LA Private

Amazon results much better than expected

Business media got all excited about the quarterly results from Amazon, which were much better than expected. However, the outlook was weaker than expected for another quarter. As a result, the shares, which had fallen more than 3% in Tuesday’s sell-off, could only manage a 2.9% gain in sparse after-hours dealings.

The online giant revealed better-than-expected earnings and revenue for the first quarter, driven by growth in advertising and cloud computing, and of course, by cost-cutting.

Amazon has chopped off more than 27,000 employees since late 2022, with the cuts bleeding into 2024. During the first quarter, Amazon let go hundreds of staffers in its health and AWS businesses and made significant cuts in Prime TV, Prime itself, and other businesses.

Revenue rose to $US143.3 billion, up 13% from $US127.4 billion a year ago, and operating income soared more than 200% to $US15.3 billion, far outpacing revenue growth. Investors said that was the big positive from the results and a solid sign that the company’s cost-cutting measures in 2022 and 2023 are now bolstering its bottom line. The cloud business, AWS, though accounted for 62% of total operating profit. Net income also more than tripled to $10.4 billion, from $US3.17 billion. Amazon said it expects a continued jump in profitability for the current second quarter but at a more measured (slower) pace. The company said operating income will be $US10 billion to $US14 billion, up from $US7.7 billion a year earlier. Revenue in the current quarter will be $US144 billion to $US149 billion, or growth of 7% to 11%. Analysts were expecting growth of 12% to $US150.1 billion, which is why the forecast was seen as a bit weak.

The rebound at AWS stood out; Amazon said sales in the division surged 17% in the first quarter to $US25 billion, topping forecasts for sales growth of 12% to $US24.5 billion. For Amazon, it was a welcome return to sales growth for AWS after a sluggish year in 2023. Demand for cloud services is being driven by AI, according to the company.

Despite media hints at a dividend re-release (joining the likes of Meta, Alphabet, and Apple among the megatechs in paying dividends), there was nothing from Amazon. Also, unlike other megatechs, there was no buyback news from Amazon in its results release.