Supported by strength in its cloud computing business, Amazon reported first quarter earnings that came in well above expectations says Michael Berger, Associate Editor of MoneyShow.com, who highlights the company’s results and his future expectations for the shares.
Amazon.com Inc. (AMZN) is up more than 12% after the company’s first-quarter earnings destroyed expectations.
AMZN reported $29.1 billion in revenue, up 28% from last year and beating expectations of $27.99 billion. During the quarter, Amazon earned $1.07 per share, which blew away the $0.58 per share estimate.
Amazon Web Services (AWS) grew faster than expected and generated $2.57 billion in revenue, slightly higher than the $2.53 billion estimate.
AWS is a Profit Machine
Although AWS accounted for less than 10% of Amazon’s total revenue, it accounted for 56% of its profit and is the most profitable business at Amazon. Revenues at AWS climbed 64% while operating income more than tripled to $604 million.
During the quarter, AWS generated more operating income than Amazon's entire US e-commerce business.
Some research firms said AWS owns more than 30% of the cloud-computing market and it remains far ahead of rivals including Microsoft (MSFT) and Google (GOOG).
International and Hardware Business Shows Strength
AWS may have taken center stage in Amazon’s earnings report but international sales and hardware sales were also major bright spots of the report.
During the quarter, Amazon recorded $9.57 billion in revenue from international sales. This represents a 23% increase from the same period last year and the numbers show massive growth outside of the US.
Although Amazon does not break out the earnings for its hardware products, the company said that its own devices are the best-selling hardware items on Amazon. CEO Jeff Bezos said the Kindle Fire was a big contributor to overall sales growth as the company sold twice as many Fire tablets as it did in the first quarter of last year.
An Incredible Growth Story
While writing this article, AMZN is trading at $677.50 and shares are up more than 12.5%.
Over the next year AMZN should realize continued growth from its retail website, Amazon Web Services, and from Amazon Prime.
We expect to see continued operating margin improvements given AMZN’s focus on operational efficiencies, its shift to third party sales and higher margin Amazon Web Services growth.
