Amazon jumps on revenue for Q3 | Online marketplaces responsible for ￡280 billion business turnover in UK
Amazon jumps on revenue?for Q3?
Amazon?shares climbed more than 13% in extended trading on Thursday after the company?reported ?better-than-expected second-quarter revenue and gave an optimistic outlook.
Here’s how the company did:
Here’s how other key Amazon segments did during the quarter:
Revenue growth of 7% in the second quarter topped estimates, bucking the trend among its Big Tech peers, which all reported disappointing results prior Thursday. Apple, along with Amazon, beat expectations.
Amazon said it expects to post third-quarter revenue between $125 billion and $130 billion, representing growth of 13% to 17%. Analysts were expecting sales of $126.4 billion, according to Refinitiv.
Amazon has been contending with higher costs, as pandemic-driven expansion left the company with too many workers and too much warehouse capacity.
“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” CEO Andy Jassy said in a statement.
Amazon shaved its headcount by 99,000 people to 1.52 million employees as of the end of the second quarter after almost doubling in size during the pandemic.
Technology companies?have been announcing layoffs , hiring freezes and rescinding job offers in the midst of economic uncertainty. On a call with reporters, CFO Brian Olsavsky said Amazon will continue to hire engineers for units like Amazon Web Services and advertising, but will be cautious about hiring in other areas.
“I think it’s right for people to step back and question their hiring plans,” Olsavsky said. “We’re doing that as well. I don’t think you’ll see us hiring at the same pace we did over the last year, or the last few years.”
Amazon?recorded ?a $3.9 billion loss on its Rivian investment after shares of the electric vehicle maker plunged 49% in the second quarter. That brings its total loss on the investment this year to $11.5 billion.
Because of the?Rivian?writedown,?Amazon?had an overall loss of $2 billion in the quarter. Analysts’ EPS estimates varied dramatically, making it difficult to compare actual results to a consensus number.
Amazon’s core e-commerce business continues to suffer as online sales are no longer flourishing like they were at the height of the Covid-19 shutdown. The company’s online stores segment declined 4% year over year. Physical store sales continued to rebound from the year-ago period, growing 12%.
Amazon’s ad business is a bright spot in an otherwise gloomy quarter for online advertising, and shows the company is picking up share in one of its fastest-growing businesses.
Ad revenue climbed 18% in the period.?Facebook , meanwhile, recorded its first ever drop in revenue and forecast another decline for the third quarter. At?Alphabet , advertising growth slowed to 12%, and YouTube showed a dramatic deceleration to 4.8% from 84% a year earlier.
Among the other top tech companies,?Microsoft ?also reported disappointing results this week.?Apple ?beat on the top and bottom lines , lifting the stock in after-hours trading.
Amazon’s cloud segment continues to hum along. Sales at Amazon Web Services?jumped ?33% from a year earlier to $19.74 billion, above the $19.56 billion projected by Wall Street.
Operating income, which excludes the investment-related loss, shrank to $3.3 billion from $7.7 billion a year earlier. AWS generated operating income of $5.7 billion, accounting for all of?Amazon’s profit plus some in the period.
The upbeat results could also help improve the mood around Jassy, who replaced?Jeff Bezos ?as CEO a little over a year ago. Jassy’s?first year on the job ?has been marred by challenges, including an ongoing labor battle, the market downturn, growing regulatory pressure and an exodus of top talent.
He’s also under pressure to show he can return Amazon’s core retail business to the growth investors have become accustomed to seeing, a difficult task given the macro pressures the company faces, such as soaring inflation and slowing consumer discretionary spending.
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Tambo's View: Amazon has presented strong revenue this quarter. And, even though revenue growth was in the single digits for the second quarter in a row, we can confidently say that the tech giant?is accelerating again. Namely, both Amazon’s physical stores and its third-party sellers’ revenues expanded by 13% which is highly positive. What's more,?AWS and Amazon’s advertising services?gained an impressive?33% and 21% respectively.?
Online marketplaces responsible for ￡280 billion business turnover in UK?
Almost 900,000 UK businesses are currently selling on online marketplaces, generating an estimated ￡282 billion worth of sales every year, according to a new report from?digital payment firm ?Shieldpay.
The research reveals?that companies selling on marketplaces reported stronger business performance, with annual revenue growth in 2021 amounting to 9.4% for businesses selling on marketplaces, compared to 7.4% for those who have not used them.
However, despite the significant turnover from online marketplace sales, these figures still represent only 6% of the UK’s annual business turnover.
As such, there is significant scope for growth in this area, as more and more businesses begin to capitalise on the value of a ready-made, secure environment for e-commerce.
When asked about the drawbacks of using marketplaces, 27% of businesses noted that they saw none whatsoever, and that nothing would prevent them from using marketplaces, again suggesting few barriers to growth.
In addition, SMEs are currently less likely to use marketplaces than larger businesses. According to the ONS, just 3% of micro-businesses cited selling through marketplaces in 2019.
This is despite the benefits that additional services that marketplaces can offer small businesses, including logistics support and data analytics from large marketplaces such as Amazon or eBay.
