Q2 Ad Revenue for Amazon Hits $12.8 Billion, Up 20% but Below Wall Street Estimates

Amazon's strategy to incorporate advertisements into Prime Video significantly impacted its advertising revenue, which increased by 20% to $12.77 billion for the second quarter of 2024. However, this figure fell short of analysts’ expectations, who had forecasted ad revenue of approximately $13 billion, according to StreetAccount. The advertising initiative, which was enabled by default starting in January unless users opted for a paid ad-free experience, is part of Amazon's broader effort to enhance user engagement with the streaming service. In April, Amazon CEO Andy Jassy announced that Prime Video had surpassed 200 million monthly viewers and highlighted improvements to the platform's user interface.

Overall, Amazon reported total revenues of $148.0 billion for the quarter, reflecting a 10% increase year over year. However, this total was slightly below Wall Street's forecast of $148.56 billion. On a positive note, net income for the quarter doubled to $13.5 billion, or $1.26 per diluted share, surpassing analyst estimates of earnings per share (EPS) of $1.03.

In his remarks, Jassy, who previously led Amazon Web Services (AWS), emphasized the reacceleration of AWS growth, with sales up 19% to $26.28 billion and segment operating income rising to $9.3 billion compared to $5.4 billion in the same quarter of the previous year. “We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” he stated.

The company's media segment also made headlines during the quarter. Amazon MGM Studios released 19 films and series, including “Fallout,” which became the second most-watched original title globally during its launch. Additionally, Season 4 of “The Boys” ranked as the most popular title on Prime Video in over 165 countries within its first two weeks. Amazon also celebrated its achievements in the awards arena, receiving 62 Emmy nominations, including 17 for “Fallout” and 16 for “Mr. and Mrs. Smith.”

Looking ahead, Amazon secured streaming rights for the NBA for 11 seasons starting in the 2025-26 season, with estimated costs of around $1.8 billion annually. For the third quarter of 2024, the company projects sales to range between $154.0 billion and $158.5 billion, indicating growth between 8% and 11% compared to the same period in 2023. The midpoint of this range falls below analysts' consensus estimates of $158.24 billion. Amazon also expects operating income to be between $11.5 billion and $15.0 billion, compared to $11.2 billion in Q3 2023.

In summary, Amazon's advertising revenue growth demonstrates a successful pivot towards monetizing its streaming services, particularly through initiatives like the integration of ads into Prime Video. This move has helped the company increase its advertising revenue by 20% in the second quarter of 2024, showcasing its ability to leverage its vast user base and enhance engagement on its platforms.

However, despite this positive development in advertising, Amazon faced challenges in meeting broader revenue expectations, highlighting the complexities and pressures associated with its diverse business model. The overall revenue reported fell short of analyst forecasts, which underscores the competitive landscape and the difficulties in balancing various revenue streams across its extensive portfolio, including e-commerce, cloud services, and media.

As Amazon continues to invest significantly in content creation and advertising capabilities, it is also strategically expanding its streaming rights, such as securing long-term agreements for sports content. These efforts are designed to not only attract new subscribers but also to enhance viewer engagement and loyalty within its ecosystem.

Looking ahead, while there are challenges in meeting short-term revenue targets, Amazon's commitment to innovation and growth in the digital space positions it favorably for future success. The company's ability to adapt to changing consumer preferences and its focus on delivering compelling content and advertising experiences will be crucial as it navigates the evolving digital landscape and seeks to capitalize on emerging opportunities in streaming and advertising.