Amazon.com Inc. reminded investors on Thursday that scraping by selling things online was just the beginning. The world’s biggest internet retailer reported larger profits in the first quarter and forecast more of the same, delivered by its cloud-computing, subscription and advertising businesses.
The results highlight Amazon’s evolution from a low-margin retailer into an expansive provider of profitable services over the internet. The Seattle-based company projected operating income in the current quarter of $1.1 billion to $1.9 bn on revenue of $51bn to $54bn. Analysts estimated operating income of $1.13bn of operating income and sales of $52.3bn.
"Virtually every opportunity that Amazon invests in is going to be structurally higher margin than its core ultra-low margin retail business," Ben Schachter, an analyst at Macquarie Securities, wrote in a recent note to investors.
The results eased concern about criticism by U.S. President Donald Trump, who dented Amazon shares last month with a series of tweets saying the company should pay more for postal services and contribute more in taxes.
Amazon shares jumped about 6 percent in extended trading following the report. The stock added to gains after executives announced an increase in the cost of the company’s popular Prime subscription, to $119 a year in the U.S. from $99. The shares are up about 30 percent so far in 2018.
The fee was increased to help Amazon cover rising shipping costs and to pay for video-streaming content and technology investments, said RJ Hottovy, an equity analyst at Morningstar Inc.
"We’ve always expected that the company would increase the base price every five years or so, while finding ways to raise the amount spent per membership via other means like subscription services," he said.
Earnings reports like the one on Thursday are changing Wall Street’s view of Amazon. The company lost billions of dollars for more than a decade as it spent heavily to expand an e-commerce business with razor-thin margins. Investors was particularly unnerved by Chief Executive Officer Jeff Bezos’s strategy of constantly investing in costly offerings like faster delivery of more goods.
However, the rise of the cloud business, Amazon Web Services, and other more-profitable initiatives like advertising has shown that as the company expands it can become more profitable. That’s a contrast to internet companies like Google, which started with high-margin businesses and are adding less-profitable offerings -- often in direct competition with Amazon.
"The biggest standout for me is the profitability," said Ron Josey, analyst at JMP Securities. "Advertising is increasingly part of the Amazon story and that is a very profitable business."
Amazon reported first-quarter profit, excluding certain items, of $3.27 a share on sales of $51bn, up 43 percent from a year earlier. Those results also exceeded analysts’ expectations.
Revenue from Amazon’s "other" category, which includes advertising sales, more than doubled to $2bn in the first quarter.
Sales for Amazon Web Services jumped 49 percent to $5.4bn. It’s the second straight quarter of accelerating growth for the profitable unit.
Subscription services, which include Amazon Prime, generated revenue of $3.1bn, up 60 per cent from a year earlier.
Bezos recently reported that the company surpassed 100 million Prime subscribers who pay yearly or monthly fees in exchange for fast shipping and other benefits like video and music streaming. The announcement signaled that the membership strategy that has helped it dominate e-commerce in the U.S. could be replicated overseas. Amazon has been losing money on its international expansion, with investments in India, Australia, the Middle East and Latin America.
To contact the reporter on this story: Spencer Soper in Seattle at ssoper@bloomberg.net.
To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr
©2018 Bloomberg L.P.
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
The Specs:
The Specs:
Engine: 2.9-litre, V6 twin-turbo
Transmission: 8-speed automatic
Power: 444bhp
Torque: 600Nm
Price: AED 356,580 incl VAT
On sale: now.
MATCH INFO
Real Madrid 2
Vinicius Junior (71') Mariano (90 2')
Barcelona 0
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
The%20specs
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THE SPECS
Engine: 1.5-litre
Transmission: 6-speed automatic
Power: 110 horsepower
Torque: 147Nm
Price: From Dh59,700
On sale: now
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
COMPANY PROFILE
Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
Leaderboard
63 - Mike Lorenzo-Vera (FRA)
64 - Rory McIlroy (NIR)
66 - Jon Rahm (ESP)
67 - Tom Lewis (ENG), Tommy Fleetwood (ENG)
68 - Rafael Cabrera-Bello (ESP), Marcus Kinhult (SWE)
69 - Justin Rose (ENG), Thomas Detry (BEL), Francesco Molinari (ITA), Danny Willett (ENG), Li Haotong (CHN), Matthias Schwab (AUT)
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
'My Son'
Director: Christian Carion
Starring: James McAvoy, Claire Foy, Tom Cullen, Gary Lewis
Rating: 2/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
