Amazon (AMZN) shares surged in post-market trading after the Club holding reported late Thursday a better-than-expected second quarter and delivered on exactly what investors wanted to see. Wall Street was happy to see stabilizing growth at the company’s cloud unit Amazon Web Services and an uptick in operating margins. Management’s upbeat third-quarter sales outlook suggests more gains could be ahead. Revenue for the three months ended June 30 increased 11% year-over-year to $134.39 billion, beating expectations for $131.5 billion, according to estimates compiled by Refinitiv. Earnings-per-share on the basis of generally accepted accounting principles, or GAAP, increased to 65 cents, compared with a loss of 20 cents per share last year. Operating income increased 130% to $7.68 billion, significantly exceeding forecasts of $4.78 billion, according to FactSet, and above the high-end of management’s guidance. AMZN 5Y mountain Amazon 5-year performance Notably, the EPS figure included a pre-tax valuation gain of about $200 million related to Amazon’s investment in Rivian Automotive (RIVN), while the figure from the same period a year prior included a loss of $3.9 billion. Due to its significant stake in the electric-vehicle maker, Amazon is required to record changes in Rivian’s fortunes as non-operating income when there are gains, or as an expense when there are declines. Given that analysts don’t include Rivian’s swings in their estimates, the consensus forecast for EPS of 35 cents does not offer an accurate comparison. As a result, the operating income estimate is a more telling metric on how Amazon fared relative to Wall Street’s expectations — and make no mistake, it was strong. Bottom line Shares of Amazon soared roughly 9% in after-hours trading Thursday to more than $140 apiece. The cloud and e-commerce giant checked off what it needed to do in the second quarter in order to exceed the high bar that comes with the stock up 53% year to date and moving ever closer to its 52-week high of $146.57 last August. Amazon Web Services, the cloud computing unit that doubles as the profit engine of the company, has finally started to stabilize after several quarters of slowing growth. Some may be quick to call a bottom, but we, at least, are relieved that the business has made a stand in the low double digits before falling back to the high single digits. And it comes right before what should be tailwinds related to monetizing generative AI, which is still very early. As for retail, Amazon delivered on its pledge to get its house in order and become more efficient, which is something we pleaded with management to do all last year as we shockingly witnessed it lose money in North America. There’s still work to be done to get the business back to operating at its pre-Covid margins, but management thinks it can get there in time. With Amazon turning a corner on profitability and AWS revenue growth stable, we think the stock still has more room to…
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