Spoiled For Choice

Image source: Amazon

What's going on?

Amazon reported better-than-expected results late on Thursday, and investors – who initially pushed its stock up 5% – couldn’t decide how to celebrate first.

What does this mean?

Amazon’s ecommerce business – perfectly placed to benefit from the global rise in stay-at-home shopping – grew its sales by a higher-than-expected 40% in North America and 60% internationally. The working-from-home trend, meanwhile, boosted the company’s cloud computing business, which reported expectation-busting sales that were 32% higher than the same time last year. Put both segments together, and Amazon delivered a quarterly profit that shook off pandemic-driven elevated costs and came in 65% better than expected – as well as a sales growth forecast for this quarter that blew past predictions.

Why should I care?

The bigger picture: Amazon’s a pulse check on big tech.

Amazon’s broad reach tells you a lot about how other companies are getting on too. The company’s better-than-expected performance in ecommerce, for example, bodes well for retail rivals Walmart and Target. The continued momentum of its cloud computing segment, meanwhile, suggests the industry’s still growing quickly – especially alongside Microsoft and Google’s own rapid growth in the area. And as far as its advertising business goes, last quarter’s 70%-plus revenue growth gives weight to recent reports that online ads are surging in a big way.

For markets: There’ll soon be more Amazon to go around.

Some investors were also expecting Amazon to announce a “stock split” on Thursday. In other words, every share an investor owns – currently worth around $3,500 each – would be replaced by multiple cheaper shares (say, 10 shares worth $350 each). Companies like Tesla and Apple took that route last year, making it easier for new investors – retail and institutional alike – to buy their shares and give their stocks a boost. Amazon didn’t end up announcing a split on Thursday, but it may happen before too long with a new CEO taking the helm later this year.

Originally posted as part of the Finimize daily email.

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