Amazon has reported its second straight quarter of $100bn-plus sales, comfortably beating Wall Street’s targets as it continues to reap the rewards of pandemic conditions.
With people around the world now hooked on online shopping and video streaming and the shift to homeworking boosting Amazon’s cloud computing business, the company posted net sales of $108.5bn in the first three months of the year, up 44 per cent on the same period a year ago.
Net income more than tripled to $8.1bn, helping push its shares up 3 per cent to a record above $3,590 in after-hours trading.
“There is little to indicate a slow down in Amazon’s growth,” said Daniel Newman, analyst at Futurum Research. “Its businesses across the board, ecommerce, cloud, advertising, devices, are all seeing growth and I expect this to continue into the next quarter.”
Almost half Amazon’s operating income — $4.2bn — came via its cloud division, AWS, whose business customers have been forced to invest as a result of the shift to homeworking. Year-on-year revenue growth at AWS was 32 per cent.
Jeff Bezos, Amazon founder, is due to move to become executive chair, with current AWS head Andy Jassy replacing him as chief executive. The company has said the handover would take place at some point in the third quarter of this year, but gave no update on Thursday.
Amazon’s advertising business is also emerging as a big new profit centre, with revenues up 77 per cent year-on-year to $6.9bn in the first quarter, as the company continued to leverage its position as the starting point for millions of daily product searches.
In its guidance, Amazon said it expected its elevated sales to continue, even as communities begin to reopen, predicting between $110bn and $116bn in overall revenue in this current quarter. That figure will be boosted by the Prime Day sales event, which is being brought forward to June. The pandemic delayed it to October last year and it has typically been held in July.
Speaking on a call with journalists, Brian Olsavsky, Amazon’s chief financial officer, said ecommerce delivery speeds in Europe were now back to pre-pandemic levels, but that the US was “not quite” at full power. He said the company expected continued heavy investment in logistics in 2021, having added more than 500,000 more workers in 2020.
Amazon said it expected net income to come in between $4.5bn and $8bn in the current quarter, factoring in $1.5bn in spending related to Covid-19 measures in its logistics network.
Charlie O’Shea, an analyst at Moody’s, described the company’s earnings as “staggering”, and drew attention to improved margins in the AWS business. “[AWS] operating income increased by over $1bn,” he said, “and increased around $600m from Q4 2020 on only $800m in revenue growth, indicating a significant leveraging of expenses driving margin expansion.”
Bezos on Thursday sought to highlight Amazon’s streaming service, Prime Video, which he said had been used by 175m Prime members over the past year, with “streaming hours” up 70 per cent year-on-year.
In one negative impact from the pandemic, sales at Amazon’s physical stores — mostly Whole Foods supermarkets — were down by 16 per cent in the first quarter, compared with the same period last year.
“I think we’re seeing a bit of a drop from people working at home, not working in buildings that surround Whole Foods stores,” Olavsky said.