Profit Push

Amazon.com Inc.’s profit topped $2 billion for the first time, powered by the company’s newer services businesses that are ushering the online retail giant into an era of swelling profitability. Fast-growing areas including the company’s cloud-computing business, advertising offerings and services it provides to sellers on its site helped propel Amazon to its highest profit margin in years as executives said heavy investments are paying off. Those businesses have helped offset its traditional retail business, which tends to yield lower margins although still the bulk of its revenue.

The Seattle-based company on Thursday reported a second-quarter profit of $2.53 billion, up from $197 million a year earlier. That makes three straight quarters of profits over $1 billion and extends Amazon’s profitability streak across three years. No longer is Amazon known for suffering losses or producing razor-thin income by plowing every dollar it makes back into investments. Still, other tech giants like Alphabet Inc. and Microsoft Corp. deliver much bigger profits.

Amazon’s stock has more than tripled in the past three years, making Chief Executive Officer Jeff Bezos the richest person on the planet. It’s the world’s second-most valuable public company now behind Apple Inc., making it one of the front-runners in the race to reach $1 trillion in market value.

Investors have placed tremendous faith in Amazon’s ability to find new customers and squeeze more money from existing users by offering them new products and services. It purchased online pharmacy PillPack last month, which followed its $13.7 billion acquisition of Whole Foods last year to jump start its struggling grocery business. CFO Brian Olsavsky said marketing in Whole Foods is creating new members for Amazon’s Prime subscription. “It’s the fastest we’ve ever seen,” he added.

Amazon will capture nearly half of all online spending in the U.S. this year, according to EMarketer Inc. Bezos is trying to convince investors that he can replicate that U.S. dominance overseas. But that takes a lot of spending upfront. Second-quarter operating expenses rose 34 percent to $49.9 billion. That was just below Amazon’s revenue growth rate.

 

Keep those stops tight

Todd “Bubba” Horwitz