Retail monster Amazon.com reported stronger March quarter revenue Thursday and raised guidance for Q2 sending the shares sharply higher. Amazon stock was trading at 118.19 ▲ 8.37 (7.62%) after the release. Earnings were 31 cents per share v 21 cents per share expected on revenue of $127.36 billion vs $124.71 billion expected. AWS generated operating income of $5.1 billion in the quarter, AWS determines the company’s profitability as total operating income rose to $4.77 billion.
The markets were already bulled up after the META strong beat the night before. Amazon was the last of the mega-cap tech companies to report. Netflix kicked it off. Microsoft, Apple, Intel, Meta and Alphabet followed.
Amazon.com Inc. (NASDAQ: $AMZN) Reported After Close Thursday
Earnings release: 4:01 p.m.; conference call: 5:30 p.m.
Amazon Q1 23 Earnings:
Here are the key numbers:
- Operating income rose to $4.77 billion from $3.67 billion a year earlier.
- AWS generated operating income of $5.1 billion in the quarter.
- Earnings: 31 cents per share v 21 cents per share expected
- Revenue: $127.36 billion vs $124.71 billion expected
- AWS Sales $21.35B (est $21.03B)
- Subs Servs Sales $9.66B (est $9.29B)
- Online Stores Sales $51.10B (est $50.57B)
- Sees Q2 Net Sales $127.0B To $133.0B (est $130.1B)
- Sees Q2 Oper Inc $2.0B To $5.5B (est $4.74B)B)
AMZN: Stock Market Reaction
- $117.91▲ 8.09 (7.37%) After Hours
- $109.82 ▼ -28.35 (-20.52%) past year
- $109.82 ▲ +30.77 (+38.93%) past 5 years
- 52wk High $146.57
- 52wk Low $81.43
Advertising
Advertising: $9.55 billion vs. $9.48 billion expected, according to StreetAccount
“Our advertising business continues to deliver robust growth, largely due to our ongoing machine learning investments that help customers see relevant information when they engage with us, which in turn delivers unusually strong results for brands,” CEO Andy Jassy said in the earnings statement.
Prime
Amazon has a built-in consumer base of more than 200 million members that is primed to buy more. Members of Amazon’s Prime discount club tend to spend more and order more frequently than non-Prime members, according to market research firm Consumer Intelligence Research Partners.
Amazon said Prime members don’t appear to be ditching their memberships to cut costs in the face of inflation.
Customers spent less on discretionary categories and shifted to lower-priced items and value brands in categories like electronics. However, they continued to spend on everyday essentials such as consumables, beauty and soft lines. Third party sellers remain a key contributor and they comprised a record 59% of overall unit sales in Q4.
Amazon earlier this year hiked the price of its Prime membership for the first time in four years. The company raised the price of its annual Prime membership to $139 from $119. The cost of the monthly Prime membership increased to $14.99 from $12.99. The price change went into effect for new members on Feb. 18, and for current members after March 25.
American Web Services (AWS)
Amazon said Thursday while AWS continues to navigate more cautious spending from cloud customers, he believes “there’s much growth ahead,” pointing to the company’s investments in large language models.
- Revenue at AWS rose about 16% in the first quarter to $21.35 billion, above the $21.22 billion projected by Wall Street.
- Howeverthat’s a deceleration from the previous quarter, when AWS grew 20%. Companies have been trimming their cloud spend in recent months amid a challenging economic environment.
- Operating income in the quarter rose to $4.77 billion from $3.67 billion a year earlier. The company is dependent on AWS for its profitability, as the cloud unit generated operating income of $5.1 billion in the quarter.
Starting back in the middle of Q3, Amazon saw its AWS growth rate slow as enterprises of all sizes evaluated ways to optimize their cloud spending. As expected, these optimization efforts continued into Q4 and the company expects they will continue to be a headwind to AWS growth in at least the next couple of quarters.
In January, AWS revenue growth was in the mid-teens. The weakness is across all industries, with particular weakness seen from mortgage companies that are seeing lower volumes. Companies involved in crypto and advertising are also spending less. The silver lining here is that its new customer pipeline remains healthy.a
During the fourth quarter AWS launched its second cloud data center region in the United Arab Emirates, and it announced the availability of “serverless” services that help developers deploy data-analytics tools with minimal server-management work.
Amazon has slowed the pace of hiring in AWS, even as it continues to grow faster than the company’s core e-commerce business. In some parts of AWS, Amazon has met its hiring needs, while in others it has thousands of job openings, an AWS spokesperson told CNBC earlier this week. The comments came as Google and Microsoft also indicated they would reduce headcount growth.
American Web Services (AWS) Background
Amazon launched AWS in 2006 and controlled about 39% of the cloud infrastructure market in 2021, down from 41% in 2020, according to estimates from technology industry researcher Gartner. Google
, Huawei and Microsoft all gained share last year, Gartner said. The industry has seen steady growth as businesses continue to offload their computing and storage to the cloud.
In cloud-computing infrastructure, Amazon has a substantial market share lead over Microsoft Azure, Google’s Cloud platform and IBM, as well as other players like Alibaba and Oracle. Microsoft and Google are currently expanding much faster and picking up share.
AWS is the envy of Apple, Oracle, Google, IBM and every other niche cloud provider. AWS is the leading platform in this growth market. Amazon Web Services., Amazon’s cloud business in just ten years has become the fifth-largest business software provider in the world.
Amazon has proven that it can diversify beyond e-commerce whilst at the same time Microsoft, Google, IBM and others are all chasing AWS in the cloud.
AWS is almost twice as big as Salesforce
Outlook
Amazon second-quarter forecast suggests sales to rise between 5% and 10% from the same period a year earlier.
Amazon is laying off 27,000 employees, the largest job cuts in its 29-year history. Earlier this week, employees in AWS and human resources were let go, following cuts in advertising and Twitch live streaming. Amazon shaved its headcount by about 76,000 people to 1.46 million employees as of the end of the end of the first quarter, reflecting in part the recent layoffs, as well as attrition in its warehouses that typically occurs following the peak holiday shopping period.
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