Amazon highlights its 'marketing stream' after ad revenue climbs

Amazon.com Inc. reported revenue that topped estimates and gave a strong sales forecast for the current quarter, allaying investor concerns about potential belt-tightening by inflation-rattled consumers. Shares jumped more than 12% in extended trading. The company highlighted updates to its ads platform from the second quarter, including the launch of Amazon Marketing Stream in June. Amazon is developing data and marketing services, competing with internet ad giants like Google. The “marketing stream” sends real-time analytics to advertisers about how “sponsored products” ads are performing. Sponsored products mainly show up when consumers browse Amazon, and they have become an essential way for brands to get discovered. Amazon’s advertising services led to $8.76 billion in revenue in the second quarter, an increase of 18% year over year. Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here Sales increased 7.2% to $121.2 billion in the period ended June 30, the Seattle-based company said Thursday in a statement. Analysts, on average, estimated $119.5 billion. Operating income in the current quarter will range from break even to $3.5 billion on sales that may increase as much as 17% to $130 billion, the Seattle-based company said Thursday. Analysts, on average, projected a profit of $3.83 billion on sales of $127 billion, according to data compiled by Bloomberg. Even as he focuses on rekindling sales growth, CEO Andy Jassy is determined to unwind a pandemic-era expansion that saddled Amazon with a surfeit of warehouse space and too many employees. The company has been seeking to sub-lease at least 10 million square feet of space, Bloomberg reported in May. Fulfillment expenses increased 14% in the second quarter to $20.3 billion, less than analysts’ projected. With costs rising, Amazon in February increased the price of a Prime membership in the US, then followed this week with similar increases in Europe. “It’s important for Jassy to reinforce their commitment to retail and acknowledge that they need to get spending to be more correlated to revenue growth,” said Michael Pachter, an analyst at Wedbush Securities Inc. As part of its effort to cut costs, the company said it added 14% more full- and part-time workers—the slowest growth since 2019—in the quarter, bringing total employment to more than 1.52 million people. “Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” Jassy said in the statement. With online sales slowing, the CEO is seeking new sources of revenue. Earlier this month, Amazon announced it would buy primary-care company One Medical in a cash deal with an equity value of $3.49 billion. The startup operates clinics in cities across the US and furthers Amazon’s push into the health care industry. Amazon Web Services, the profitable cloud-computing division, generated sales of $19.7 billion in the quarter, topping analysts’ average estimate of $19.4 billion. Shares rose to a high of $138.75 in extended trading after closing at $122.28 in New York. Amazon shares have dropped almost 27% this year amid a broader market downturn. “The next two quarters feature Prime Day events that should recharge e-commerce momentum,” said Andrew Lipsman, an analyst at Insider Intelligence. “This will boost growth and reduce membership churn, while giving a jolt to the advertising business that’s increasingly responsible for Amazon’s bottom line. It looks like Amazon is finally primed to turn the corner after a rocky couple of quarters.” Ad Age Small Agency Awards See all of the 2022 winners Click here —Bloomberg News with reporting from Garett Sloane

Amazon highlights its 'marketing stream' after ad revenue climbs

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