasting yet another quarterly loss. Last week, the company ran a one-day sale for Prime subscribers, and chief executive Jeff Bezos said more new members tried Prime worldwide “than any single day in Amazon history”.

“We’ve had competition for 20 years now from some of the biggest names in retail and other areas”, Mr. Olsavsky said. On the company’s conference call, CFO Brian Olsavsky said AWS is now in 11 regions and will soon come to India, where the company has ramped up its investment.