Sat, Apr 27, 2019 - Page 10 News List

Amazon delivers record profits for Q1

GROWTH DRIVERS:Net earnings more than doubled to US$3.6 billion, driven by rising digital advertising revenue and subscription to its Amazon Web Services cloud platform

AFP, SAN FRANCISCO

Amazon.com Inc on Thursday delivered record profits for the first quarter, fueled by gains in cloud computing and new business segments for the US technology colossus.

Net profit more than doubled from the same period last year to US$3.6 billion, extending Amazon’s trend of rising profitability.

Overall revenue rose 17 percent to US$59.7 billion, according to the update, which topped most analysts’ forecasts.

Seattle-based Amazon said that revenue from online sales was up 10 percent, while money taken in from subscription services and the Amazon Web Services (AWS) cloud platform jumped about 40 percent.

The “other” revenue segment, which includes online advertising, grew about 34 percent from a year ago.

Analysts said Amazon is increasing its digital advertising revenue, a market dominated by tech rivals Google and Facebook Inc.

“Amazon just turned in another powerhouse quarter fueled by its strength in the cloud and advertising businesses, which continues to inflate the company’s operating margins,” Andrew Lipsman of the research firm eMarketer said.

“While AWS’ momentum continues unabated and is clearly the bigger driver of this profit story at the moment, the advertising flywheel now appears to be in full effect for Amazon and will only be a bigger part of the growth story over the near term,” he said.

Neil Saunders of the research firm GlobalData Retail, said that Amazon’s growth in product sales is slowing, a trend to be expected given its massive size and competition from other retailers.

“In our view the trend is only likely to accelerate going forward and it will put Amazon under more competitive pressure that it has been before,” Saunders said in a research note.

However, Amazon’s diversified business gives it more opportunities to deal with competition, he said.

The company has begun investing more in its recently acquired Whole Foods Market Inc grocery stores and expanding the home delivery areas for the chain.

“As much as the top-line performance matters, Amazon’s shallower growth is coinciding with a period of improving profits,” Saunders said.

A free two-day shipping benefit offered to Amazon Prime subscribers is evolving into a one-day shipping perk that the company expects to boost shopping and membership, executives said on an earnings call.

Amazon expects to spend US$800 million this quarter on shortening delivery times to a single day for Prime buyers, with shoppers in North America expected to be the first to benefit.

Amazon’s Prime Video has also been in tough competition on streaming television with Netflix Inc and new entrants, and its Alexa-powered devices are seeing more rivals from other firms using digital assistants with artificial intelligence.

Amazon executives said the company would continue to invest “meaningfully” in original shows and films for its Prime streaming television service.

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