AMZN 2021 Q3 results
$Amazon(AMZN.US$ Rising wages, labor shortages, supply chain bottlenecks leading to extra costs were the name of the game in Q3. This seems like it's a theme that will continue into, and probably beyond, the all-important Q4 holiday season for e-commerce. It will be difficult to pass costs on to consumers during this highly competitive quarter.
On a whole, the numbers were not awful, but they also were not impressive. Total revenue for the quarter was $110.8B, up 15% from Q3 2020 which came in at $96.1B. Costs were up significantly, however, and operating income for the quarter dropped to $4.9B from $6.2B a year ago. Cash from operations was also down from $12B in Q3 2020 to $7.3B in Q3 2021. Inventory, shipping, and labor costs are likely culprits. Diluted earnings per share were chopped in half to $6.12 from $12.37 a year ago.
Taken separately, the ecommerce figures were very discouraging. Product sales were up a mere 4% from Q3 2020. Yes, there is a COVID-19 effect to factor in, however, this is anemic any way one slices it. On a whole, the ecommerce segments of North America and International were net unprofitable for the quarter, losing $31M in operating income. The retail business has never been hugely profitable, however, investors have been hoping that scaling would lead to better profitability. Instead, AWS is the saving grace.
There is a great disparity between the revenue and income produced by AWS as compared to the bulky e-commerce segments.
As shown above, despite taking in only 13% of revenues, AWS was responsible for more than 50% of operating profits for the first two quarters of 2021. AWS as a segment has tremendous margins. This trend has been exacerbated in Q3.
Below I have updated the figures for Q3 2021 and the nine months then ended.
As we can see, the Q3 numbers are skewed as the e-commerce business posted an operating loss. However, this is no less telling. For the first three quarters of 2021, this trend has accelerated from over 50% to now well over 60% of operating profits being provided by AWS. With its impressive growth, the total revenue provided by AWS is also up from 13% to 15%.
It truly is a tale of two companies. However, it should be three.
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Giants1967 : A split would do for now
HGBlog : Most people don't understand Amazon. It's one company because it HAS to be. The car would not move without the engine. AWS's biggest customer is Amazon. The majority of AWS growth for years has been because of Amazon. They can't spin it off without hurting their core retail business.
StarB612 : Interesting idea, article makes a logical case. Timing is everything if something like this happens.
But an AWS split would be like Disney spinning off Parks and Resorts at this point in time.
DollarDog : It is not as a clear case for breakup as you might think.
NO CUSTOMER WANTS TO BE THE FIRST GUINEA PIG TESTING A NEW SERVICE.
That's where retail/media business is useful to AWS. It is the guinea pig for AWS services.
That's why Microsoft/Oracle wanted to buy Tiktok. They wanted to own a social media business to prove their technology. Google would not be interested as they have youtube.
Biotechmaster : Just split 10 to 1. Watch it take off
Jennings1003 : Decelerating growth with a skyhigh PE FWD and a propensity to want to grow into low margin lines (outside of AWS and Ads of course).
Yes, it is time to spin off AWS.
dudedude Jennings1003: AWS is the most profitable, yes, but it requires the massive ecommerce cashflow to grow.
Ren Calli : I suspected this might be a down QTR. I didn't think it would be horrible. This just isn't a miss. This was bomb and starts to confirm that AMZN is over building massively. Burning up those AWS profits.
Stonksalltheway Ren Calli: lol what? Their revenue missed by less than a billion of the expected $111 billion. About 0.8%. Dramatic much?
RachXchange Stonksalltheway: their guidance: could have ZERO OPERATING MARGIN. that s crazy. If amazon stops making money how much is it worth?
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