“A marketplace is more than just a business in and of itself, it is a distribution channel to empower other businesses to reach new markets and a transformational tool to unlock new value for the end consumer through greater choice and more competitive pricing",?Shieldpay revenue director Claire Van ze Zant said.
“Our research not only shows that marketplaces make a notable contribution to the UK economy, but that businesses are not yet fully capitalising on the significant benefits they can bring. The value of marketplace commerce can often be overlooked, especially by SMEs, but the robust infrastructure, convenience and security that they provide should encourage more businesses to move online and make the most of these advantages.”
Tambo’s View: The ￡280bn turnover that online marketplaces contributed to the UK economy is a sizeable figure.?At 6%?it remains?a small contributor?to?the economy, however,?it is?clear that this small?share is only set to increase further in the coming years due to the low barriers to entry and growth as well as the lower risk and safer environment to do business. For these reasons we expect more and more SMEs to join online marketplaces?in the coming years.
Amazon is slowly turning Alexa into a totally automated virtual assistant
Amazon is making a bunch of changes to the Alexa user experience, all with the same idea in mind: making the virtual assistant easier to use. The most notable is a change in how Alexa handles Routines, which developers can now create and recommend to users instead of requiring you to manually build your own automations. Alexa’s also starting to coexist with other manufacturers’ assistants, and Amazon is working to make sure that the most important commands — like “Stop!” — work no matter what wake word you’re using.
Amazon made these announcements during its Alexa Live developer event, in which the company announced a slew of other new Alexa features mostly geared toward developers. They can add shopping to skills, more easily support?Matter ?and other smart home systems, plug into a simpler setup flow, and understand more about their surroundings.
But Amazon knows that none of Alexa’s flashy new features matter much if you can’t find them or figure out how to use them. And rather than build new UIs or clever voice menus, the Alexa team is increasingly leaning into just making the system do the work for you. “We want to make automation and proactivity available to everybody that interacts with Alexa and the devices that are connected to Alexa because it’s just so delightful,” says Aaron Rubenson, a VP on the Alexa team.
The change to Routines is the most obvious example among the new announcements. Users can still configure their own routines — “when I say I’m leaving, make sure the stove is off and turn off all the lights,” that sort of thing — but now developers can build routines into their skills and offer them to users based on their activity. “So as one example,” Rubenson says, “Jaguar Land Rover is using the Alexa Routines Kit to make a routine they call ‘Goodnight,’ which will make sure the car is locked, remind customers about the charge level or fuel level, and then also turn on Guardian mode.” It’s the sort of thing a lot of people might enjoy but few will do the work to create for themselves, but now they’ll just have to turn it on.
Rubenson says that people who use Routines are some of the stickiest and most consistent Alexa users and that he wants those people to continue to have the knobs they need to build their weirdest and wildest automations. “But we also recognize that not everybody will take that step,” he says. As Alexa continues to?struggle to keep users engaged , adding some proactivity to routines could make them more useful to more people.
Voice assistants have always presented a tricky UI problem since they don’t offer a series of buttons or icons and instead are just a blank slate you can talk to or shout at. Over time, the Alexa team has chipped away at that friction by essentially trying to make it impossible to say the wrong thing. That’s part of the thinking behind its multi-assistant support, which lets developers put their own virtual helper next to Alexa inside the device. (Amazon’s newest partner is Skullcandy, so you can talk to your headphones either by saying “Alexa” or “Hey Skullcandy.”)
Along the same lines, Amazon’s also working on a feature called Universal Commands that makes it so an Alexa-running device can do certain critical things no matter which wake word you used. For instance: You could say “Hey Skullcandy, set a timer for 10 minutes,” and Skullcandy’s assistant can’t do that, but Alexa can, so Alexa could handle it automatically. Rubenson named timers and call rejection as similarly important things that any Alexa-enabled device should be able to handle even if you haven’t been interacting with Alexa. That feature, Rubenson says, is rolling out over the next year.
Developers will have to implement and make use of these features in order for them to catch on, of course. Amazon is trying hard to incentivize them to do so: it’s changing its revenue sharing agreement so that developers keep 80 percent of their revenue instead of 70 percent and is launching the Skill Developer Accelerator Program, which Rubsenson says “will reward developers for taking the actions that we know lead to creation of a high-quality and engaging skill based on all the history we have.” Which is code for: Amazon is paying developers to make better skills.
If Amazon can make this all work, though, it will have taken a step toward solving one of the big problems with voice assistants: it’s hard to figure out what they can do, so most users default to music and lights and timers, which means there’s no reason for developers to invest in the platform, which means there’s?nothing for users to do . By simultaneously making the platform more powerful and by making the platform do more of the work on users’ behalf, Amazon can get that flywheel going in the other direction. And you don’t even have to help.
Tambo’s View: This is part of a broader effort by the company to counteract slower growth in the smart speaker market?over the past couple of years.?Although Amazon?still leads the market, it is?hoping that greater ease-of-use and automation of smart home technologies will open the doors to a larger audience.
That's all for this week.?For more news on Amazon and updates about Tambo?visit our?blog.