Amazon has released first quarter results showing that revenues have risen on the back of good performance in its cloud computing and retail divisions. The first-quarter growth in sales beat estimates and led to an appreciation in the stock price during the extended trading hours.
Net sales increased by 23% to reach a figure of $35.7 billion against estimates by analysts who had projected net sales of $35.3 billion. Results were boosted by a growth in advertising revenue as well an increase in subscribers of Amazon Prime and the online retail giant’s media streaming services.
Profit was also higher than what analysts had estimated. There was a 41% increase in net income when it rose to $724 million. This translated to a net income of $1.48 a share and this was the 8th straight quarter in which Amazon recorded a net profit. Prior to the release of the results, net income estimates were averaging $1.12 a share.
Owing to price cuts that Amazon had effected on Amazon Web Services which is currently the biggest player in cloud services, there was worry by investors that this would slow the momentum of the Seattle, Washington-based ecommerce giant. However, the first-quarter results have proved those investors wrong.
“The core e-commerce segment remains very healthy. Subscription services and advertising are growing much faster, and beginning to move the needle, which also helps increase profit margins,” Baird Equity Research’s analyst, Colin Sebastian, said.
The key contributor to Amazon’s increase in subscription sales was Amazon Prime which saw subscription sales rise by 49% year-over-year to reach a figure of $1.9 billion. Besides the revenues the subscriptions generate, they also play a larger role of encouraging shoppers to spend more on Amazon more frequently.
As for the cloud business, revenues generated by Amazon Web Services increased by 42.7% to hit $3.66 billion. This was in line with what analysts had estimated. Revenues from 3rd party sellers who pay to have their products promoted on the Amazon website as well as revenues emanating from a co-branded credit card deals increased by 56% to hit $850 million.
From its international operations, Amazon reported an operating loss which reached $481 million. This was four times larger compared to the same period in 2016. That is not discouraging Amazon from expanding beyond its domestic market though as it has already indicated that it is allocating over $5 billion for the purposes of increasing its market share in India. A foray into Australia was also recently announced.