Amazon reported first-quarter earnings on Thursday that reflected an ongoing change at the company: less growth but fatter profit margins.
Despite the huge earnings beat, Amazon stock is up just 1% in after-hours trading, as second-quarter operating profit guidance came below street estimates.
Here are the most important numbers:
Amazon’s revenue came to a slowdown across the board. It’s total revenue grew 16.9% compared with the year-ago period, representing the slowest expansion since the first quarter of 2015. Its North American revenue saw a 17% increase, compared with last year’s 46% growth, while international growth dropped to just 9%, down from the previous year’s 34% growth rate.
Amazon’s advertising business, which is looped under the “other” category, significantly slowed down, seeing only 34% revenue growth to $2.7 billion, after growing at least 60% in the past five quarters. Its physical stores revenue, primarily consisting of Whole Foods sales, grew just 1% year over year to $4.3 billion.
Amazon’s cloud service, meanwhile, continued its solid growth with a 41% sales increase, although that was also a deceleration from last year’s 49% growth rate.
Investors, however, are seeing more profitability from Amazon in exchange. Net income hit a record $3.6 billion, and its operating profit of $4.4 billion represented a 7.4% margin, up from last year’s 3.8% margin.
The wider margins come from growth in businesses like cloud, advertising and third-party seller services, where profits are bigger but total sales are smaller. Whole Foods, a slower-growing business, is also now fully integrated into Amazon’s results. Read more