Amazon (AMZN) on Tuesday reported first-quarter earnings and revenue that beat expectations, helped by strong growth in its cloud computing and advertising businesses. Amazon shares rose slightly in after-hours trading, perhaps held back by concerns about a lower-than-expected sales forecast for the June quarter.
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In a news release Tuesday, Amazon said it earned 98 cents per share on revenue of $143.3 billion in the final March quarter, up 13% from a year ago. Analysts forecast the Seattle-based company would earn 84 cents per share on revenue of $142.7 billion, according to FactSet.
In the same period last year, Amazon earned 31 cents per share on revenue of $127.4 billion.
Additionally, revenue from the company’s Amazon Web Services cloud computing division rose 17% year-over-year to $25 billion. That beat consensus expectations for revenue growth of about 15% year-over-year for the closely watched business.
For the current quarter, Amazon Sales are forecast to be between $144 billion and $149 billion. Analysts expected revenue of $150.12 billion for the end of the June quarter, according to FactSet.
On the stock market today, Amazon shares rose more than 2% to 180 in the latest after-hours action.
Amazon Stock: Strong Quarter for AWS
In the company’s press release, CEO Andy Jassy said AWS has $100 billion in annual revenue.
“The combination of companies renewing their efforts to modernize their infrastructure and the attractiveness of AWS’s AI capabilities is once again accelerating AWS’s growth rate (now at $100 billion in annual revenue),” Jassy said.
Amazon is by far the largest provider of cloud computing services for businesses. With this report, Amazon maintained its lead over similar sales growth accelerations from its key competitors. Microsoft (MSFT) and Google parent company alphabet (GOOGL).
AWS revenue growth has now accelerated in consecutive quarters for the first time since the industry-wide downturn that began in early 2022. In addition, AWS – long Amazon’s most important profit driver – will become even more profitable. The division’s operating income rose 84% to $9.4 billion. Operating margin for AWS increased to 37.6%, compared to 24% in the same quarter of 2023.
Amazon’s operating income exceeds expectations
Also notable in the report: Amazon’s international retail stores reported operating income for the first time since 2021. The division posted an operating profit of $900 million, compared to a loss of $1.2 billion in the first quarter of 2023. Sales in this segment increased 9.6% year-over-year to $31.9 billion -Dollar.
The company’s North American operations, meanwhile, contributed $5 billion to operating income, up 450% year over year. Revenue rose 12% year over year to $86.3 billion.
Overall, Amazon posted operating profits of $15.3 billion in the first quarter, well above analysts’ expected operating profits of $11.3 billion, according to FactSet.
Meanwhile, there was some speculation in the report that Amazon could follow the lead of other Big Tech companies Metaplatforms (META) and Google by introducing a dividend. However, there was no mention of a dividend in the company’s announcement.
Amazon Q1 in numbers
Amazon’s advertising business grew 24% year-over-year to $11.8 billion in revenue, beating expectations of $11.7 billion, according to FactSet. In the press release, Jassy said ad sales “continue to benefit from the growth of our Stores and Prime Video businesses.”
Online store sales rose 7% year over year to $54.7 billion, in line with consensus expectations.
Despite lower-than-expected sales forecasts, Amazon gave an operating profit outlook that was roughly in line with expectations. Amazon forecast operating profit of $10 billion to $14 billion for the June quarter, compared with analysts’ expectations of $12.7 billion.
In a note to clients Tuesday, RBC analyst Brad Erickson noted that Amazon is “known for taking a conservative approach.”
Amazon Stock: Technical Reviews
Before the results were released, Amazon shares fell 3.3% in regular Tuesday trading. Shares have gained 15% and 65% this year during the last 12 months.
At the time of the report’s publication, Amazon stock had an IBD Composite Rating of 94 out of a best possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Amazon’s Relative Strength Rating was 92 out of a best possible 99.
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