With a profit growth rate of 1186%, is Amazon still far from a trillion-dollar market value?

For Amazon's quarterly financial report, one of the data worth noting is its year-on-year profit growth rate, which is related to the strategy Amazon has always adopted. Since its listing in 1997, Amazon has used various means to keep itself in a non-profit and slightly loss-making state for a long time; it was not until the third quarter of 2015 that Amazon achieved a net profit of US$97 million for the first time - but then Amazon's year-on-year profit margin has doubled, often becoming one of the most dazzling stocks in the financial reporting season.

When the second quarter 2018 financial report was released, history repeated itself and intensified.

Q2 financial report data shows that Amazon's net sales in the second quarter were US$52.886 billion, a year-on-year increase of 39% from US$37.955 billion; net profit was US$2.534 billion, a year-on-year increase of 1,186% from US$197 million in the same period last year - a year-on-year profit growth rate of more than 10 times, which is very eye-catching.

Although net sales fell short of analysts' expectations, Amazon's stock price rose sharply after the market closed as earnings per share far exceeded expectations.

From the perspective of business sectors:

• Amazon's North American division had net sales of $32.169 billion in the second quarter, up 44% from $22.370 billion in the same period last year; operating profit was $1.835 billion, up from $436 million in the same period last year. In the past three quarters, Amazon's North American division's revenue growth rate has remained above 40%.

• Amazon's international division had net sales of $14.612 billion in the second quarter, up 27% from $11.485 billion in the same period last year, but it posted an operating loss of $494 million, compared with an operating loss of $724 million in the same period last year.

• AWS cloud service net sales in the second quarter were $6.105 billion, up 49% from $4.100 billion in the same period last year; operating profit was $1.642 billion, up from $916 million in the same period last year. In the past six quarters, AWS business revenue growth has remained above 40%.

It can be seen that Amazon's international division is still in a loss-making state, but the loss itself is narrowing, and the strong growth of the North American division and AWS is enough to make up for this loss; especially the AWS business, which is in a state of continued strong growth. In fact, in the conference call after the release of the financial report, Amazon CFO Olsavsky said that the reason for the high profit growth in this quarter's financial report was due to the strong growth of AWS and advertising business.

However, for Amazon CEO Jeff Bezos, he is more concerned about the business related to Amazon's voice assistant Alexa. In his comments on the Q2 financial report, Jeff Bezos said:

We want users to be able to use Alexa anywhere. Currently, tens of thousands of developers in more than 150 countries and regions around the world use the Alexa voice service to develop new devices. In the past year, the number of devices that support Alexa has more than tripled. Our partners are developing a variety of new Alexa devices and experiences, including speakers developed by Polk and Sonos, headphones developed by Jabra, smart furniture devices developed by Ecobee and First Alert, Windows 10 PCs from Acer, HP, and Lenovo, and cars from BMW, Ford, and Toyota.

Leifeng.com noticed that Alexa was the only product that Jeff Bezos talked about in his comments, which shows how important Alexa is to him. In fact, in 2016, Jeff Bezos said that Alexa has become one of the four pillars of Amazon's development, along with Amazon e-commerce, Prime members (the number has exceeded 100 million), and AWS.

Dave Fildes, Amazon's head of investor relations, said of Alexa's contribution to Amazon's music business:

Another very important factor is Alexa. We think that the most satisfying feature of using those devices (Leifeng.com note: referring to Echo-related devices) is the ability to interact with Alexa... People can enjoy a rich and growing range of Amazon services. There are now more than 45,000 services available to customers.

Leifeng.com noted that Amazon’s current market value is $877.29 billion, and just two days ago, its market value once exceeded $900 billion. However, for a giant of this size, the most concerned issue for the outside world may still be: Can Amazon realize its dream of a trillion-dollar market value before giants such as Apple and Microsoft?

I believe time will give the final answer.