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Amazon, which has entered its thirties, has delivered a "mediocre" quarterly report card. It is learned that on August 1, Amazon released its second quarter financial report for 2024. The financial report shows that Amazon's net sales in the second quarter of 2024 were US$148 billion, a year-on-year increase of 10%; net profit was US$13.5 billion, a significant year-on-year increase of 100%. Overall, Amazon's performance achieved steady growth in the quarter. However, in detail, the net profit growth exceeded expectations in the quarter mainly due to the continued growth of cloud computing business. This also means that behind the steady growth of performance, Amazon still has hidden worries. Facing a market environment full of uncertainties, standing at a new starting point of its 30th anniversary, how will Amazon adjust its direction to alleviate concerns and continue its growth story? The answer may be revealed by further analysis of its Q2 performance. The financial report shows that in the second quarter of 2024, Amazon's net sales were 148 billion US dollars, a year-on-year increase of 10%, slightly lower than the market expectation of 148.5 billion, and the growth rate also slowed down compared with Q1. In the first quarter of 2024, Amazon achieved net sales of 143.313 billion US dollars, a year-on-year increase of 13%. Looking further into the financial report, it shows that the main impact was the slowdown in growth of the core retail business . 👉 Registration for "Gravity · US Resource Linking Conference" is now open, click here to register now! By region, Amazon's sales from North America accounted for 61% of total sales in the second quarter, the same as the same period last year; sales from the international department accounted for 21% of total sales, down 1% from the same period last year. Although the performance in North America achieved growth, Amazon's CFO pointed out in the earnings conference that the revenue growth rate in the North American market was slightly lower than expected , mainly because consumers chose to buy cheaper products, resulting in a decrease in the average selling price (ASP) . In this regard, the industry generally believes that on the one hand, due to the pressure of the Federal Reserve's long-term high interest rates and the impact of inflation, the US economic growth rate slowed significantly in the first half of 2024; on the other hand, it is closely related to the price war launched by multiple e-commerce platforms in North America . Amazon's chief financial officer pointed out that today's consumers are more cautious when shopping, so low-priced goods are extremely popular. Some reports also show that consumers' consumption habits are changing, and 79% of consumers want to save money when shopping. Although Amazon, as the global e-commerce hegemon, has long occupied the leading position in the US e-commerce landscape, in the context of global consumption downgrade, with the unstoppable growth of emerging platforms known for their low prices, even a strong company like Amazon cannot help but be "caught" in the price vortex. Amazon's CEO also said that Amazon's online retail business is facing fierce competition from low-price retailers such as Temu and SHEIN. Perhaps in response to the "low-price mental war" launched by platforms such as Temu, Amazon launched the "Low-Price Store" at the end of June this year, aiming to reach middle- and low-income consumers who pursue cost-effectiveness by providing white-label, low-priced goods, thereby further consolidating its market share. It is worth mentioning that although Amazon's low-price store and Temu's full hosting have a certain degree of similarity, both platforms are responsible for logistics, traffic and other operational processes, and sellers are responsible for product selection, but the difference is that sellers under this model have independent pricing and inventory management rights. From this point of view, Amazon's launch of the low-price mall may not only be a low-price offensive against Temu. On the basis of the main site taking the brand cultivation route and building a brand moat, the low-price mall, a new traffic entrance, is expected to extend its tentacles to white-label products, reach a wider consumer group, and provide the market with more dimensional choices in the context of consumption downgrade. However, as of press time, Amazon has not yet publicly released relevant information on this matter, and the specific details of the project are still to be followed up. At the beginning of 2024, when Amazon announced its first-quarter 2024 performance outlook, Bloomberg News analysts said that Amazon's profits are expected to expand further in 2024, driven by AWS cloud services and 20% or more advertising revenue . In May of this year, when the first quarter 2024 financial report was released, Amazon also pointed out that the reason why the revenue and profits for the quarter were better than expected was mainly due to the growth of advertising and AWS cloud computing business. Judging from the second quarter 2024 financial report released recently, advertising and AWS cloud business are still Amazon's fastest growing business types , and are also the key factors driving its quarterly revenue and profit growth. Specifically, in terms of advertising business , Amazon's net sales of advertising services in the second quarter were US$12.771 billion, a year-on-year increase of 20%. It is understood that Amazon has launched a series of new features for advertisers (mainly Amazon sellers), such as bulk management of advertising campaigns and sponsored TV advertising services. These new features have effectively helped Amazon gain more budgets originally used for Google and Meta. In terms of AWS business , in the second quarter of 2024, the net sales of Amazon AWS cloud services were US$26.281 billion, a year-on-year increase of 19%, exceeding market expectations ; operating profit was US$9.334 billion, a year-on-year increase of 74%, continuing the growth in the first quarter of this year, and the growth rate even increased. The financial report shows that Amazon's core business AWS had net sales of US$25 billion in the first quarter, a year-on-year increase of 17%. Amazon CEO Andy Jassy said the cloud computing division's annual revenue is expected to reach $105 billion by 2024. However, it is worth mentioning that the financial report shows that Amazon's capital expenditure in the first quarter was US$14 billion and in the second quarter it was US$16 billion. Affected by this, compared with the net profit of US$10.4 billion in the first quarter, which increased by 229% year-on-year, in the second quarter of 2024, Amazon's net profit also increased significantly year-on-year to US$13.5 billion, but the growth rate declined. The earnings conference also mentioned that Amazon will continue to increase its investment in the field of AI. Amazon 's chief financial officer said that Amazon's capital investment is expected to be higher in the second half of 2024 , and most of the expenditure will be used to support AWS infrastructure, especially investment in generative artificial intelligence. It is understood that in recent years, with the release of generative AI dividends, the e-commerce industry has become the most active application field. At present, many overseas companies have used generative AI to achieve efficient, refined and digital operations to build competitive barriers. According to Statista data, the global artificial intelligence market size is expected to reach US$184 billion by the end of 2024 and exceed US$826 billion by 2030. As early as last year, AWS CEO said that AI will be the next wave of innovation in the cloud. In July this year, according to foreign media reports, Amazon also plans to invest more than $100 billion in data center construction in the next 10 years to strengthen artificial intelligence infrastructure construction and consolidate its leading position in the field. As the saying goes: The bigger the waves, the more expensive the fish. Industry insiders believe that considering Amazon's strong cloud business foundation, betting on the AI ​​field may further improve its product ecosystem and lay the foundation for subsequent growth. At the same time, analysts also predict that Amazon's artificial intelligence projects are expected to generate tens of billions of dollars in revenue in the next few years. However, for now, Amazon's investment in AI development lags slightly behind Microsoft and others. If it wants to innovate and create a differentiated path, it will need to invest a lot of money. This also means that in the short term, Amazon will still temporarily give up profits in favor of AI spending . Therefore, looking forward to the third quarter of 2024, Amazon expects net sales to be between $154 billion and $158.5 billion , an increase of 8% to 11% year-on-year; operating profit is expected to be between $11.5 billion and $15 billion , both lower than market expectations. This guidance also caused Amazon's stock price to plummet by 7% after the market that day. Faced with a market environment full of uncertainty, even a strong company like Amazon has to increase its weight to continue to accelerate its progress while maintaining its core business growth engine.
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