Amazon.com reported stronger-than-expected third-quarter net income, with a significant contribution from Rivian Automotive. Even after factoring out the impact of Rivian’s stock volatility, Amazon’s results remained solid.
Impressive Financial Performance
Amazon’s unadjusted net income for the third quarter was just under $10 billion, surpassing Wall Street’s estimate of around $6 billion. Citi analyst Ronald Josey commented that Amazon Web Services’ revenue exceeded expectations, and the retail sector proved to be resilient.
Positive Investor Response
Investors responded positively to Amazon’s performance, as reflected in the 6.8% increase in premarket trading for Amazon stock. Additionally, S&P 500 and Nasdaq Composite futures saw gains of 0.2% and 0.8% respectively.
Understanding the Impact of Rivian
Amazon’s net income figure includes a $1.2 billion gain from its ownership of approximately 160 million Rivian shares. During the third quarter, Rivian stock started at $16.66 per share and closed at $24.28 per share. The $1.2 billion gain is calculated by taking the difference between these prices, which is $7.62, and multiplying it by the 160 million shares held.
Evaluating Amazon’s Performance
According to accounting regulations, companies are required to recognize changes in the value of publicly traded stocks in their income statements each quarter. While gains and losses from stock fluctuations are generally anticipated, they can impact the evaluation of financial results.
Excluding the gain from Rivian, Amazon still earned approximately $7.7 billion in the third quarter, surpassing Wall Street’s expectations.
The Impact on Amazon’s Holdings
The closing price of Rivian stock on Thursday was $16.17 per share, resulting in a loss of $1.3 billion for Amazon. If the quarter were to end at that point, this loss would be reflected in the profit-and-loss statement.
However, the $1.3 billion loss represents only 0.1% of Amazon’s market capitalization, which is not a significant concern for investors.
Rivian’s Significance for Amazon
Previously, the movement of Rivian stock held more significance for Amazon. In November 2021, the stock reached a record high of $179.47. At that time, Amazon’s stake in Rivian was worth approximately $29 billion, accounting for almost 2% of Amazon’s market capitalization. Although its impact has diminished, when Rivian stock traded at a higher price, it had a more substantial effect on Amazon’s quarterly results.