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A day after Jeff Bezos downplayed Amazon's power, it posts record profit

The report comes after Amazon's boss attended a contentious antitrust hearing Wednesday, in which he tried to de-emphasize the company's influence.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
4 min read
bezos-before-congress

Amazon CEO Jeff Bezos speaking via videoconference during a House Judiciary Subcommittee hearing on Wednesday.

Graeme Jennings/Washington Examiner/Bloomberg via Getty Images

After Amazon warned of turbulent times ahead during the coronavirus and CEO Jeff Bezos downplayed the company's leadership position before Congress on Wednesday, Amazon went ahead and posted massive gains in the second quarter.

The company on Thursday reported a profit of $5.2 billion, or $10.30 per share -- an all-time record -- and double last year's total. That record came even after the company poured $4 billion during the quarter into its coronavirus response to protect its workers and customers. Finance chief Brian Olsavsky said another $2 billion will be spent in the current, third quarter.

Revenue rose 40% to $88.9 billion, the highest percentage increase in two years. Amazon trounced Wall Street's expectations, with analysts predicting earnings of $1.46 a share and revenue of $81.5 billion, according to Yahoo Finance.

Shares jumped 5% after hours.

Olsavsky said the unexpected windfall came from Amazon being able to ship much more than it expected, as well as a change in what type of goods consumers were buying. At the start of the pandemic, shoppers were focused on low-profit items like toilet paper, masks and groceries, so Amazon was expecting to break even on these sales due to its increased coronavirus costs. Instead, much more profitable stuff started selling, too, resulting in a lot more money hitting the bottom line. Amazon Web Services and the advertising business also had strong results, he said.

Olsavsky said Prime one-day and two-day shipping times, which have been delayed for months during the viral outbreak, are improving, but he had no timeline on when shipping times will get back to normal.

"We've seen the one-day and two-day recover through the quarter," he said on an analyst call Thursday, "but it's still considerably behind the going-in rate, before any of this happened."

He also said Prime Day was moved to the fourth quarter of this year. The company previously confirmed only that the sales event was delayed amid the pandemic.

Amazon, already the king of US e-commerce , is poised to become even more dominant following the coronavirus pandemic, which has forced more people to shop online. Amazon already accounts for 38% of US online sales. Signs of e-commerce's massive growth are showing up in a big way this earnings season, with PayPal reporting a rise in digital payments on its network, e-commerce tools provider Shopify posting gains as more retailers sell online, and UPS reporting a spike in residential shipments.

Amazon's sales growth was widely expected to be just as impressive, and that's shown in Amazon's surging stock price. Bezos, the world's richest person and Amazon's largest shareholder, added $65 billion just this year to his massive wealth, totaling $180 billion.

Watch this: Watch the best moments from Jeff Bezos' testimony before Congress

While this rosy picture would presumably make most corporate CEOs ridiculously happy, Bezos has reason to worry. He was called before Congress just a day earlier for an antitrust hearing, with both Republican and Democratic lawmakers accusing Amazon and other Big Tech companies of monopolistic practices. Bezos defended his company by saying it accounts for less than 1% of the global retail industry, a statistic that belies its massive influence in e-commerce and includes categories it doesn't compete in. Rep. David Cicilline, the antitrust subcommittee chairman, said some of these corporations will need to be broken up and all will have to be regulated.

Additionally, Amazon's growth during the coronavirus has been far from easy. The e-commerce giant, after training generations of customers to expect two-day shipments, faced major delays in its shipping times during the pandemic. Plus, it's had to deal with product shortages, price gouging on its marketplace and repeated protests by its warehouse workers for better protections from the virus.

Those stumbles have provided an opening for rivals like Target and Walmart, resulting in Amazon losing market share in recent months.

Some of these problems appear to have been mitigated, with gear for warehouse employees broadly available, but Amazon still faces shipping delays months into the crisis. During the company's previous quarterly report, Bezos warned of huge spending to protect workers and customers from the virus, saying $600 million was spent in the first quarter and $4 billion would be spent in the second quarter.

The gains in e-commerce are also proving to be a zero-sum game. While US online sales are projected to have risen 23% in the second quarter, brick-and-mortar sales have tanked 24%, according to eMarketer. That sparked another wave of bankruptcy filings, from J.C. Penney, Neiman Marcus and J. Crew, after plenty of traditional retailers, including RadioShack and Toys R Us, have already crumbled.

Added to that, Amazon's huge earnings report comes the same day the federal government reported a massive downturn for the economy last quarter and more than 1.4 million weekly unemployment claims.

Amazon predicted sales will continue to rise strongly in the third quarter, anticipating 24% to 33% growth.

Shipping costs jumped 68% from a year ago, a huge increase from prior quarters, and the employee headcount during the quarter rose 34% from a year earlier. The company said Thursday that its combined number of regular and seasonal employees is now over 1 million.