Amazon’s healthy Q2 sales can’t offset big earnings drop

Amazon’s Prime Day may have boosted the company’s second quarter sales, but the event wasn’t enough to keep its earnings on track.



The online giant’s net income for the second quarter, ended June 30, was $197 million, or $0.40 per diluted share, compared with net income of $857 million, or $1.78 per diluted share, in second quarter 2016. Earnings also drastically missed analyst expectations of $1.42 per share, according to consensus estimates from Thomson Reuters.



Net sales climbed 25% to $38.0 billion, compared with $30.4 billion in the second quarter of 2016. Excluding the $502 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 26% compared with second quarter 2016.



Common shares outstanding plus shares underlying stock-based awards totaled 502 million on June 30, 2017. This is compared with 495 million one year ago.



A number of strategic deals kept the online giant busy throughout the quarter. In addition to announcing it will purchase Whole Foods Market for $13.7 billion in June, Amazon also purchased souq.com, one of the largest e-commerce players in the Middle East.



Amazon kept up the momentum in July, hosting its third annual Prime Day shopping event. Amazon is calling the sale — which ran from July 10 through the wee hours of July 12 — as its “biggest global shopping event ever.”



Specifically, Prime Day added more new Prime members joining Prime than any single day in Amazon history. It also was the biggest sales event ever for Amazon devices worldwide, including record sales for Echo, Fire tablets, and Kindle devices, according to Amazon.



Earlier this month, Amazon also announced a partnership with Sears Holdings. Through the deal, Amazon will sell the department store retailer’s prized Kenmore-branded appliances online. Further, Sears will sync its full line of Kenmore Smart appliances with Amazon's Alexa. The integration means that customers will able to control the appliances with a voice command.



On Wednesday, Amazon launched Prime Now in Singapore. The debut marks the ninth country to offer the same-day delivery service.



“Our teams remain heads-down and focused on customers,” said Jeff Bezos, Amazon founder and CEO.



“In the last few months, we launched Echo Show (our newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, and launched four new Fire tablets,” he added. “We expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service, and held our third annual Prime Day — signing up more Prime members than ever before. It’s energizing to invent on behalf of customers, and we continue to see many high-quality opportunities to invest.”



Looking ahead to its third fiscal quarter, the company expects its net sales to be between $39.25 billion and $41.75 billion, or to grow between 20% and 28% compared with third quarter 2016. This guidance anticipates an unfavorable impact of approximately $125 million or 40 basis points from foreign exchange rates.