Amazon third-quarter earnings soar as pandemic sales triple profits

Home delivery of groceries from Whole Food Market

Amazon reported blowout third-quarter results on Thursday as a pandemic sales boost helped the company triple its profits amid a 37% increase in earnings.

The company’s revenues of $96.15bn were better than analysts expected and its net income increased to $6.3bn in the third quarter, compared with net income of $2.1bn in third quarter 2019. Its cloud-services unit, Amazon Web Services, reported net sales of $11.6bn for the quarter, up 29% year over year.

The gains came despite a decision to spend $4bn on coronavirus-related measures, including procuring personal protective equipment, enhanced cleaning of its facilities and wage increases.

The company is also expecting a bumper holiday shopping period, as Amazon gave revenue guidance in the range of $112bn to $, above analyst expectations of $112.7bn.

Amazon CFO Brian Olsavsky said during an earnings call: “In total, we have incurred more than $7.5bn in incremental COVID-related costs in the first three quarters of 2020, and we expect to incur approximately $4bn in Q4.”

Olsavsky added that the company had added 250,000 jobs in the third quarter, and 100,000 in the first month of the fourth.

Earlier this week, Amazon said it would add 100,000 seasonal jobs to its current workforce of close to 900,000 people to assist with increased demand – jobs, the company stated, would offer either a “path to a longer-term career” or “extra income and flexibility during the holiday season”.

In statement, Amazon’s founder and chief executive, Jeff Bezos, whose personal fortune is now in excess of $200bn, drew attention to the company’s jobs growth and decision to boost the minimum wage for workers.

“Two years ago, we increased Amazon’s minimum wage to $15 for all full-time, part-time, temporary and seasonal employees across the US and challenged other large employers to do the same. Best Buy and Target have stepped up, and we hope other large employers will also make the jump to $15. Now would be a great time,” Bezos said.

Bezos added that “offering jobs with industry-leading pay and great healthcare, including to entry-level and frontline employees, is even more meaningful in a time like this, and we’re proud to have created over 400,000 jobs this year alone”.

The Amazon boss said the company was seeing “more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season. Big thank you to our employees.”

Amazon’s results came as US stocks bounced back on Thursday a day after their biggest rout in four months, with the S&P 500 rising 1.2% as investors were encouraged by better-than-forecast economic data.

Technology heavyweights Apple, Facebook, Google-parent Amazon and Alphabet all rallied on Thursday ahead of earnings reports, adding a collective $230bn to their market value. Facebook jumped over 5%, with Apple and Alphabet each up nearly 5%, and Amazon adding nearly 3%. Twitter, also reporting on Thursday, surged 8%.

The rally came after two days of selling over which the six biggest tech companies (Apple, Microsoft, Amazon, Alphabet, Facebook and Tesla) lost about $270bn on fears of a global surge in coronavirus cases and enduring US political impasse over a new economic stimulus package.

Amazon lost roughly $30bn, while Microsoft, which reported weak revenue guidance on Tuesday, lost $70bn. Apple, which hit a $2tn market cap over the summer, shed $70bn in value, while Tesla dropped $13bn.

Despite this, the tech giants are still coming out as winners for the year. The six largest tech companies were worth about $5tn in January. They are now worth more than $7.1tn.

But while Amazon has benefited massively from at-home shopping during the pandemic, there have also been warnings of a tech bubble. Investor David Einhorn warned this week that technology stocks are in an “enormous” bubble.

“The question at hand is where are we in the psychology of this bubble?” the head of hedge fund Greenlight Capital wrote in a note.

“Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped. If so, investor sentiment is in the process of shifting from greed to complacency.”