Amazon shares rallied 8% on Friday, a day after the company reported blowout second-quarter earnings and issued upbeat guidance.
The e-retailer easily beat on the top line, reporting earnings of 65 cents per share versus a Refinitiv consensus estimate of 35 cents a share. Amazon notched its biggest profit beat since 2020, boosted by CEO Andy Jassy's aggressive cost-cutting efforts.
Revenue surged 11% year over year to $134.4 billion, better than the single-digit revenue expansion it had been mired in recently. Analysts had been expecting revenue of $131.5 billion. For the third quarter, Amazon said it expects sales of between $138 billion and $143 billion, topping consensus estimates of $138.25 billion, according to Refinitiv.
Wall Street cheered the results, lauding the strong results for Amazon Web Services and improving retail margins.
"Amazon fired on all cylinders: AWS finally stabilizing and now a coiled spring; Retail performance hanging in with weakened consumer; N. American retail margins are back to pre-pandemic levels and accelerating alongside compressing fulfillment windows — impressive; and aggregate operating profits are up and to the right," said Bernstein analysts, who maintain an outperform rating on Amazon's stock, in a Friday research note. "Was this a sneak peek of a Jassy-led growth era? Or was 2Q23 a peak unlikely to repeat? We'll take the former thank you very much."
Analysts were also encouraged by Amazon executives' commentary about growing efficiencies in its retail business. The company has taken steps to trim expenses in its fulfillment network by shifting to a regional model instead of a national "hub-and-spoke" strategy. Amazon says that has sped up deliveries, while also saving costs.
Morgan Stanley analysts characterized the shift as the "next retail flywheel" for Amazon. The firm has an overweight rating on Amazon's shares.
"The fact that Amazon now sees faster speed equal lower cost when they have the right underlying infrastructure (same day facilities are more streamlined with greater efficiency from pick and pack to loading dock)," the analysts wrote, noting that Amazon's plan to expand that business "is one of the most important points this quarter."
"This is because one-day/same-day has historically led to higher conversion and consumer spend growth (due to faster ship times) which, when combined with better unit economics, may mean AMZN is entering a period of faster sustained N. America retail growth and improving profitability (even through investment)," the Morgan Stanley analysts said.
— CNBC's Michael Bloom contributed to this report.
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