Amazon’s net profit shot up exponentially to $857 million for the quarter ended June 2016 (Q2 2016). The company had reported a net profit of $92 million in the same quarter last year, a jump of more than 800%.
Net sales increased 31% to $30.4 billion in the second quarter, compared with $23.2 billion in the same quarter last year. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on net sales was $166 million.
CEO Jeff Bezos continued to be upbeat about India following the launch of Amazon Prime in the country. “It’s been a busy few months for Amazon around the world, and particularly in India — where we launched a new AWS Region, introduced Prime with unlimited free shipping, and announced that Prime Video is coming soon, offering Prime members in India exclusive access to Original Series and Movies — including original content featuring top Indian creators and talent,” Bezos said in a statement.
Here are some takeaways from the results:
Doubling down on video
Amazon will be doubling its content spend in the second half of the year versus the second half of 2015, CFO Brian Olsavsky told in an analyst call. It was reported that Amazon was investing $300 million for video in India. Huffington Post reported that directors Vishal Bhardwaj and Vidhu Vinod Chopra have been brought in to create TV shows for Prime Video which is expected to launch in November. Last year, it invested $100 million for producing original TV shows.
Why Amazon has increased its fulfillment centres (FCs)
Amazon is opening six new FCs in Chennai, Mumbai, Delhi and Jaipur to expand its presence in India. Currently, it has 21 FCs compared with 10 fulfillment centers for the first three quarters of last year. “If you remember back to Q4 and the capacity constraints we had in Q4, primarily due to really strong Fulfilled By Amazon (FBA) growth, we talked a lot in the Q4 call about the operational cost of that in Q4. Customers were well taken care of, but we had additional fulfillment costs from being so tight on capacity,” Olsavsky said.
“That compares with last year in Q2 when we saw 22% unit growth, so we’re 600 basis points faster growth in Q2 this year than last year and that 22% last year turned into 26% in Q4,” he added.
Interestingly, the company mentioned that 80% of the sellers used its fulfillment services. For the quarter ended September 2015, Amazon CFO Brian Olsavsky mentioned that 90% of the sellers in Amazon India use the company’s warehouse and logistics services.
Prime Air in the UK
Amazon was given a green light for small-scale drone deliveries in the UK. Darrin Manney, director of investor relations, added that Amazon will be testing beyond line-of-sight operation, sense-and-avoid technologies and flights where one person operates multiple drones. Note that drone regulations in the US require the operator to maintain a line of sight of the device at all times, something that Amazon had objected to.
“So we definitely appreciate the pragmatic and forward-looking approach on this topic with the UK and we’re going to continue to work with regulators and policy makers in many countries, including the US,” Manney added.