Amazon posted strong profits in the first quarter due to strong growth in its cloud business, AWS.
advertisementAmazon reported strong first-quarter profits that beat market expectations as its cloud computing service, Amazon Web Services (AWS), accelerated growth supported by advances in artificial intelligence (AI).
Shares of the e-commerce giant rose more than 1% in after-hours trading, despite widespread declines on Wall Street.
Overall strong quarterly profit
Amazon beat market expectations, reporting earnings of 98 pence per share and revenue of $143.3 billion, beating estimates of 83 pence and $142.5 billion, respectively. Overall sales revenue increased 13% from $127.4 billion in the same period last year. Operating income was $15.3 billion and net income was $10.4 billion, both more than triple the same period last year. Over the subsequent 12 months, operating cash flow increased by 82% to $99.1 billion.
The AWS and advertising segments, key indicators of business growth, showed solid momentum, increasing 17% and 24% year-over-year, respectively. Meanwhile, sales at online stores, the main revenue contributor, rose 7% year over year to $54.7 billion, slightly lower than the 8% growth in Q4 2023. However, the growth of third-party seller services is slowing. , sales rose 16% to $34.6 billion, slowing from the 19% increase in the previous quarter and the 20% increase in the first quarter of 2023.
Amazon has an upbeat outlook for the second quarter, expecting operating income to be in the range of $10 billion to $14 billion, representing year-over-year growth of 30% to 82%.
Amazon's AWS growth accelerates
ASW segment sales revenue reached $25 billion, an increase of 17% year over year, significantly exceeding the estimate of $24.5 billion, a 12% increase. This segment is considered a vital core business for the company and has the top market share in the cloud business, followed by Microsoft's Azure and Google Cloud.
AWS stands out as the company's most profitable division, accounting for 62% of total operating income. Operating income reached $9.4 billion, nearly double the same period last year. Additionally, the cloud business generated 17% of overall revenue and operating margin of 38% in the first quarter, representing notable growth acceleration of 14% and 30%, respectively, from the final quarter of 2023.
A variety of factors are contributing to AWS's growth, including the adoption of AI, increased corporate spending on cloud computing, and cost-cutting measures.
Amazon is optimistic about the potential of Amazon Q, a generative AI-powered assistant that helps customers develop software and analyze internal data. Additionally, the expansion of our “strategic collaboration” with NVIDIA represents another major advance in the AI field.
Consistent with positive reports from other tech giants about cloud computing, such as Microsoft's Azure and Alphabet's Google Cloud, Amazon's AWS is similarly benefiting from a resurgence in corporate spending due to the AI boom. Amazon observes that the business cost optimization trend is shrinking, and this trend is expected to continue and further support AWS growth.
In early April, the company announced plans to cut hundreds of positions in its cloud computing space in order to “focus on key strategic areas with the greatest impact.” The layoffs could reduce expenses and further boost the division's profit margins.
Amazon's advertising department is experiencing steady growth
Advertising revenue has exceeded expectations, making it Amazon's second fastest-growing business. The segment's revenue was $11.8 billion, up 24% year over year, compared to Alphabet's 13% increase and Meta's 27% increase in the same quarter. It became. Ad-supported Prime Video plans are expected to maintain advertising revenue growth. The sector has maintained a steady growth of more than 20% since the last quarter of 2022.
