Amazon on Cloud Nine With Strong Q1 Results

The company's cloud division powered a 28% jump in revenue and posted more operating income than its core business in North America.
Katie Kuehner-HebertApril 29, 2016

Amazon’s first quarter results resoundingly beat expectations, benefiting in particular from the strong performance of its Amazon Web Services (AWS) cloud computing business.

For the company’s fourth straight profitable quarter, revenue rose 28% to $29.1 billion, due in large part to a 64% jump in AWS revenue to $2.57 billion. Net income was $513 million, or $1.07 per share, compared with a net loss of $57 million, or 12 cents per share, a year earlier.

Analysts’ consensus estimates had AWS revenue at $2.53 billion, total revenue at $27.99 billion, and EPS at 58 cents, according to Yahoo Finance.

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After surging more than 11% in after-hours trading Thursday, Amazon stock was up another 9%, at $658.40, on Friday.

“Amazon is crushing it in cloud computing,” Yahoo said. “AWS provides storage services to General Electric, Netflix, Instagram and Spotify, to name just a few of the major players that pay to use it. AWS is also a profit machine: It accounted for 56% of the company’s profit this quarter and is the most profitable business at Amazon.”

AWS posted operating income of $604 million that was nearly 3% higher than that of the core business in North America.

“More and more, it looks like AWS is going to be a huge second line of business for the company, especially if it continues to grow at this rate,” TechCrunch said.

First-quarter results were also impacted by strong sales of Amazon devices, including a doubling of sales of Fire tablets, CEO Jeff Bezos said in a news release.

The Amazon Echo wireless speaker, he said, is also “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.”

In an email, Moody’s lead retail analyst Charlie O’Shea said, “A distinct positive on the product side is the robust margin expansion, which was up over $400 million, which translates into 1.76% vs. 0.28% for Q1 2015. … Amazon continues to invest significant sums in both Amazon Web Services and content, among other areas, and we continue to believe that continued expansion of its content eco-system will generate positive returns, especially when viewing its Prime membership through the ‘lens’ provided by this expanded and enhanced content.”

Amazon said in its annual shareholder letter that Amazon Studios acquired the rights to “several high-profile films” that would ultimately be available to Prime members through Prime Video.