Amazon Profit Crushes Estimates as Cloud Services Revenue Soars on Thursday reported profit and revenue that blew past analysts’ expectations, sending its shares soaring in after-hours trading and demonstrating the growing market power of its core retail business and new cloud services division.

The results draw a sharp contrast to the disappointing fourth quarter Amazon reported in January, which renewed worries among some shareholders about the company’s comparatively thin profit margins. Shares of the world’s biggest online retailer jumped nearly 13 percent to $679 in extended trading on Thursday.

Amazon’s performance also assuaged concerns about a broader slowdown among tech and internet companies after Apple, Microsoft, and Intel all reported disappointing earnings.

“It did restore my faith,” said Dan Conde, an analyst at the Enterprise Strategy Group, who keeps a close eye on Amazon’s cloud business.

The company also offered a bright outlook, with revenue guidance for the current quarter of $28 billion to $30.5 billion, compared to the $28.33 billion analysts had expected.

While Amazon displayed impressive growth for a company its size – revenues last quarter rose 28.2 percent to $29.13 billion, the biggest revenue growth since 2012 – its Amazon Web Services (AWS) cloud computing division was the highlight. Revenues at the division climbed 64 percent to $2.56 billion while operating income more than tripled to $604 million.

Even though operating margins fell at the unit compared to last quarter, as Amazon spends heavily to compete with rivals like Microsoft and Google, they remain a healthy 27.9 percent. That compares to 28.5 percent last quarter, and 16.9 percent a year earlier.

AWS, launched 10 years ago, delivered more profit in the quarter than Amazon’s retail business. Research firms say AWS has more than 30 percent of the fast-growing cloud-computing market and it remains far ahead of rivals including Microsoft and Google.

Amazon said it also has seen strong growth in subscribers to its Prime loyalty program, which offers one-hour delivery, original TV programming and access to its digital entertainment products such as Prime Music and Prime Video for an annual fee of $99.

The company said it would ramp up spending to entice Prime customers through video content, particularly its “Prime Originals” – shows Amazon develops itself. That strategy builds on the success of programs including “Mozart in the Jungle” and “Transparent,” which each have won Golden Globe awards.

“We feel that program is working,” Chief Financial Officer Brian Olsavsky said in a conference call with analysts. “We’re going to significantly increase our spend in that area.”

The company recently launched a monthly subscription to the program for $10.99. Amazon has also said it plans to offer its video streaming service as a standalone service for a monthly fee of $8.99.

Amazon does not break out the numbers of Prime subscribers, but Consumer Intelligence Research Partners says the program has 54 million U.S. members. Amazon’s growth on the revenue side suggests that the relationship model around Amazon Prime is working, said Frank Gillett, a senior analyst at Forrester Research.

Amazon on Thursday also said it would continue to build its logistics operations, where it has started using its own trucks and planes to supplement carriers such as UPS and Fedex and offer-same day service.

“They’re still great partners, have been, and will continue to be for the future,” Olsavsky said in response to an analyst who asked if Amazon would ever entertain delivering items for those companies. “But we see opportunities where we need to add additional capacity and we’re filling those voids.”

Amazon founder Jeff Bezos also touted the success of new hardware products. “Amazon devices are the top selling products on Amazon,” he said in a press release, citing the Echo voice-response system and the Fire TV Stick.

The Echo has been a surprise hit and Bezos said in the statement that the company could not keep it in stock, but he declined to provide sales figures.

Amazon’s net sales in North America, its biggest market by revenue, increased 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, marking a fourth straight quarter of profits for the once perennially money-losing company. A year earlier, Amazon reported a loss of $57 million, or 12 cents per share.

Analysts on average had expected a profit of 58 cents per share and revenue of $27.98 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Narottam Medhora in Bengaluru and Sarah McBride in San Francisco; Editing by Kirti Pandey, Jonathan Weber and Bernard Orr)

image by SounderBruce


  1. Nate Hoffelder29 April, 2016

    What I find interesting about this report is that Amazon makes more money in services than as a retailer. I had thought that Amazon would eventually have to merge or acquire a b&M retailer in order to keep growing.

    Instead Amazon is expanding in other areas.

    1. Fjtorres29 April, 2016

      A lot of Amazon’s business is infrastructure and B2B, even though they aren’t seen as a B2B player by the masses. Their two biggest cash cows are AWS and their third party merchant services. Even in ebooks, both KDP and KDP select are really B2B plays and if you consider KU a marketing tool and squint a bit it too is B2B. 😉

      You often say that “if you’re not the customer you’re the product” but with Amazon very often consumers are both.

      KDP, Alexa, and FireTV all fall into that category as vendors looking to reach as big an audience as possible are drawn to those platforms because of their installed base and openess.

      The most recent example of this appeal is the recent appearance of Sony’s VUE service on the FireTV platform. Sony is probably second only to Apple in NIH and “mine, mine, mine” thinking and Vue started out, predictably, as Playstation- and Sony TV-only. So it is shocking that, upon rolling Vue out nationally, Sony’s first choice for a streaming platform partner wasn’t Roku, but rather Amazon. And more, while you can only stream Vue to one PlayStation at a time, they allow it to be streamed to multiple FireTVs simultaneously. (Gotta wonder: is Amazon paying Sony? Sony paying Amazon? Is it true love? Inquiring minds… 😉 )

      Suddenly, with that one move, Vue becomes an instant competitor to Dish, DirecTV (which is coming out with its own TV via IP product later this year), and the cablecos. And not at all a bad alternative for live TV in the living room. It’s not the mythical ala carte service so many of us pine for and the higher end packages are short of compelling channels but the basic package when combined with the other options on Fire TV makes for a very attractive combo at substantial savings over comparable cable deals.

      Something to keep an eye on. There’s a reason the Amazon gave the shoutout to the stick (and 18-month old product) in yesterday’s press release.


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