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Amazon 3Q numbers - surge in profits

Amazon's 3Q Numbers

In his new book, The Four, Prof. Scott Galloway says that Amazon appeals to our consumptive gut, taking in stuff we need to survive and sending it to our bodies. The notion of "more" is hardwired into us. Even when things are too much, there is still a desire for more. When it comes to consumption; throughout history the penalty for too little has been starvation and malnutrition which is a terrible death. The penalty for too much is lethargy, gluttony, diabetes but has a pretty long lag. Open your cupboards, open your closets you have ten to a hundred times more than you really need. It's really crazy when you think about how much stuff we have, but its so hardwired in our DNA! The ultimate business strategy is more for less. It has been the business strategy of China, Walmart, and now Amazon.

Here are some astonishing statistics: 44% of U.S. households have a gun and about half of U.S. households have a landline. However, about 64% of these same households have Amazon Prime and spend about $1400 per month on Amazon. This now means more households have a relationship with Amazon Prime than have a landline phone. If this trend continues, more people are going to have a pipeline of stuff to their house from Prime vis-a-vis than have cable television.

Amazon is about selection, convenience and value to the consumer.

Amazon the everything store reported better than expected third-quarter numbers on the 26th of October 2017 sending the shares surging 8% higher in the after-hours trade.

How did the company do compared to Wall Street's expectations?

- Made $43.7 Billion in Sales, up 34%, beat by $1.6 Billion
- Made $256 Million in Profit
- Earning Per Share of $0.52, beat by $0.49


The cloud business Amazon Web Services (AWS) is still a big growth area for Amazon which netted Sales of $4.6 Billion, growing 42% year-on-year which was the same rate as last quarter (Q2).

All eyes were on the $13.7 Billion acquisition of Whole Foods which was completed in August. We were ahead of the results when we wrote about the increased traffic in the the month of October here . Foot traffic to Whole Foods has increased tremendously, up 17% year-on-year following the acquisition. The biggest losers were Sprouts, Trader Joe's, Sam's Club, Target, CostCo, Kroger and Walmart in that order. Whole Foods had Sales of $1.3 Billion for the quarter and we expect these to accelerate with store optimisation as they move more into digital.

Another big winner for the company has been Prime Video, the original content streaming services competitor to Netflix. In the past three years Prime Video has gone from nothing to being the third biggest video streaming platform today. Prime Video now on the Microsoft's Xbox One!

The fourth quarter is going to be a big one for Amazon as it includes the December holidays. Amazon expects to make between $56 Billion and $60.5 Billion in Sales including Whole Foods and favourable exchange rates. That translates to 28% to 38% growth compared to last year.

The Amazon story has been the most fascinating. This is the only 800 pound gorilla we know that's still investing 100 cents to the dollar back into consumer experience. No company can compete with that kind of re-investment pace at the moment as it is a very rare occurrence in business. It truly defines Jeff Bezos ethos of "your margin is my opportunity."


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