Amazon has done it again. Moments ago Jeff Bezos’ company reported Q1 earnings that blew away expectations, when it printed revenues of $29.13 billion, well above the expected $28 billion, generating EPS of $1.07 almost double the expected $0.57.
However, it is what drove this surge in profitability because while AMZN reported a respectable jump in its North American retail operating income which rose from $254MM a year ago to $588MM in the current quarter, or a 3.4% profit margin, it was Amazon’s cloud service, the AWS that was the standout with a whopping 604MM in profit, a massive 23.5% margin on $2.37 billion in AWS sales, which also beat expectations. The AWS profit was also higher than the profit reported by any other part of the company.
Furthermore, cloud revenue growth was 64% in the quarter, compared to 49% a year ago, and was responsible for 9% of total revenue while generating more than half of total profits.
This is what Jeff Bezos said about the quarter:
“Amazon devices are the top selling products on Amazon, and customers purchased more than twice as many Fire tablets than first quarter last year,” said Jeff Bezos, founder and CEO of Amazon.com. “Earlier this week, the $39 Fire TV Stick became the first product ever — from any manufacturer — to pass 100,000 customer reviews, including over 62,000 5 star reviews, also more than any other product ever sold on Amazon. Echo too is off to an incredible start, and we can’t yet manage to keep it in stock despite all efforts. We’re building premium products at non-premium prices, and we’re thrilled so many customers are responding to our approach.”
Something else curious: “Amazon entered into agreements with Air Transport Services Group (ATSG) to lease 20 air cargo planes to support one and two-day delivery for U.S. customers. ATSG will operate the planes for Amazon.”
The company also laid out the following guidance:
- Net sales are expected to be between $28.0 billion and $30.5 billion, or to grow between 21% and 32% compared with second quarter 2015. Wall Street expected $28.3 billion
- Operating income is expected to be between $375 million and $975 million, compared with $464 million in second quarter 2015.
Overall sales growth also picked up to 29% from 26% last quarter as the company boosted its total headcount to a record 245,200 (mostly part-time) employees.
More importantly, consolidated operating margin has now certainly turned the corner, rising from 3.1% to 3.7% courtesy of AWS, the highest margin since 2010.
Finally, amazon’s Free Cash Flow, long time a big concern to shareholders, is soaring and in the current quarter Amazon reported $6.4 billion in Free Cash Flow.
The stock is loving the results, and just like Facebook yesterday, the stock has soared 12% in the after hours and is now at $675 after closing just north of $600.
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