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Retail monster, and President Trump's favorite company Amazon.com shares soared to record highs after another blow out quarter. Cloud division AWS continues to dominate and the Whole Foods intergration has not been the albatros predicted by many.

 

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CEO Jeff Bezos Adding To His 'World's Richest Man Stats

Earnings

  • Revenue: $51.04 billion vs. $49.78 billion, as estimated, according to Thomson Reuters, includes sales from Whole Foods, increased 43 percent year-over-year.
  • EPS: $3.27 per share vs $1.26 per share, as estimated, according to Thomson Reuters (not comparable)
  • AWS revenue: $5.44 billion vs. $5.25 billion, as estimated, according to FactSet Amazon's revenue, which includes sales from Whole Foods, increased 43 percent year-over-year.

Amazon.com, Inc. NASDAQ: $AMZN

Market Reaction > After hours 1,618.02 +100.06 (+6.59%) (New ATH $1625.01)

“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down.  As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row. A huge thank you to all our AWS customers, and you can be sure we’ll keep working hard for you.” said Jeff Bezos, Amazon founder and CEO.

Highlights

  • North America revenue rose 46 percent to $30.7 billion,
  • International sales rose 34 percent to $14.8 billion.

It is expected this trend to continue for a while with hostile competitors like Alibaba. Operating margins are likely to remain relatively low in the near future.

The Cloud - Amazon Web Services (AWS)

Amazon's cloud business smashed analyst estimates, with revenue climbing 49 percent in the first quarter. Amazon Web Services reported sales on Thursday of $5.44 billion, compared to the $5.26 billion average estimate of analysts surveyed by FactSet.

AWS contributed about 11 percent of Amazon's total revenue for the period, up from 8.5 percent in the prior quarter. AWS continues to be a big revenue driver and even larger profit engine for its parent company, which dominates the low-margin e-commerce market.

AWS architecture

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. While AWS has maintained growth above 40 percent, Microsoft and Google are currently expanding much faster and picking up share. AWS produced $1.4 billion in operating income in the first quarter. That accounted for 73 percent of Amazon's $1.93 billion in operating income.

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.

 If AWS continues to grow as much as it did lin 2017 it could pass SAP in size before the end of 2019. SAP's 2017 revenue of $26.5 billion was up 6 percent, and the company expects the same growth rate in 2018. Analysts are currently projecting 38 percent growth at AWS this year, according to FactSet.

AWS is almost twice as big as Salesforce, which generated sales of $9.9 billion over the past four quarters, growing 25 percent. 

Amazon Prime

Amazon has said that its most recent Prime Day was the best on record.  Before the latest Prime Day, Jeff Bezos recently said $AMZN has over 100 million. The analysis shows Amazon Prime members spend around $1,300 per year on the site. Non member customers spend aroun $700 per year they show.

Last year CIRP estimates 63% of Amazon shoppers are Prime members. Josh Lowitz, co-founder of Consumer Intelligence Research Partners says "Amazon Prime membership basically doubled in the U.S. in the past two years." 

On average, U.S. Amazon Prime members shop at Amazon 25 times per year. In contrast, customers without Amazon Prime shop at Amazon an average of 14 times per year, CIRP said.

Brick and Mortar Acquisitions and Partnerships

Over the past few years Amazon has been on a buying spree with WholeFoods, talk of Amazon Moving Into Real Estate and last quarter the deal with Sears where Kenmore appliances will be sold through Amazon. Investors will be looking for updates on these and others and a clarification of just what is their strategy going forward. One I would like to hear is about the Whole Foods locations and the $400 billion plus pharmacy market.

There is also the latest retail partnership, this with Kohl’s Corporation $KSS. Amazon will  start selling smart-home products in Kohl’s stores and cater for product returns. With Whole Foods, Sear and now Kohls Amazon is stealthly building brick-and-mortar retail for it's digital base.

Outlook

  • Amazon completed the Whole Foods acquisition in late August 2017.
  • $AMZN's current growth is expected to come from existing businesses, 
  • Amazon gave second-quarter revenue guidance in the range of $51.0 billion to $54.0 billion, in-line with street estimate of $52.2 billion.
  • Operating income is expected to fall between $1.1 billion and $1.9 billion, exceeding the $1.01 billion street estimate.

Source: Amazon.com, Inc

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