Amazon earnings surpass expectations as company invests in pursuit of future growth

Amazon, the world's biggest online retailer, released its latest quarterly earnings report this week, surpassing expectations.

Bloomberg reports that the Seattle, Washington-based company reported net income of $191 million in its second fiscal quarter, which was down slightly from 2010 levels. However, net sales climbed to $9.91 billion, which was ahead of analysts' expectations.

The strategic sourcing of its products, along with an emphasis on business cost reductions, helped to fuel growth during the quarter. What's more, Amazon officials said that sales of its popular Kindle e-reader and the growing popularity of its online digital media services also boosted revenue.

While Amazon's profit margins have fallen over the past few fiscal quarters, industry analysts said that the company is merely investing in its future growth, constructing additional distribution centers that will help to increase future efficiency.

"We're seeing continued robust revenue growth, better than expected," Robert W. Baird & Co. analyst Colin Sebastian told the news agency. "Amazon is running on all cylinders, despite the pressure on its margins." 

Amazon chief financial officer Tom Szkutak said that the company planned to invest in more than 15 fulfillment centers this year as it works to augment its production capacity amid surging demand.

"This is the strongest growth we've seen - both in terms of percentage growth on a dollar basis as well as local currency growth - in over 10 years," Szkutak affirmed. "Because of that, what we see looking forward is we're investing a lot in capacity." 

Manufacturing cost reductions, which Amazon has achieved through improving efficiency at its technology advanced fulfillment centers, have helped propel the company's expansion over the past few years. Amazon chief executive Jeff Bezos asserted that an amalgamation of forces has spurred the company's rapid growth this year, Reuters reports.

"Low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade," he said. 

Amazon executives also that the company's third quarter guidance had been raised based on brisk sales. Amazon expects third quarter sales to hit between $10.3 billion and $11.1 billion, which would represent a precipitous jump from the same period the year prior. 

Still, operating income will likely decline between 37 percent and 93 percent, the company projected, as it aggressively invests for future growth.