Amazon forecast shows company can grow profitably
SEATTLE: Amazon.com Inc. reminded investors on Thursday that scraping by selling things online was just the beginning. The world’s biggest internet retailer reported larger profits in the first quarter and forecast more of the same, delivered by its cloud-computing, subscription and advertising businesses.
The results highlight Amazon’s evolution from a low-margin retailer into an expansive provider of profitable services over the internet. The Seattle-based company projected operating income in the current quarter of $1.1 billion to $1.9 billion on revenue of $51 billion to $54 billion. Analysts estimated operating income of $1.13 billion of operating income and sales of $52.3 billion. “Virtually every opportunity that Amazon invests in is going to be structurally higher margin than its core ultra-low margin retail business,” Ben Schachter, an analyst at Macquarie Securities, wrote in a recent note to investors.
The results eased concern about criticism by US President Donald Trump, who dented Amazon shares last month with a series of tweets saying the company should pay more for postal services and contribute more in taxes.
Amazon shares jumped about 6% in extended trading following the report. The stock added to gains after executives announced an increase in the cost of the com- pany’s popular Prime subscription, to $119 a year in the US from $99.
“The fee was increased to help Amazon cover rising shipping costs and to pay for video-streaming content and technology investments,” said R J Hottovy, an equity analyst at Morningstar Inc.