Amazon surges past earnings estimates

Report of online vendor’s more profitable quarter in its history sparks share price rise

SEATTLE— Amazon delivered a blowout quarter on Thursday, joining Facebook as one of the rare bright spots in a technology sector that has recently produced a string of disappointing earnings reports.

Helped by its fast-growing Amazon Web Services business, the company swung to a profit that, for Amazon, qualified as hefty. The company’s shares jumped more than 12 per cent in after-hours trading.

For the first quarter ended March 31, Amazon reported net income of $513 million (U.S.), or $1.07 a share, up from a loss of $57 million, or 12 cents a share, in the same period a year ago.

It was the most profitable quarter in the company’s history.

Revenue at the company rose to $29.13 billion from $22.72 billion a year ago.

The results were well above the average estimates of analysts surveyed by Thomson Reuters for earnings of 58 cents a share and revenue of $27.98 billion.

Amazon is a company that often flip-flops between showing profits and losses, depending on how aggressively it decides to plow money into big, new business bets.

Investors have granted the company much wider leeway to do so than other technology companies of its size because of its history of delivering outsize growth.

For the time being, it has clearly chosen to produce profits.

For the last four quarters, Amazon has run in the black, even if it’s still not quite as profitable as some technology companies.

Facebook, in contrast, reported its net income for the first three months of the year tripled to $1.5 billion from a year earlier.

A big part of that is Amazon Web Services, the cloud computing business started just over a decade ago that’s on track to haul in more than $10 billion a year in revenue.

AWS, as the business is known, is the most popular cloud service for start-ups and for a growing number of big companies that want to rent computing capacity rather than run their own hardware and software.

It’s also much more profitable than Amazon’s North American retail business, which runs on much thinner margins, and its international retail business, which runs at a loss. The operating income for AWS more than tripled in the quarter to $604 million. Revenue from AWS jumped 64 per cent to $2.57 billion.

Last year, Amazon reached $100 billion in annual sales.

Even at that size, it is an accepted truth among most investors that Amazon can become a lot bigger because online commerce still represents a relatively small portion of total retail sales.

According to eMarketer, a technology research firm, online sales in 2016 are expected to reach about $385 billion in the United States, or 8 per cent of the company’s total retail sales.