Amazon.com Inc on Thursday reported profit and earnings that blew past analysts’ expectations, sending its shares soaring in after-hours trading and showing the growing market power of its core retail company and new cloud services department.
The results draw a sharp contrast to the disappointing fourth quarter Amazon reported in January, which rekindled worries about the firm’s relatively thin profit margins among some investors. Shares of the world’s largest online retailer soared almost 13 percent to $679 in extended trading on Thursday.
Concerns also assuaged about a broader slow down among technology and internet companies after Intel, Microsoft and Apple all reported disappointing earnings.
While Amazon shown remarkable growth for a firm its size – earnings last quarter increased 28.2 percent to $29.13 billion, the largest sales increase since 2012 – its Amazon Web Services (AWS) cloud computing department was the highlight. Sales at the office rose 64 percent to $2.56 billion while operating income more than tripled to $604 million.
Even though operating margins dropped at the unit compared to last quarter, as Amazon spends greatly to compete with competitors like Microsoft and Google, they stay a strong 27.9 percent. That compares to 28.5 percent last quarter, and 16.9 percent a year before.
AWS, established 10 years ago, delivered more gain than Amazon’s retail company in the quarter. Research companies say AWS has more than 30 percent of the fast growing cloud computing marketplace and it stays way ahead of competitors including Google and Microsoft.
The firm said it would ramp up spending to entice Prime customers through video content, especially its “Prime Originals” – reveals Amazon develops itself.
“We believe that plan is working,” Chief Financial Officer Brian Olsavsky said in a conference call with analysts. “We are going to substantially increase our spend in that place.”
Consumer Intelligence Research Partners says the plan has 54 million US members, although Amazon doesn’t break out the amounts of Prime subscribers. Amazon’s increase on the sales side indicates the relationship model around Amazon Prime is operating, said Frank Gillett, a senior analyst at Forrester Research.
Amazon on Thursday also said it would continue to construct its logistics businesses, where it’s began using its own trucks and airplanes to supplement carriers like Fedex and UPS and offer- .
“They are still excellent associates, have been, and will continue to be for the future,” Olsavsky said in response to an analyst who inquired if Amazon would ever amuse delivering items for those businesses. “But we see opportunities where we must add additional capacity and we are filling those voids.”
The Echo has been a surprise success and Bezos said in the statement the firm can barely keep it in stock, but he declined to provide sales amounts.
Amazon’s net sales in North America, its largest market by earnings, rose 26.8 percent to $17 billion in the first quarter.
Amazon reported net income of $513 million, or $1.07 per share, for the quarter ended March 31, indicating a fourth straight quarter of gains for the once perennially cash-losing business. A year before, Amazon reported a loss of 12 cents per share, or $57 million.