Amazon earns record second-quarter profit on cloud computing, advertising

Amazon.com Inc. reported better-than-expected earnings in the second quarter and forecast more of the same in the current period, igniting investor optimism about cloud computing, advertising and other businesses that are more profitable than its main online retail operation.

The world’s largest e-commerce company said third-quarter operating income will surge to as much as $2.4 billion, compared with the average analyst estimate of $1.28 billion, according to data compiled by Bloomberg. Second-quarter profit came in at a record $2.53 billion, or $5.07 per share, more than double analysts’ forecasts. The shares rose 4.1 percent in extended trading.

While revenue missed Wall Street expectations, the earnings show Amazon is managing to keep a lid on expenses while investing heavily in new devices and businesses like selling groceries and prescription drugs. Chief Financial Officer Brian Olsavsky said 2017 investments in warehouse and data-center efficiency are lifting profit this year. The company also slowed hiring and is filling positions on growing teams through internal transfers, he said.

RJ Hottovy, an equity analyst at Morningstar Inc., said Amazon profit also got a boost from more sales by independent merchants on its site, where the company gets commissions without the cost of buying inventory.

“We’re seeing a lot more third-party transactions, which is why the revenue missed but the profits are so good,” he said. “The big number is operating income in the second quarter coming in so far ahead.”

Amazon projected third-quarter sales of $54 billion to $57.5 billion, while analysts were looking for $58 billion. Second-quarter revenue was $52.9 billion, slightly missing analysts’ expectations, too.