Amazon Q1 sales vastly exceeded expectations, rising to over $100b, with profit after tax more than tripled compared to last year.
Amazon has seen net Q1 sales top $108.5b, comfortably outperforming Wall Street estimates of $104.5b, while profit after tax more than tripled on the same period last year, increasing from $2.5b to $8.1b and beating expectations of just $5b.
Amazon says profits were driven by a significant boost in services like Amazon Prime and Prime Video, which net far higher margins than the company’s traditional retail offering. This still saw growth of 37.4%, however.
Founder and chief executive Jeff Bezos commented: “175m Prime members have streamed shows and movies in the past year, and streaming hours are up more than 70% year-on-year”.
Meanwhile the group’s increasingly dominant cloud computing arm Amazon Web Services (AWS) also performed strongly, seeing revenues climb 32% year-on-year to $13.5b.
“This could be a golden age for the group,” Hargreaves Lansdown’s equity analyst Nicholas Hyett told Charged/The Retail Gazette. “With high streets shut, Amazon is a natural home for consumers’ spare cash. AWS services remote working, which has suddenly become the norm, and tech wizardry is all the more useful when we can’t see friends and family in person. It’s possible those tailwinds begin to unwind in the months ahead, and the golden age is followed by some dark years. Somehow we doubt it.”
Amazon says it is confident the pandemic-led boom will continue into the next quarter, estimating sales to come in at between $110b and $116b, once again exceeding estimates of $108.6b. This is largely due to plans to hold Prime Day a month early in June, which should help boost second quarter earnings considerably.
Despite a continued rapid roll out of physical stores, with three new Fresh stores open in London during the quarter, Amazon’s bricks-and-mortar store revenue dropped 16% to $3.9b.
Nicholas Hyett added: “Despite billions in extra costs associated with the pandemic, Amazon has seen margins gallop ahead. A huge surge in retail volumes in the US and abroad has boosted revenues to the point where they are more than covering the fixed cost base – a fixed cost base which is itself growing at breakneck speed as the group continues to invest in fulfilment infrastructure. The overall revenue mix is also shifting more towards service, now accounting for 47% of revenues compared to 44.5% a year ago. That might sound small, but service revenues are far higher margin, and we suspect the 70% or so growth in advertising revenues is even higher margin than usual.”