Again, a reminder that this year, our Prime Day sales event occurred on July 12th and 13th, and is incorporated into our third quarter guidance. For revenue, note that our guidance includes an estimated approximately 390 basis points of unfavorable impact from year-over-year change in foreign exchange rates. The estimated FX impact to operating income is not significant. And, Jason, on your second question related to the international and the profitability there reported. There’s a foreign exchange exposure there on that segment with the operating income, that’s included in there about $231 million of unfavorable impact to that segment included in that $1.7 billion loss for the quarter.
- Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.
- Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
- This compares to Q2 operating income of $3.3 billion.
- We also provided our third-quarter financial guidance as part of our earnings release.
Other cost pressures are principally on our cost and employees. If you look at our stock-based comp as a percent of revenue, it’s gone up 150 basis points quarter over quarter as we stepped up from Q1 to Q2. We see that pattern every year, but we don’t see that magnitude, and that’s where a lot of our wage inflation is for, particularly our technical employees. Here are some other stocks that you may also consider, as our model shows that these too have the right combination of elements to beat on earnings this season.Aspen Technology AZPN has an Earnings ESP of +1.40% and a Zacks Rank #2 at present.
Third-quarter guidance
So we feel good about the program and the state of the Prime members after a very rough couple years of pandemic turmoil. So on the seller fee again, we added that fee grudgingly in May to compensate for some of the inflationary pressures we’re seeing. I don’t want to give you the idea that either of those fee increases came close to covering our costs. You can see from our operating results, some what is ad hoc reporting & the meaning of ad hoc analysis of it’s internal related, but a lot of it’s external factors that they’re – we are not passing through that at a 100% to external groups. And it’s – we’ve got to work our way out of the condition we are in and we are making good progress in Q2 and expect to keep pressing on that in the second half of the year, but saw strength in the seller results in Q2, as we mentioned on the percentage mix.
- That will be opening up and effective in 2023 and beyond.
- We’ve also taken steps to slow future network capacity additions.
- In the U.S., we’ve started making customer deliveries using the Rivian electric delivery vehicles.
- But where we’ve been operating, in many of those cases, considerably shorter than the tenure that we’ve had in the U.S.
We’re happy with the results we’re seeing in the Prime program. Prime member membership and retention is still strong. And when it’s part questrade fx of FBA, it can also help as being more Prime eligible and available to ship in one, two days or whatever the Prime offer happens to be.
For the quarter, worldwide net sales of $121.2 billion exceeded the top end of our revenue guidance range and represented an increase of 10% year-over-year, excluding approximately 320 basis points of unfavorable impact from changes in foreign exchange rates. This was a larger foreign exchange headwind than the 200 basis point impact we had incorporated into our Q2 guidance. For the quarter, worldwide net sales of $121.2 billion exceeded the top end of our revenue guidance range and represented an increase of 10% year over year, excluding approximately 320 basis points of unfavorable impact from changes in foreign exchange rates.
The majority of advertising revenue is in North America. On the company’s earnings call, CFO Brian Olsavsky touted the company’s advertising business, noting that it has grown while others have begun to see slowdowns. The company has been grappling with inflationary pressures and logistics issues related to the pandemic. The data on a possible recession doesn’t look great — the economy contracted for the second straight quarter in Q2, data from the Commerce Department showed Thursday.
Amazon Earnings: What to Watch on July 28
We saw another strong quarter of innovation and customer engagement in AWS where net sales were $19.7 billion in Q2, up 33% year over year, and now represent an annualized sales run rate of nearly $79 billion. Our comments and responses to your questions reflect management’s views as of today, July 28, 2022, only and will include forward-looking statements. Additional information about factors that could potentially impact our financial results is included in today’s press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. So on the Prime fee increase earlier in the year, we’re happy with the results we’re seeing in the Prime program. I think that change has been above our expectations positively.
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On the transportation side, we’ve continued to improve delivery route density and improve package deliveries per hour. We are encouraged by the progress during the quarter and see opportunity to further improve in the second half of the year. And, Stephen, on your — just your question on stock-based comp, as you mentioned, we do utilize restricted stock units, or RSUs, as our primary mode of equity compensation. And as a result, we typically see a step-up in the SBC expense from Q1 to Q2. And we’re making good progress in Q2 and expect to keep pressing on that in the second half of the year. But we saw strength in the seller results in Q2, as we mentioned on the percentage mix.
Amazon Q1 2022 Earnings Report Recap
The first one, Brian, I wanted to talk a little bit about the bridge from 2Q to 3Q EBIT guide a little bit. It sounds like you’re going to have revenue westernfx review up nicely. You talked about the efficiencies of the $1.5 billion quarter over quarter and some of the incremental investments in content, etc.
Business
On the bridge to Q2 to Q3, so again, you have the – mentioned three items, ops improvement that we see of a $1.5 billion and offsetting that is increased costs in AWS, as we build out depreciation. We also are adding – continuing to add people in that space; product engineers, salespeople, customer support. Speaking more broadly, we know AWS is a huge opportunity to early days in the adoption curve for companies and governments. And we invest with that – with that confidence in mind and customers have responded and we’re going to keep investing there.
AMZN Earnings: All you need to know about Amazon’s Q2 2022 earnings results
About 40% of that is comprised of technology infrastructure, primarily supporting AWS as well as our worldwide stores business. Another 30% of the $60 billion was fulfillment capacity and a little less than 25% was for transportation, remaining 5% was comprised of things like corporate space and physical stores. Investors will probably be approaching the e-commerce and technology behemoth’s report feeling somewhat cautious. Last quarter, the company’s earnings missed Wall Street’s expectation, while its revenue was in line with the consensus estimate. While investors were undoubtedly not pleased with the bottom-line result, they were likely more concerned about the company’s second-quarter revenue guidance. It came in significantly lower than what analysts had been projecting.
There are two main drivers when talking about fixed cost leverage. First is the unfavorable comparison to very high holiday-level utilization rates that we saw in the first half of 2021; and second is the normal step down in volumes off of our Q4 peak that we saw in the first half of 2022. On the first point, we expect this challenging year-over-year comp will have ended in Q2.
Of course, there are some regulatory hurdles and other differences out there. So on margins in AWS, yes, as you mentioned, it is dropping sequentially. The margin rate is going to fluctuate in this business. So there’s always a pre-spend to keep the — again, the pipeline moving. But again, we have move things out and capital is coming down in those areas, as we just mentioned. Using Wall Street Horizon historical data as a primary data source, independent academic studies have shown that market volatility can be anticipated by the scheduling and revisions in corporate events.
Right now, we still see strong advertising growth. Again, it’s got be a positive both for the customer and for the brand. I think our advantage is that we have highly efficient advertising. People are advertising at the point where customers have their credit cards out and are ready to make a purchase. And when people are looking, companies are looking to potentially streamline or optimize their advertising spend, we think our products compete very well in that regard. In addition to maybe longer term things like brand building and brings new selection to bear in front of customers.
We’ve invested a lot in tools and capabilities, and of course, the delivery capabilities and all the things that go along with that. But that’s an opportunity for us to support merchants who may or may not be FBA sellers with the tools and the opportunity just to sell their products online and scale their business and build their brand. And so I think I’m really excited about, of course, getting to be able to launch this program over the last few months and dialing it up for more sellers as the year progresses.
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