Amazon's bet on groceries, drones and films can't dent profit

The e-commerce giant posted another surprise quarter -- this time a good one.

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
2 min read
Whole Foods Market Acquisition

Amazon is one of the few companies that can stomach investing in seemingly crazy projects.

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No, Amazon isn't quite done growing.

The biggest online retailer in the world managed to blow away Wall Street estimates for its latest quarter, thanks again to sharply higher revenue (hello, Prime Day!) and its superbly profitable Amazon Web Services cloud-computing business.

That the company can post a higher profit despite its huge investments in international markets, drone deliveries, new warehouses, Whole Foods and a Hollywood studio seems to defy logic. Indeed, operating expenses jumped 35 percent to $43.4 billion. But it's important to note that CEO Jeff Bezos' heavy spending has hurt Amazon's quarterly results for years, including just last quarter, when it badly missed Wall Street's expectations.

The fact that its results are still so hard to predict shows that Amazon seems to act like a startup, even though it's now one of the biggest companies globally. Amazon is one of the few companies that can stomach investing in seemingly crazy projects like drones that deliver you Blu-ray discs and video games. One of the others, Google, also reported its latest results Thursday. The search giant reported surging profit despite $812 million in operating losses from its "Other Bets" category, also known as "moonshots."

One gamble Amazon has seen pay off is the creation of Prime Day, which started off as the summer equivalent of Black Friday in 2015, but has grown into its own proper shopping day phenomenon. 

Its other big bet, the acquisition of Whole Foods at the end of August, contributed $1.3 billion in revenue in a little more than a month. 

For the third quarter, Amazon posted sales of $43.7 billion, up 34 percent from a year earlier. Profit edged up to $256 million, or 52 cents a share, from $252 million last year.

Wall Street predicted revenue of $42.1 billion and a per-share profit of just 3 cents, down from a year earlier due to heavy investments in new warehouses and international growth, according to Yahoo Finance.

It's that wide disparity between expectations and reality in the per-share earnings number that has Amazon shares up 8 percent to $1,050 after hours, according to Yahoo Finance.

The company's Amazon Web Services cloud-computing division has also beefed up profit, with its operating income rising to $1.2 billion, up from $861 million.

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