• by Thom Forbes  @tforbes, July 31, 2020

Everyone knew Amazon was getting a lot more business because of the COVID-19 -- those vans seems to be rounding every corner in the New York metropolitan area all the time -- but even the super-vigilant analysts had no idea just how good the pandemic has been to the company’s bottom line.

“Amazon reported record revenue and profit even as it spent $4 billion between April and June to stabilize its supply chain and improve worker safety. The Seattle e-commerce pioneer now employs more than 1 million workers, the second-largest in the U.S. Amazon reported $88.9 billion in sales as a flood of customers grew to rely more than ever on online shopping. Profits doubled to a record $5.2 billion, far exceeding analyst expectations,” Sebastian Herrera reports  for The Wall Street Journal. 

Apple (up 11% in quarterly sales) and Facebook (also up 11% due to “increased engagement as people around the world sheltered in place”) also fared very well. 

“Google parent Alphabet was the outlier Thursday, reporting a decline in quarterly revenue compared with a year earlier for the first time in company history. Still, the company’s sales beat analyst expectations, and its profit, though down 30%, was still more than $6 billion,” Herrera writes.

Let’s focus on Amazon, the more pervasive disruptor.

“‘This is an exceptional quarter on all fronts under extreme circumstances,' Moody’s vice president Charlie O’Shea said of Amazon]s blockbuster rise,” the BBC reports.

“The flood of online shopping has strained the firm's capacity. Amazon hired about 175,000 people in the quarter and is working to expand its warehouse space in anticipation of continued growth,” it adds.

“We've run out of space…,” chief financial officer Brian Olsavsky said on a call with analysts transcribed by Seeking Alpha. “And when you talk about profitability, we’ll also mention that there are a couple of expenses that have gone down in the interim. Marketing, we cut marketing -- probably by about one-third in Q2 -- mainly because we’re trying to manage demand.”

And it may as well stay at that level for the foreseeable future.

“Jesse Cohen, senior analyst at Investing.com, said Amazon’s business model sets it up ‘to expand its e-commerce dominance even more broadly as the global COVID-19 pandemic continues to flare,’” write  Reuters’ Jeffrey Dastin and Akanksha Rana.

“Online store sales jumped 48% to $45.9 billion in the second quarter. Meanwhile, merchants paid Amazon more to fulfill and sponsor their products in order to reach the company’s loyal customers. That resulted in a 52% and 41% jump in seller services revenue and other revenue such as from ads, respectively,” they continue.

“Amazon’s cloud services also saw higher demand as companies switched to virtual offices in the pandemic. Revenue from Amazon Web Services (AWS), which sells data storage and computing power in the cloud, rose nearly 29% to $10.81 billion,” Dastin and Rana add.

“Patrick Moorhead, president and principal analyst at Moor Insights and Strategy, noted that AWS’s growth during the quarter was ‘larger than the entire annual revenue of many cloud plays. AWS is well on its way to creating an annualized, $40B revenue company. This makes AWS larger than Salesorce.com and SAP,’” Javier E. David writes  for Yahoo Finance.

“Meanwhile, Amazon also said it plowed over $9 billion into capital projects, and saw its grocery delivery capacity skyrocket by more than 160% amid a threefold spike in online grocery sales during the quarter,” David adds.

“As the pandemic wore on, consumer demand shifted away from consumables and groceries, categories that aren’t ‘super profitable’ for the company, and toward a more normal mix of products, Amazon CFO Brian Olsavsky told CNBC’s Deirdre Bosa. Amazon was also able to ‘ship a lot more,’ Olsavsky said,” CNBC’s Annie Palmer reports.

“One- and two-day shipping have since recovered somewhat but are ‘probably considerably behind the going rate before any of this happened,’” Olsavsky said on the earnings call, Palmer writes.

As trying a time as the leaders of Amazon, Facebook, Apple and Google may have had in their video appearances before a congressional subcommittee this week, it all comes down to the bottom line.

“Together, the four companies reported revenue of $206 billion and net income of $29 billion in the three months ending in late June,” observes  Bloomberg’s Ian King for The Washington Post.

“‘Right now, it’s big tech’s world and everyone else is paying rent,’ said Wedbush Securities analyst Dan Ives. ‘They are consumer staples now and this crisis has bought their growth forward by about two years.’”