Amazon reports Q2 profit and revenue surge as Covid-19-induced uptick in online sales continues

Amazon sees profit and revenue surge in the wake of the coronavirus, but growth of its cloud business slows as IT buyers re-prioritise investments because of pandemic

The Covid-19 coronavirus pandemic has contributed to Amazon posting better-than-expected second-quarter results, with revenue up 40% to $88.9bn.

The online retail giant also posted a profit of $5.8bn, up markedly from the $3.1bn it posted during the same quarter in 2019, with its numbers, overall, coming in way above analyst expectations.

Amazon CEO Jeff Bezos described Q2 as a “highly unusual quarter” for the firm, given that this time of year is usually, by the firm’s own admission, a relatively “low-volume” period for its retail business.

As previously reported by Computer Weekly, the company’s first-quarter results saw it publicly commit to reinvesting $4bn of its projected Q2 profit into readying its business on several fronts to respond to the surge in demand for online shopping caused by the pandemic.

Bezos confirmed in a statement that Amazon had made good on this promise, and the company has also stated elsewhere in its results that it intends to follow up this investment with a further $2bn to cover the ongoing costs of protecting its staff from the virus.

“As expected, we spent over $4bn on incremental Covid-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand – purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank-you bonus of over $500m to front-line employees and delivery partners,” said Bezos.

Amazon has also embarked on “unseasonal” temporary staff hiring sprees in certain countries to ensure it has the staff on hand to cope with the uptick in demand it has seen for online orders since the onset of the pandemic.

On this point, Bezos said the company had created more than 175,000 new jobs since March 2020, with 125,000 of these currently becoming full-time, permanent employees.

Looking ahead, the company’s investment priorities will be focused on increasing the capacity of its fulfilment centres as it enters the traditionally busier second half of the year, with Bezos making the point that, even against the backdrop of Covid-19, it has continued to reinvest in its business.

“Even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9bn in capital projects, including fulfilment, transportation, and AWS [Amazon Web Services],” he said.

On the AWS side, the company’s chief financial officer, Brian Olsavsky, said customer usage of its cloud computing services remains strong, with that segment of its business bringing in $10.8bn revenue in Q2.

This represents a 29% year-on-year rise in revenue, up from $8.3bn in the same quarter last year, but it also marks something of a dip from the 30%-plus revenue growth figures it posted in previous quarters.

Even so, AWS is a confirmed $43bn annualised run rate business on the strength of its Q2 performance, said Olsavsky, but some of the customer sectors it serves have been hit harder by Covid-19 than others, which is reflected in its numbers.

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“What we see are companies working really hard right now to cut expenses, especially in the more challenged businesses like hospitality and travel, but pretty much across the board,” said Olsavsky.

“We’re helping them. We’re actively, with our sales force, looking for ways that we can help them save money. This includes things like scaling down the usage where it makes sense or benchmarking their workloads against our architectural best practices.

“That’s not going to help our usage growth in the short run, but it will help those customers save money. We think that’s the right thing to do, not only for their success and so they can come out of this at a better shape, but also for the long-term health of our relationship with them as an AWS [customer].”

At the same time, however, there are other customers on the company’s books that have responded to the Covid-19 crisis by accelerating their cloud migration plans in pursuit of longer-term cost efficiencies, said Olsavsky.

“They realise their on-premise infrastructure is not really flexible to go up or down. And especially in a time of sinking demand, it’s a big fixed cost for them and we’re seeing migration plans accelerate,” he added.

“They’re certainly not going to happen overnight, but we see companies moving more in that direction. We think that will be a good long-term trend.”

Olsavsky added: “If you’re in an industry that’s been heavily impacted by Covid in the economy, you’re looking for ways to save money, and we’re trying to help in that regard. And one of the best ways to save money long-term is to use the cloud.”

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