Amazon kept the cash register ringing in the third quarter, including a strong 26% increase in advertising revenue, to post results that beat Wall Street forecasts.
Overall, Amazon reported Q3 revenue of $143.1 billion, up 13%, and net income more than tripled to $9.88 billion (94 cents per share). The quarter included sales from the first of two sets of Amazon Prime Day sales events on 11-12 July (followed by the second instalment earlier this month). Consensus analyst estimates were for revenue of $141.5 billion and net income of $6.05 billion (59 cents per share), according to FactSet.
“We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilise, our advertising revenue grew robustly, and overall operating income and free cash flow grew significantly,” said Amazon CEO Andy Jassy in announcing the results.
On the Q3 earnings call, Jassy touted Prime Video as an “integral” part of the Prime membership programme, which is often one of the top two reasons people sign up. He also said that Amazon sees Prime Video eventually becoming a “large and profitable business in its own right”.
Amazon’s Q3 ad revenue was $12.06 billion, up 26%, as the tech giant continues to gain market share in the digital advertising space. Analysts had forecast ad revenue of $11.6 billion. The segment includes sales of advertising services to sellers, vendors, publishers, creators and other third parties through programmes such as sponsored ads, display ads and video advertising. It also includes advertising sold for Prime Video’s exclusive Thursday Night Football package and the Freevee ad-supported video service.
“We’ve barely scratched the surface in terms of better figuring out how to integrate advertising into video, commerce and food,” Jassy said on the call.
The company boasted about the performance of “Thursday Night Football” on Prime Video, which has averaged 12.9 million viewers through the first six games of the 2023 NFL season, up 25 per cent from last season’s six-game average, according to Nielsen. So far this season, the median age of “TNF” viewers is 47 – seven years younger than the median age of NFL viewers on linear networks.
On the advertising front, Amazon said in Q3 that it had partnered with BuzzFeed, Hearst Newspapers, Pinterest, Raptive, Ziff Davis’ Lifehacker and Mashable, among others, to display sponsored product ads on their apps and websites for products sold in Amazon’s US store.
And Amazon will soon have even more ad inventory to sell: Starting in 2024, the company’s Prime Video service will begin running ad breaks in programming, although it will serve “significantly fewer ads” than traditional TV networks, Jassy told analysts. To continue watching ad-free Prime Video, customers in the US will have to pay an extra $2.99 a month on top of the cost of a Prime membership ($139 a year).
Meanwhile, Amazon Web Services (AWS), the company’s cloud computing division, reported revenue of $23.06 billion, up 12%, and operating income of $6.98 billion, up 29% from operating income of $5.40 billion in Q3 2022.
Also during the quarter, Amazon announced the Fire TV Stick 4K Max, which comes with the Fire TV Ambient Experience, which “turns the TV into an always-smart display” to do things like show calendars, control smart devices or play audio. It also introduced the Fire TV Stick 4K with support for Wi-Fi 6 and the Fire TV Soundbar with support for DTS Virtual:X and Dolby Audio.
