Amazon to up content spend in Q3

Amazon auto show, The Grand Tour

Amazon plans to up its investment in video content in the current quarter, despite reporting a year-on-decline in net income during Q2 on the back of higher spend.

Speaking on the company’s second quarter earnings call, chief financial officer Brian Olsavsky said that Amazon would continue to build on its momentum in the video space, after it took a “significant step up” in content spend between the second half of 2016 and the second half of 2015.

“We’ll be increasing video spend on a sequential and year-over-year basis in Q3, and that’s included in this guidance,” said Olsavsky.

During Q2 Amazon said that its spend on technology and content grew 51% year-on-year to US$633 million (€541 million) while marketing spend climbed 66% to US$133 million.

Overall the company’s net sales grew 25% year-on-year in the quarter to a huge US$38.0 billion, however net income dropped 77% to US$197 million.

Asked about the company’s Q2 spend, Olsavsky said the year-on-year difference was primarily driven by investments in fulfilment capacity and logistics services, digital video, its Echo devices and Alexa voice platform, growth in India, and the build up of its Amazon Web Services (AWS) infrastructure.

Olsavsky said the company had also increased its headcount by 42%, driven by operations hires, and said there was an accelerated growth rate in software engineers and sales teams hires primarily to support AWS and advertising.

“As far as Q2 is concerned, we were very encouraged by the revenue and unit growth acceleration, particularly in North America. We see that tied to the Prime growth and the adoption of Prime and success of that program,” said Olsavsky.

For Q3 Amazon said it expects sales to reach US$39.25 billion and US$41.75 billion, which would mark a year-on-year increase in the range of 20% – 28%.

It said operating income could come in anywhere between a loss of US$400 million and gain of US$300 million, compared with US$575 million a year earlier.

“Our teams remain heads-down and focused on customers,” said Amazon founder and CEO, Jeff Bezos.

Listing the company’s achievements in the last few months, he said Amazon had: launched Echo Show, its newest Echo device; introduced calling and messaging via Alexa on all Echo devices; and debuted Inside Edge on Prime Video – the first of 18 Indian Original Series.

In Q2, Amazon also: introduced Amazon Channels in both the UK and Germany; launched four new Fire tablets; expanded Amazon Fresh to Germany; launched Prime Now in Singapore; hired more than 30,000 new employees; opened three new Amazon Books stores; launched more than 400 “significant AWS features and services”; migrated more than 7,000 databases using AWS Database Migration Service; and held its third annual Prime Day — signing up more Prime members than ever before.

“It’s energising to invent on behalf of customers, and we continue to see many high-quality opportunities to invest,” said Bezos.