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Amazon triples profits due to improved spending

Europe will now bid farewell to Amazon’s small and light program for compact, lightweight, and budget-friendly products.
Europe will now bid farewell to Amazon’s small and light program for compact, lightweight, and budget-friendly products.

Amazon has reported a staggering surge in profits for the latest quarter, nearly tripling to $9.9 billion, up from $2.9 billion the previous year, despite the challenges posed by rising interest rates and a shift back to physical stores. 

The retail giant’s revenue climbed by 13% to $143.1 billion between July and September 2023, surpassing Wall Street’s expectations.

Increased consumer spending

The company, renowned as the world’s largest retailer, has built an extensive digital empire encompassing diverse sectors, including e-commerce, smart devices, and cloud computing through Amazon Web Services (AWS). 

Andy Jassy, the CEO, credited the success to optimizing Amazon’s US fulfillment network, which was split into eight distinct regions, surpassing their optimistic projections.

While the pandemic initially boosted online shopping, Amazon faced pressure due to surging inflation rates, prompting the company to cut costs by laying off 27,000 employees. 

Despite these challenges, Amazon expects its total net sales for the current quarter to range between $160 billion and $167 billion, marking a potential 12% increase from the previous year.

Increased business support

Additionally, Amazon’s advertising revenue saw significant growth, accelerating to 26%, reaching $12 billion in the quarter. 

Sales of services provided to third-party sellers on Amazon’s platform also grew, reaching $34 billion. 

However, the costs for sellers doing business on Amazon have become a focal point in the ongoing antitrust lawsuit filed by the Federal Trade Commission. Despite challenges and a cautious outlook, Amazon’s strong sales performance underscores its resilience in the market.

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The company’s robust performance is reflected in its stock value, which surged by 3.6% in after-hours trading, and its market capitalization now exceeds $1.2 trillion. Despite earlier workforce expansions, Amazon’s employee count has decreased from its peak of 1.62 million to 1.5 million workers.

Amazon’s profits explained

While these results showcased strong performance, Amazon offered a cautious outlook for the holiday quarter, noting that sales growth might moderate in the last three months of the year, traditionally the company’s busiest period encompassing Christmas shopping and promotional events like Black Friday deals.

One area of keen investor interest was Amazon’s cloud computing business, pivotal for the company’s profits. After a period of rapid deceleration in growth, the cloud computing division showed signs of stabilization with a 12% increase in sales, reaching $23 billion, and operating profits of $7 billion.

Some real pitfalls

In recent developments, Amazon faced challenges, including forming the first union at one of its US warehouses in Staten Island, New York. 

Additionally, the Federal Trade Commission and 17 state attorneys general sued Amazon, accusing the company of inflating prices, overcharging sellers, and hindering competition. 

Amazon refuted these allegations, emphasizing potential adverse consequences for consumers, such as increased prices and delayed deliveries. 

Despite facing diverse competitive challenges from various fronts, including Walmart and TikTok Shop, Amazon continues to deliver impressive growth and maintains a robust retail media offering.

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