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Amazon Tops Earning Expectations, Hints at What's Next for Whole Foods, Video

By Published on .

Much curiosity preceded Amazon's third-quarter results, and the Seattle-based ecommerce giant did not disappoint when it reported earnings that topped analyst expectations on Thursday.

For the period, net sales were up 34 percent to $43.7 billion, compared with the year-earlier period—that includes $1.3 billion from Whole Foods Market, acquired in late August. Net income, at $256 million, was up 1.5 percent from $252 million last year. One of the company's fastest-growing divisions is Amazon Web Services cloud computing offering, where sales skyrocketed 42 percent to $4.6 billion.

Below, some other key takeaways from the company that's constantly turning retail on its head.

The synergistic value of Whole Foods
Amazon is already working on more integrations with the grocer and its own Prime Now and Amazon Fresh products. Whole Foods items now sell on Amazon, and Amazon lockers exist in certain Whole Foods locations. The company also plans to increase beyond Whole Foods' current 465-store footprint and add more Amazon-branded bookstores—there are currently 12 and three additional shops are planned in California, Washington DC, and Austin.

"There will be a lot of integration, a lot of touchpoints, a lot of working together as we go forward," said Brian Olsavsky, chief financial officer, on a call with analysts. "We're experimenting with a lot of formats and Whole Foods really gives us a vast headstart on that."

More spending on marketing
Amazon's marketing spend for the quarter was up nearly 50 percent to $2.5 billion as the company splurged on promotions of Whole Foods and new devices. Not all analysts were enthused. "For all Amazon's undoubted success, there are a few chinks in the behemoth's armor," wrote Neil Saunders, managing director of GlobalData Retail, in a research note, calling out the "dramatic growth of marketing costs" as taking a toll on the bottom line.

'Very pleased' with ad business
Revenue from "other" businesses, including advertising services, increased 58 percent to $1.1 billion in the quarter. Dave Fildes, director of investor relations, said on the call that the company is "very pleased" with the advertising business. "Our goal is to be helpful to consumers and help them make better shopping and selection choices." In recent weeks, Amazon has been rolling out enhanced offerings for advertisers such as wide-screen videos and multimedia displays, an offering that costs $500,000 a year per brand, marketers told Ad Age.

More experimentation with delivery
After announcing Amazon Key, a service where packages are left inside the home with a special lock, earlier this week, the company expects to ramp up its offerings with more experimentation with options.

Video rife with opportunity
Despite the recent resignation of Amazon Studio head Roy Price following accusations of sexual harassment, the company said it is continuing to invest in video. Osavsky noted the opportunity of tracking consumer data patterns between sales and viewing. "We remain bullish on the video business," he said.

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