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Amazon Surprising 2Q Earnings

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Amazon

“A very good cost quarter,” is the way Amazon.com Inc CFO Brian Olsavsky conservatively described Amazon’s Q2 2015 results. Operating cash flow increased 69% to $8.98 billion for the preceding twelve months, compared with $5.33 billion for the same period last year.

Investors reacted less conservatively with shares surging more than 17% to $566 within hours of the announced result. In the past Amazon’s been known for sacrificing short-term profit, preferring to spend its money on long-term investment. Wall Street was bracing for a loss of 14 cents per share with only $22.39 billion in revenue — so results that put the company narrowly in the black understandably surprised the market.

Net sales also increased 20% to $23.18 billion in the second quarter, compared with $19.34 billion in Q2 2014. Net sales increased 27% compared to Q2 2014.

Some factors which impacted the results were Amazon’s increased deployment of automation in its warehouses to reduce costs, the Prime Day online sale (where customers purchased 34.4 million items reportedly at a rate of 398 products per second), and a sales increase of 81% to 1.82 billion of Amazon Web Services (AWS) which supplies cloud computing.

Contrast this to other companies’ recent Q2 reports and the results are even more staggering. Apple posted Q2 revenue of $58 billion and quarterly net profit of $13.6 billion reflecting 27% revenue growth. Microsoft’s Q2 revenue was $26.5 billion and shares dropped 4% mostly due to Windows OEM revenue — the amount of income Microsoft gets from selling software on new retail PCs — being down 13% from last year.

Amazon CEO Jeff Bezos has now taken Amazon to a company that’s bigger (by capitalization) than Walmart. Impressive for a business that only a year ago reported a loss of $126 million and ever-shrinking margins. Bezos is well known for taking a long-term view of the market and his attention to business detail, and Amazon has certainly been working on those details. Olsavsky commented that there is “certainly” a connection between Amazon’s past investment, faster delivery times, same-day delivery services (Prime Now), and revenue today.

The impact of growth in AWS cannot be overlooked. Bezos has referred to AWS as a “$5 billion business.” The 2015 Q2 results put AWS with a run rate greater than $7 billion — well ahead of its target. In comparison, Microsoft’s run rate for their longer-established cloud business reported was $8 billion for the same period.

A good result for Amazon also means a good year for Bezo personally with his net worth increasing by $8 billion as the 2Q result came out. By way of contrast, Google owner Sergy Brin and Larry Page’s net worth surged by $4 billion each last week when their 2Q result came out and market capital increased by $60 billion.

Amazon’s now seen as a growth company. Even the workforce is predicted to increase (Amazon has over 4,600 open positions just in its Seattle headquarters). There are new services on the horizon such as the production of the original film, video content for its subscription streaming service Prime. Investors will be eagerly awaiting Q3 results to see if the growth in revenue continues.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Telecommunications

Call, Data Rate to Jump 100% as FG Imposes 5% Excise Duty on Telecoms

Call and Data rates could jump as much as 100% once the Federal Government implemented 5% excise duty on telecommunication services

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Services Tax

Call and Data rates could jump as much as 100% once the Federal Government implemented 5% excise duty on telecommunication services, a source from the sector stated.

According to industry experts, the increment will not only impact subscribers but also increase tax burden on telcos which would translate into rise in tariffs.

This, experts explained would increase the total consumption tax on the sector from just the 7.5% Value Added Tax (VAT) to 12.5%, a situation they said would worsen Nigerians’ economic status given the ongoing happenings in the country.

If implemented, Nigerians are now expected to be paying as much as N40 a minute, up from N20 and could be paying up to N2,500 per gigabyte.

Last week, Isa Pantami, Nigeria’s Minister of Communications and Digital Economy, decried the new tax, threatening to take the Federal Government to court for overburden the industry with so much taxes at a time when the telecommunication sector and the entire Nigerian economy was not faring well.

He said: “The 5 percent excise duty will overburden the industry. As a Minister, I was neither consulted nor obtained a memo to that effect. Even the appropriate lawmakers that were supposed to be talked with have also told me they were not.

”Things are not done that way. Besides condemning the tax, we will take every lawful step to guarantee that the tax does not stand.”

