Amazon extends 20-year streak of double-digit revenue growth, shares hit new record

An Amazon.com Inc driver stands next to an Amazon delivery truck in Los Angeles.
An Amazon.com Inc driver stands next to an Amazon delivery truck in Los Angeles. PHOTO: REUTERS

SEATTLE (BLOOMBERG) - Amazon.com's unbroken 20-year streak of double-digit revenue growth shows no sign of slowing this year, helped by an influx of online shoppers who are abandoning stores and new business for its cloud-computing division.

The company topped profit and revenue estimates in the first quarter and projected sales that may beat projections in the current period, reinforcing its message to investors that big spending on warehouses, movies and devices are all part of a winning formula.

"Amazon appears to be firing on all cylinders," said Mr Colin Sebastian, an analyst at Robert W Baird & Co. "The core e-commerce segment growth remains very healthy, Amazon Web Services was fairly stable even with the recent price reductions, and growth in subscription services and advertising is robust, starting to move the needle, and helping to augment profitability."

Shares gained as much as 5.1 per cent in extended trading after closing on Thursday (April 28) at a record US$918.76 (S$1,282) in New York. The stock has jumped 23 per cent this year.

The world's largest online retailer is dominating e-commerce in the US with its US$99-a-year Amazon Prime subscription, which includes delivery discounts, music and video streaming and photo storage that keep shoppers engaged with the website.

Seattle-based Amazon had 80 million Prime subscribers in the US as of March 31, an increase of 36 per cent from a year earlier, according to Consumer Intelligence Research Partners. Prime memberships help lock in loyalty, which is critical as competitors such as Wal-Mart Stores Inc. enhance their e-commerce offerings to slow Amazon's momentum.

Amazon Web Services, its cloud-computing division, subsidises the company's spending for various initiatives such as expanding into India and Australia, speeding up delivery times to as little as an hour on select products, adding new skills and devices for its voice-activated Alexa platform and producing original movies and shows.

First-quarter sales increased 23 per cent to US$35.7 billion. Net income was US$724 million, or US$1.48 a share, the company said in a statement. Analysts estimated profit of $1.08 a share on revenue of US$35.3 billion, according to data compiled by Bloomberg.

Amazon Web Services revenue gained 43 per cent to US$3.66 billion. That's slower than 47 per cent year-over-year growth in the previous quarter.

A combination of better profit margins in the cloud-computing unit and a smaller increase in shipping costs helped Amazon beat earnings projections, said Mr Josh Olson, analyst at Edward Jones & Co. Amazon Web Services had a profit margin of 24.3 per cent in the first quarter, compared with 23.5 percent a year earlier. Shipping expenses, a major cost for Amazon, increased by 30 per cent, the slowest pace in at least six quarters, he said.

Still, company spending remains an investor concern. Operating expenses rose 24 per cent to $34.7 billion in the quarter.

"They earned US$724 million on US$35.7 billion in sales, or a whopping 2 per cent," said Mr Michael Pachter, analyst at Wedbush Securities. "Sales grew by US$6.6 billion and net income grew by US$200 million. They're playing mind games with us."

Amazon on Thursday forecast operating income in the current quarter of US$425 million to US$1.08 billion on net sales of US$35.3 billion to US$37.8 billion. That compares with operating income of US$1.29 billion on sales of US$30.4 billion in the same period a year ago. Analysts projected sales of US$36.9 billion in the current quarter.