Three major readings of Amazon's highly anticipated quarterly earnings

According to technology blog Re / code reports, Amazon's generous investment style finally allows investors to sit still. In the second quarter of this year, Jeff Bezos's revenue was in line with Wall Street expectations and the loss was well above market expectations. Affected, Amazon shares fell nearly 10% today after a sharp drop in yesterday's after-hours trading. The stock has fallen nearly 10% this year.

Here are 3 key insights into Amazon's highly anticipated quarterly earnings:

1. Cloud service prices hurt revenue.

Amazon Web Services ("AWS") in recent quarters appears to be the fastest growing business for Amazon. However, the impact of a series of price cuts (both 28% down and 51% down) is finally on AWS revenue figures. In the second quarter, revenue from Amazon's "Other" businesses, including Amazon, saw a significant slowdown. Revenue in North America increased 38% YoY, significantly lower than the 60% increase recorded in the same period last year. In the second quarter of last year, the overall revenue of "other" businesses increased by 64% over the same period of previous year.

Amazon Chief Financial Officer Tom Szkutak acknowledged that the price cuts caused the business to slow down its revenue growth, and also said the company believes the price cuts will help increase its market share in the long run. He also said AWS usage growth remained strong, up about 90% from a year earlier.

Amazon would love to let Hollywood know it attaches great importance to the video business.

How do you get Hollywood's attention when you do not have a hit show like Cardboard? Of course, show them the size of your budget. In its earnings call yesterday, Amazon said it expects a "significant" increase in its investment in the entire video business in the current quarter. It said Amazon's original play was a potential growth part of the business. The company is investing in creating new original plays in hopes of differentiating its video services from its competitors. Amazon said it will invest more than $ 100 million in this quarter.

However, Amazon's original drama budget may well be far below rival Netflix. Just two quarters of "card house" Netflix has invested more than 100 million US dollars, the company expects its original drama investment will account for more than 10% of its total content budget.

3. Amazon's current investment cycle will be longer than most analysts expected.

Amazon is still investing heavily in a series of projects that will not pay off in the near term. Among the larger deals are: expanding its staff for AWS business and upgrading its technology; continuing to expand its warehousing network at home and abroad with a focus on the China market; and manufacturing and marketing New hardware products such as Fire TV set-top boxes and Fire phones, and the video business.

Therefore, analysts want to know when Amazon will stop taking the benefits of a mature business to invest in long-term projects. Unsurprisingly, Amazon did not respond positively to the issue. Yesterday, at a conference call, Zikatu told analysts that Amazon is in a multiyear investment cycle. But he did not say when this wave of investment will end.

Several brokerages have lowered their target prices today, though their analysts still generally believe the investment cycle will pay off someday.

Translator: Le Bang

Original link: http://recode.net/2014/07/25/three-big-takeaways-from-amazons-q2-financial-results/

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