Amazon Gains on Positive Outlook Fueled by E-Commerce Sales Inc. shares gained after it gave a sales outlook that topped estimates on a strong performance from its main e-commerce business and reported the slowest pace of spending in at least a decade.

(Bloomberg) — Inc. shares gained after it gave a sales outlook that topped estimates on a strong performance from its main e-commerce business and reported the slowest pace of spending in at least a decade.

The company projected revenue in the current quarter will be $138 billion to $143 billion, compared with analysts’ average projection of $138.3 billion. Operating income will range from $5.5 billion to $8.5 billion. Analysts, on average, estimated $5.41 billion.

Since taking the reins two years ago, Chief Executive Officer Andy Jassy has been putting his stamp on the world’s largest e-commerce and cloud services company. Besides cutting thousands of jobs, he reined in spending while continuing to invest in Amazon’s core businesses. The company’s quarterly expenses increased at the slowest rate since at least 2012. 

Keen to retain a competitive edge in its core online retail business, Amazon has pledged to reinvest in its logistics operation and on Monday said it would double the number of facilities capable of getting orders to customers the same day. Earlier this week, Bloomberg Businessweek reported that Amazon is rebooting its grocery operation by offering fresh food delivery to shoppers without Prime subscriptions and more tightly integrating its Fresh and Whole Foods Market chains.

Second-quarter revenue increased 11% to $134.4 billion, the company said in a statement, topping estimates. Sales in the online stores category increased 4% to $53 billion.

“The upturn in Amazon’s e-commerce business is an encouraging sign for the back half of the year that should add to topline growth,” Andrew Lipsman, an analyst at Insider Intelligence, said after the results.  

The Seattle-based company is generating an increasing share of revenue from the more profitable business of providing services and advertising to independent merchants, who rent space on Amazon’s website and in its warehouses. Advertising sales rose 22% to $10.7 billion and seller services revenue jumped 18% to $32.3 billion in the quarter.

Chief Financial Officer Brian Olsavsky said products from independent merchants represented 60% of all sales on the site, the highest ever, which contributed to growth of Amazon’s seller-services revenue.

Lipsman pointed to the ad business, saying it “held up especially well this quarter, and the picture should only get brighter in (the second half of the year) with Prime Day and the holidays adding to its momentum.”

Jassy showed in the results that he can boost sales while also cutting spending. Operating expenses increased 7.5%. Sales and marketing costs rose just 6.5%, after years of hovering closer to increases of 35%.

After cutting 27,000 mostly corporate jobs, Amazon employed 1.46 million people as of the end of the period on June 30, a decrease of 4% from the period a year earlier. 

The shares jumped about 7.5% in extended trading after closing at $128.91 in New York. The stock has increased 53% this year as part of a broad technology industry rebound.

Amazon Web Services, which generates much of the company’s operating profit and is now slowing, has rolled out various products based on generative artificial intelligence. Some analysts believe Amazon has fallen behind Microsoft Corp. and Alphabet Inc.’s Google, which have released popular chatbots powered by the technology. Amazon denies this and says the generative AI race has barely begun.

AWS revenue rose 12% to $22.1 billion, which was more than Wall Street projected. But it was the sixth consecutive quarter that the pace of growth has declined in the cloud business.

Olsavsky said growth rates for the cloud unit were “stabilizing” during the second quarter and the company has a healthy customer pipeline.

–With assistance from Matt Day.

(Updates with comments from analyst in the sixth paragraph.)

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