Wall Street was really looking forward to Amazon’s second-quarter earnings. On Wednesday (July 26) the stock climbed 1.2% in anticipation of the results, pushing Amazon into the elite half-trillion-dollar-company club, and making founder and chief executive Jeff Bezos the richest man in the world.
Then came the actual numbers. Amazon did not meet earnings expectations of $1.42 per share, not even close. It reported earnings of 40 cents per share, a 78% miss (net income of $197 million). It generated $38 billion in revenue, a slight beat, $4.1 billion of which came from its cloud-computing unit Amazon Web Services, also slightly higher than expected. This time last year, Amazon did $30 billion in sales and booked $857 million in net income.
Bezos is no longer the richest man in the world.
Investors would normally be angry over such a miss. Instead the market mostly shrugged.
Amazon has long defied the normal rules of the market. For years, the company either barely eked out a quarterly profit or posted losses in the hundreds of millions. It wasn’t until 2015 that Amazon started to regularly turn a profit—and this is a company that’s been public since 1997.
Then there’s Amazon’s intended acquisition of Whole Foods. Usually when one company announces the purchase of another, the buyer’s stock falls. When Amazon said it had reached a deal to buy Whole Foods, its stock surged, so much that Amazon’s gain in market cap exceeded the $13.7 billion purchase price, making the deal effectively free.
Why are these weird things happening? Perhaps because the market has finally started to regard Amazon as a monopoly. Amazon is, among other things, a massive e-tailer, a delivery and logistics network, a fashion designer, a data-storage and web-services provider, a TV and film producer, a grocer, a payment service, and a gadget maker. Its flagship Prime membership program is used by 85 million Americans, an estimated two-thirds of all US households. It can crush another company just by filing for a trademark.
Do investors like it when Amazon beats estimates? Sure. Are they going to lose faith when it misses? Nope. Amazon can do whatever it wants. Lackluster earnings have yet to change that.