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Amazon Continues to Grow, but not Without Some Pain

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The juggernaut that is Amazon continued in the second quarter, at least on the top side, as the bottom line was hit by high expenses.

Amazon.com Inc.

In a Nutshell: Fresh off the third annual Prime Day that was the biggest global shopping event ever for Amazon, with more new members joining Prime than any single day in Amazon history. Amazon reported substantial sales gains in the second quarter ended June 30, while earnings tumbled. This can be blamed in part on a steep jump in quarterly expenses that increased 28 percent to $37.3 billion used for its aggressive expansion.

[Read more about how Amazon did on Prime Day: Prime Day Prompts 200,000 Dress Sales, Sets Amazon Records]

Sales: Net sales increased 25 percent to $38 billion in the second quarter, compared with $30.4 billion in second quarter of 2016. The company also said the upcoming third quarter should see net sales rise to between $39.25 billion and $41.75 billion, or 20 percent and 28 percent, compared with third quarter 2016.

Earnings: Net income was $197 million in the second quarter compared with net income of $857 million in the year-ago quarter. Operating income decreased 51 percent to $628 million in the quarter from $1.3 billion in the year-ago period. Third quarter guidance anticipates an unfavorable impact of about $125 million or 40 basis points from foreign exchange rates. Operating income loss of $30 million to $300 million is forecast compared with $575 million in third quarter of 2016.

CEO’s Take: Jeff Bezos, Amazon founder and chief executive officer, said: “In the last few months, we launched Echo Show (newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, launched four new Fire tablets, expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service and held our third annual Prime Day, signing up more Prime members than ever before.”

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