What Amazon's Latest Earnings Mean for Long-Term Investors

Core Insights - Amazon reported second-quarter earnings with revenue of $167.7 billion and diluted earnings per share of $1.68, both exceeding consensus estimates [2] - Revenue increased by 13% year-over-year, driven by an 11% gain in the North America segment [4] - Operating income rose 31% to $19.2 billion, reflecting successful cost control and operational efficiency strategies [5] Market Reaction - Despite strong earnings, Amazon's stock declined due to management's forecast of third-quarter operating income at $18 billion, indicating only a 3% year-over-year growth [6] Long-term Strategy - Amazon is heavily investing in artificial intelligence, with capital expenditures totaling $31.4 billion in the quarter, potentially exceeding $125 billion annually [7][8] - The company maintains a diversified business model, benefiting from e-commerce, cloud computing, and digital advertising [8][11] Cloud Computing - Amazon Web Services (AWS) remains a leader in cloud computing, although facing increased competition from faster-growing rivals [9][10] Digital Advertising - The digital advertising segment grew revenue by 23%, leveraging Amazon's online marketplace and Prime Video service [11] Valuation - As of August 6, Amazon shares traded at a price-to-earnings ratio of 33.9, below the trailing five-year average, indicating potential upside for long-term investors [12] Conclusion - Despite the market's negative reaction, Amazon is considered an elite business with strong long-term prospects [13]