It was another cash-pumping quarter for Amazon.
Continued strong demand for Amazon Web Services (AWS) and online purchases – heightened by the coronavirus – saw TTM (trailing twelve months) free cashflow jump 26%, to $29.5 billion, compared with the $23.5 billion generated in the 12-month period ended September 30, 2019.
CFO Brian Olsavsky said AWS growth in Q3, in terms of "absolute dollars," was the "largest we've ever seen."
Run to the cloud
Speaking on Amazon's Q3 earnings conference call, according to a Seeking Alpha transcript, Olsavsky said "lots of customers" were moving to the cloud at a "faster pace."
Though some industry sectors are being hit more than others during the pandemic – travel and hospitality, for example – the CFO said the majority of companies were now looking at ways to cut down on expenses, and that going to the cloud was a "good way" to do that.
Amazon's Q3 net sales were up 37% year-on-year, to $96.1 billion, of which AWS contributed $11.6 billion (up 29% year-on-year).
Where AWS traditionally makes its biggest financial contribution, however, is operating income. AWS drummed up $3.5 billion in operating income during Q3, a 56% year-on-year increase. This sum accounts for more than half of Amazon's total operating income for the quarter ($6.2 billion).
Eagle-eyed watchers of AWS' top line will no doubt note that quarterly year-on-year growth, although still stellar at 29%, has been on a steady decline (it was 35% in Q3 2019).
Maintaining the same high levels of growth is of course more difficult as time goes on, but Olsavsky was hugely confident about market dynamics and trends going forward. "Cloud is good for the customer," he said, "and therefore it will be good for us long term."
Not immune to COVID-19
Amazon set aside around $4 billion in Q4 for coronavirus-related expenses, up from $2.5 billion in Q3, largely because of some drags in productivity (social distancing, for example) and the need for closer supply-chain monitoring and testing.
The company said it expects sales to grow between 28% and 38% in Q4, helped by inclusion of the delayed Prime Day event.
Operating income is expected to be between $1.0 billion and $4.5 billion, compared with $3.9 billion Q4 2019 (and assumes the $4 billion of costs related to COVID-19).
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— Ken Wieland, contributing editor, special to Light Reading