Amazon’s profit skyrockets on cloud-computing, ads

Amazon.com Inc. reported quarterly profit that exceeded analysts’ estimates, demonstrating the company’s focus on cloud-computing, advertising and other high-margin businesses continues to pay off. First-quarter earnings were US$7.09 a share, the Seattle-based company said Thursday. Analysts had projected US$4.67 a share. Revenue gained 17 per cent from a year earlier to US$59.7 billion — in line with the average estimate of analysts compiled by Bloomberg. The retailer has been buoyed in recent quarters by increasing sales in cloud-computing, digital advertising, and services for third-party sellers on Amazon’s retail site, all of which are more profitable than the company’s central online business. While profit was greater than the Street expected in the first quarter, Amazon’s forecast tempered investors’ enthusiasm. The company projected operating income in the current quarter of as much as US$3.6 billion, falling short of estimates, and suggesting Amazon may be spending more than anticipated on its bets for future growth. “They’ve kind of reaped the benefit of prior investment, but they caught up now,” Aaron Kessler, an analyst at Raymond James, said before the company’s results were posted. Amazon may have to increase investments again to spur future revenue growth, he said. The stock has jumped 27 per cent this year.

Chief executive Jeff Bezos for years pumped most of the cash generated from Amazon’s operations back into new initiatives. That led to prodigious revenue growth, but little income left over for investors. Now, with quarterly sales growth of less than 20 per cent for the first time since 2015, shareholders are seeking greater profit, much of which comes from the Amazon Web Services division, which leads in the growing market for selling computing power and data storage. AWS revenue gained almost 42 per cent from a year earlier to US$7.7 billion. The unit’s operating income was US$2.2 billion, or 50 per cent of Amazon’s total. Sales in Amazon’s “other” segment, which is mostly advertising, increased 34 per cent, to 2.72 billion. The company’s digital advertising franchise has grown into the third largest in the U.S., trailing only Alphabet Inc.’s Google and Facebook Inc., researcher EMarketer estimates.