Amazon.com Inc. registered its most profitable quarter ever in the three months ended Sept. 30 as its North America revenue increased by 39.3% year over year amid the surge in online shopping driven by the COVID-19 pandemic, the company announced Thursday.
Amazon’s sales of merchandise it owns, which it refers to as first-party sales, increased 32.8% globally. Fees Amazon collected from sellers on its ecommerce marketplaces increased even more dramatically, by 54.7%. Those fees includes the commissions Amazon collects from marketplace sellers and revenue from its Fulfillment by Amazon warehousing and delivery service, among other items.
Overall, Amazon’s revenue increased 37.4% to a record $96.15 billion. Its net income also set a quarterly record at $6.33 billion, an increase of 196.7% over the third quarter of 2019.
Amazon chief financial officer Brian Olsavsky told investment analysts on a conference call Thursday that sales by third-party sellers on Amazon marketplaces accounted for 54% of unit sales in the third quarter, and grew faster than Amazon’s first-party sales.
He also said the online retailer had spent roughly $30 billion in capital investments in the first nine months of 2020, including $12 billion in the third quarter. About half of that, he said, went to improving Amazon’s fulfillment capacity, which is slated to increase by 50% by the end of 2020 over last year.
That includes hiring 250,000 permanent employees, both full-time and part-time, in the third quarter, and another already in the fourth quarter, Olsavsky said.
Despite the investment, fulfillment capacity remains “very tight,” Olsavsky said. “We’re adding it and using it simultaneously,” he said.
Amazon launches a new marketplace in Sweden
Amazon’s international operations, which have often lost money, turned a profit in Q3 of $407 million, versus a loss of $386 million a year ago. It was the second quarter in a row in the black for the international unit. Olsavsky attributed that improvement largely to increased sales, particularly in the United Kingdom and Germany. He noted that Amazon this week launched an ecommerce site in Sweden, its 16th online marketplace outside of the United States.
Amazon projected revenue of between $112.0 billion and $121.0 billion for the fourth quarter, which would increase 28% to 38% over last year’s period. It projected Q4 net income of between $1.0 billion and $4.5 billion, compared to $3.3 billion in profits during the 2019 fourth quarter. Those estimates include projections of Amazon spending $4.0 billion in the fourth quarter on COVID-related expenses.
Amazon sales and revenue in the third quarter, ending Sept. 30:
For the third quarter, Amazon reported:
- Net sales of $96.15 billion, a 37.4% increase from $69.98 billion in the same quarter in 2019. Of that revenue, $52.77 billion stemmed from merchandise Amazon itself sold to consumers—what the retailer terms “net product sales”—up 32.8% from $39.73 billion year over year. The rest, $43.37 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 43.4% from last year’s $30.26 billion.
- North American net sales of $59.37 billion, up 39.3% from $42.64 billion for the third quarter of 2019. North America accounted for about 61.8% of sales in the third quarter of 2020, versus 60.9% a year ago.
- International net sales totaling $25.17 billion, up 37.2% from $18.35 billion in 2018. International accounted for 26.2% of sales in the second quarter, unchanged from in the year-ago quarter.
- Amazon Web Services revenue was $11.60 billion during the quarter, up 29.0% from $9.00 billion a year earlier for the company’s highly successful cloud computing unit.
- Other income–largely coming from Amazon’s growing advertising business–totaled $5.40 billion, up 50.5% from $3.59 billion.
- Revenue from subscriptions, including Prime fees, were $6.57 billion, up 32.6% from $4.96 billion.
- Net income of $6.33 billion, up 196.7% from $2.13 billion in the same period in 2019.
- Spending on marketing increased 14.4% to $5.43 billion from $4.75 billion.
- Spending on technology and content, including fees for licensing content for its Amazon Video service, increased 19.3% to $10.98 billion from $9.20 billion.
- Spending on fulfillment increased 44.6% to $14.71 billion from $10.17 billion.
- General and administrative spending increased 23.7% to $1.67 billion from $1.35 billion in the same quarter in 2019.
Amazon is No. 1 in the 2020 Digital Commerce 360 Top 1000.
Percentage changes may not align exactly with dollar figures due to rounding.