Amazon reported its most profitable quarter to date last week as sales beat expectations, sending its share price up 12 per cent to value the group at almost $280bn.
Sales grew to $29.1bn in the first quarter, up 28 per cent from the same period a year ago, exceeding analysts’ expectations and the company’s own forecast.
Net income rose to $513m, Amazon’s highest quarterly profit. North American retail sales and international retail sales both grew more than 30 per cent during the quarter.
The fastest growing part of the company was Amazon Web Services, the company’s cloud computing division, which reported $2.6bn in sales, up 64 per cent from the same period a year ago.
However operating margins narrowed slightly for Amazon Web Services compared to the earlier quarter.
“This is pretty much a knockout quarter for Amazon, especially when you balance it with the results from eBay and Google,” said Scot Wingo, executive chairman of Channel Advisor, which provides software to retailers that sell on Amazon. “Amazon is taking market share from eBay,” Wingo added. “At this growth rate, they are probably taking market share from pretty much everybody.”
During the first quarter Amazon also continued investing heavily in new areas, including logistics operations, last-mile delivery, and original video content.
The profits came as a surprise because Amazon has historically eschewed profits and founder Jeff Bezos has often said that he places more value on other financial metrics as better measures of growth.
However, chief financial officer Brian Olsavsky warned that Amazon’s spending on areas such as original video content would increase in the second half of this year, an oblique hint that profits might not continue.
The company has doubled down on its video offering, including by launching a Netflix-style monthly video subscription last week.
Olsavksy also pointed to Amazon Prime, a membership program for free shipping and video content, as one of the reasons for the company’s strong sales.
“We feel that the flywheel of Prime is working really well,” he said. Prime membership increased 51 per cent in 2015, and analysts at Bernstein estimate the service has 65m members worldwide.
This year Amazon has also been focused on building on its logistics and delivery operations, leasing cargo planes and even taking out a shipping license in China. The company has also expanded its rapid delivery program in major urban areas, even offering restaurant delivery in some US cities.
