Unlike most companies, Amazon has a stock that seems immune to worries about falling profits. The company’s approach, after all, is to invest today’s earnings into tomorrow’s revenue growth. Even so, the decline in Amazon’s earnings last quarter caught investors off guard, as it spent more heavily than expected to expand overseas, build out its video library, and beef up its cloud infrastructure.
Amazon said its net profit plummeted 77 percent in Q2 despite a stronger-than-expected rise in revenue, as growing expenses in its international operations added to losses. The decline in profit put it more than a dollar short of Wall Street’s estimates.
Revenue at the online retailer rose 24.8 percent to $37.6 billion, while net income declined to 40 cents a share from $1.87 a share a year ago. Analysts were expecting Amazon to see revenue of $37.2 billion and net income of $1.42 a share in the quarter. The company also forecast an operating income of $300 million to a loss of $400 million for the current quarter.
Amazon has been expanding into countries like India, which has been taking its toll on margins. The operating loss of its international operations rose more than fivefold to $742 million, while international revenue rose by only 17 percent. Revenue in North America, by contrast, rose by a more robust 27 percent.
In a call with analysts to discuss earnings, CFO Brian Olsavsky said some of the higher costs are coming because Amazon is quickly rolling out to international Prime members the same features that it took years to build out for North American subscribers. “The North America segment is a little bit further along in terms of the Prime membership growth curve,” he said. “So, in some cases, we’re giving the benefits a little bit earlier in the cycle for international customers.”
Amazon said a 42 percent increase in headcount in…