Amazon reported Q1 earnings and revenue after the bell on Tuesday that came in above analysts’ expectations, thanks to growth from its Amazon Web Services (AWS) and advertising revenue. Amazon stocks climbed over 2% in extended trading following the release.
CEO Andy Jassy credited the strong quarter to growth from AWS, in part fueled by new artificial intelligence (AI) features, as well as progress in its advertising business.
Amazon Q1 earnings
Here’s how the company did in its Q1 earning report:
Amazon earnings per share: 98 cents vs. 83 cents expected by LSEG
Amazon revenue: $143.3 billion vs. $142.5 billion expected by LSEG
Wall Street is also looking at these key numbers:
Amazon Web Services: $25 billion vs. $24.5 billion in revenue, according to StreetAccount
Advertising: $11.8 billion vs. 11.7 billion in revenue, according to StreetAccount
Cost cutting paid off
Operating income soared more than 200% in the period to $15.3 billion, far outpacing revenue growth, the latest sign that the company’s cost-cutting measures and focus on efficiency is bolstering its bottom line. AWS accounted for 62% of total operating profit. Net income also more than tripled to $10.4 billion, or 98 cents a share, from $3.17 billion, or 31 cents a share, a year ago.
Amazon’s earnings growth has been driven in part by widespread cost-cutting, tweaks to its fulfillment operations, and the stabilizing of cloud spending. CEO Andy Jassy has become more disciplined in the company’s spending, while growing profitable services like advertising, cloud computing, Prime memberships and its third-party marketplace.
The company has laid 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.
Sales increased 13% from $127.4 billion a year earlier.
Amazon outlook
Amazon expects a continued surge in profitability for the Q2 but at a more measured pace. The company said operating income will be $10 billion to $14 billion, up from $7.7 billion a year earlier.
Amazon profit surges
Revenue in the current quarter is expected to be in the $144 billion to $149 billion range, Amazon said, representing growth of 7% to 11%. Analysts were expecting growth of 12% to $150.1 billion, according to LSEG.
Sales at AWS accelerated 17% in the first quarter to $25 billion, topping Wall Street’s forecast for sales growth of 12% to $24.5 billion. For the past year, growth in AWS has slowed, as businesses trimmed their cloud spend. But Amazon executives have said they’re seeing cost optimizations taper off, and they’ve indicated that demand for generative artificial intelligence can be a boon for its cloud business.
Growth in ad business
Amazon’s advertising unit saw sales surge 24%, just ahead of consensus estimates. It’s the first report since Amazon started running ads in Prime Video, a move analysts predict could generate significant revenue over time.
The company’s ad business, which grew faster than retail or cloud computing, has become an increasingly important profit driver for Amazon and has emerged as a main player in online advertising.
Revenue from third-party seller services, which includes commissions collected by Amazon, fulfillment, shipping fees and other charges, continued to surge. Sales in the unit grew 16% year over year to $34.5 billion.
Growth in market
That market overall started growing again after a brutal 2022, when brands reeled in spending to cope with inflation and rising interest rates. Meta, Snap and Google parent Alphabet all reported first-quarter results last week and showed better-than-expected revenue growth, which was primarily driven by improvements across their ad businesses.