However, Ahmed Zainab, Nigeria’s Finance Minister, had different excuse for going ahead with the new 5% excise duty. According to her, the new 5% excise duty was in line with 2020 Finance Act and was part of Federal Government efforts at augmenting the nation’s revenue, especially from the non-oil sector.

The National Association of Telecoms Subscribers and the Nigerian Telecommunication Consumer have joined Pantami and other Nigerians to kick against the decision they considered wicked and inconsiderate.

Chief Adeolu Ogunbajo, president National Association of Telecoms Subscribers (NATCOMS) also added his voice. He said the sector is barely holding its ground with the existing 7.5 percent VAT, additional 5 percent will sum the total VAT in the sector to 12.5 percent. This is a killer move on the sector, he said.

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Fintech

Soft POS User Base to Grow 475% Globally by 2027

The total number of merchants deploying soft POS solutions will surpass 34.5 million globally by 2027

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point of sales

A new study from Juniper Research has found the total number of merchants deploying soft POS solutions will surpass 34.5 million globally by 2027; rising from 6 million in 2022. This growth will be driven by Apple’s entrance into the soft POS space; enabling iOS users to access an affordable mobile POS solution.

Soft POS enables NFC enabled smartphones or tablets to accept contactless payments, without additional hardware.

1.2 Billion iOS Users Added to Soft POS Market

The research forecasts that Apple’s decision to enable third parties to develop soft POS solutions leveraging iOS NFC capabilities will result in an influx of iOS-specific services; leading to innovative solutions for merchants. Furthermore, the research predicts Apple’s entry will provide 1.2 billion iOS users with soft POS capabilities; unlocking a previously untapped market.

Soft POS is the latest development from Apple within the payments space; building upon Apple Pay and Apple Pay Later. Soft POS vendors should leverage Apple’s payment ecosystem by developing innovative solutions such as integrated QR payment acceptance, using Apple Pay and Pay Later compatibility to attract a broader iOS user base.

Increasing Contactless Payment Adoption to Drive Soft POS Uptake

The research anticipates soft POS adoption being driven by the increasing use of contactless payments – with volumes expected to rise from 195 billion in 2022 to 408 billion by 2027. Therefore, consumers will come to expect contactless acceptance as standard; forcing smaller merchants to adopt contactless-capable POS solutions. Merchants are anticipated to embrace soft POS, based on cost savings achievable from eliminating the need for additional hardware, as well as mobility advantages over contactless POS.

This will be profound for small-sum and mobile merchants that must accept contactless transactions, but lack the need for high-cost dedicated terminals. As such, the research recommends soft POS vendors must look to target micro and mobile merchants; designing solutions that meet their unique needs.

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Fintech

Buy Now Pay Later Users to Reach Over 900 Million Globally by 2027

Buy Now Pay Later users will surpass 900 million globally by 2027; increasing from 360 million in 2022.

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mastercard biometric payment card fingerprint

A new study from Juniper Research has predicted that the number of BNPL (Buy Now Pay Later) users will surpass 900 million globally by 2027; increasing from 360 million in 2022. This substantial growth of 157% will be driven by the anticipated economic downturn, which will increase the demand for low-cost credit solutions.

BNPL schemes enable consumers to spread the cost of their purchases without interest charges; making them a highly attractive alternative to credit cards. Additionally, BNPL services do not require hard credit checks and an increasing number of merchants are accepting this payment method; making it easier to access for consumers than traditional credit.

India to Experience High User Growth

The research identified India as having potential for rapid growth in BNPL, with users predicted to grow from 25 million in 2022 to 116 million by 2027. This is due to rising eCommerce usage and growing interest in international goods available through online retailers. In turn, it recommends that vendors build strategic partnerships with vendors in developing markets with established consumer bases, to successfully capitalise on this user growth and associated revenue.

Virtual Cards to Further Boost Usage

The research predicts that the adoption of virtual cards, where digital only cards are used for purchases, will increase the usage of BNPL solutions, as they only require merchants to accept card payments – overcoming previous limitations on growth. The advancement of virtual cards allows BNPL schemes to compete with credit cards; particularly in-store, where single use BNPL cards can be used within a digital wallet to complete contactless transactions.

Juniper Research recommends that in order to compete in this highly competitive landscape, BNPL vendors must differentiate their services: including offering virtual cards, browser extensions that automatically facilitate BNPL payment services, and digital loyalty schemes.

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