Amazon’s bet on groceries, drones and films can’t dent profit – CNET

Whole Foods Market Acquisition
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No, Amazon isn’t quite done growing.

The biggest online retailer in the world managed to blow away Wall Street estimates for its latest quarter, thanks again to sharply higher revenue (hello, Prime Day!) and its superbly profitable Amazon Web Services cloud-computing business.

That the company can post higher profits despite its huge investments in international markets, drone deliveries, new warehouse, Whole Foods and a Hollywood studio seems to defy logic. Indeed, operating expenses jumped 35 percent to $43.4 billion. But it’s important to note that CEO Jeff Bezos’ heavy spending has hurt Amazon’s quarterly results for years, including just last quarter, when it badly missed Wall Street’s expectations.

The fact that its results are still so hard to predict shows that Amazon seems to act like a startup, even though its now one of the biggest companies globally. Amazon is one of the few companies that can stomach investing in seemingly crazy projects like drones that deliver you Blu-Ray discs and video games. One of the others, Google, is also reporting today. The search giant reported surging profits despite $812 million in operating losses from its “Other Bets” category, also known as “moonshots.”

One gamble Amazon has seen pay off is the creation of Prime Day, which started off as the summer equivalent of Black Friday back in 2015, but has grown into its own proper shopping day phenomenon. 

Its other big bet, the acquisition of Whole Foods at the end of August, contributed $1.3 billion in revenue in a little more than a month. 

For the third quarter, Amazon posted sales of $43.7 billion, up 34 percent from a year earlier. Profit edged up to $256 million, or 52 cents a share, from $252 million last year.

Wall Street predicted revenue of $42.1 billion and a per-share profit of just 3 cents, down from a year earlier due to heavy investments in new warehouses and international growth, according to Yahoo Finance.

It’s that wide disparity between expectations and reality in the per-share earnings number that has Amazon shares up 7.8 percent to $1,047.97, according to Yahoo Finance.

The company’s Amazon Web Services cloud-computing division has also beefed up profits, its operating income rising to $1.2 billion, up from $861 million.

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