Amazon surges after Q1 profit, cloud-unit sales top estimates

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Amazon.com Inc reported quarterly profit that topped estimates as cost cuts and surprisingly strong sales in the cloud-computing division helped the e-commerce giant weather an uncertain economy. The shares were little changed in extended trading, giving back earlier gains of as much as 12%.
First-quarter revenue increased 9.4% to $127.4 billion, the company said in a statement, above expectations for $124.7 billion. Operating income was $4.8 billion. Analysts, on average, projected $3 billion.
The world’s largest online retailer and cloud-computing provider has been working for more than a year to streamline its businesses to adjust to slowing sales growth in online shopping and its Amazon Web Services (AWS) division. The company is cutting 27,000 jobs, the largest such cull in its history, with the latest round of layoffs announced landing mostly on employees of AWS, its cloud unit.
“Amazon did what it needed to do in Q1 by reversing — or at least stalling — its most troublesome declining growth trends,” said Andrew Lipsman, an analyst at Insider Intelligence. “Amazon’s stronger-than-expected performance for its key profit centers of AWS and advertising indicate that the enterprise and the digital ad sectors may be turning the corner.”
The earnings reflect an ongoing shift in Amazon’s business model away from buying goods directly from manufacturers and selling them itself. An increasing share of revenue is coming from the more profitable business of providing services and advertising to independent merchants who rent space on Amazon’s website and in its warehouses. Advertising sales rose more than 21% to $9.51 billion and seller services jumped 18% to $29.8 billion in the quarter.
Sales in Amazon’s online stores category — the company’s original business — were flat compared with a year ago, and down about 4% from the same period in 2021.
AWS revenue rose 16% to $21.4 billion, more than Wall Street projected, although sales growth declined for the fifth straight quarter. Some analysts have speculated that a slowdown in corporate technology spending could push the cloud unit’s growth rates to single digits later this year. AWS is less profitable than it was a year ago, which is partly the result of discounts the company offered to customers in exchange for longer-term contracts, Chief Financial Officer Brian Olsavsky said on a call with reporters.
Amazon’s results also suggest the company’s efforts to reduce costs are starting to pay off. Operating expenses increased 8.7% in the quarter, the slowest pace in at least a decade.
The company’s North America segment was profitable on an operating basis for the first time since late 2021. The Seattle-based company employed almost 1.47 million people as of March 31, a decrease of 10% from the period a year earlier and down from more than 1.54 million workers three months earlier.
Amazon’s positive results follow similar good news this week from fellow big tech companies Alphabet Inc., Microsoft Corp and Meta Platforms Inc. Microsoft, like Amazon, reported sustained sales for its public cloud business while Alphabet’s Google Cloud produced a profit for the first time. Meta’s digital advertising business rebounded, returning the company to sales growth after three straight quarters of declines.
Amazon projected sales of $127 billion to $133 billion in the current period ending in June and operating profit of $2 billion to $5.5 billion. Both were in line with estimates.

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