Amazon's Profit Climbs as Cost Cutting Takes Effect

Amazon announced its third quarter earnings yesterday, beating analyst expectations and delivering a near-record net income of close to $10 billion. The result was simultaneously the company's best operating margin, at 7.8 percent, since reaching a record of 8.2 percent in Q1 of 2021. After pandemic highs and subsequent lows brought about by layoff severance and losses at EV maker Rivian, Amazon's net income has been growing strong for the third quarter in a row.

The company's new CEO since 2021, Andy Jassy, has been very active in cutting costs and his effort seems to have paid off. 27,000 jobs were axed in just the last year, while a focus on the company's core business delivered good results there. Growing by 7 percent year-over-year, Amazon's own online store sales hit $57.3 billion, up $3.8 billion from last year's September quarter. This was in absolute terms only topped by the quickly expanding third-party sales, which added $5.7 billion compared to Q3 of 2022. Together, these two segments' operating income topped $4 billion, up from just $2.3 billion in Q2. The North American market brought in the positive income numbers here, while the international segment was still unprofitable, but improved majorly. The operating margin of North American first-party sales rose to a substantial 4.9 percent.

Other, smaller segments also showed strong relative growth. Cloud segment Amazon Web Services, traditionally a higher-margin business, grew by 12 percent, the equivalent of an extra $2.5 billion in sales, while digital subscriptions and advertising sales also saw growth rates exceeding those of the traditionally lower-margin online and offline retail segments.