Amazon reported its lowest growth rate in quarterly revenue since 2015 but profit more than doubled to an all-time record for a quarter, fueled in part by its high-margin cloud computing and advertising businesses.
For the first quarter, Amazon’s revenue rose 16.9% to $59.7 billion, enough to match analysts’ estimates but well below the 30% growth the company once experienced. It was the smallest revenue gain since the same period of 2015.
But net income increased from $1.63 billion to $3.56 billion, delivering earnings of $7.09 per share. Analysts had predicted earnings of $4.72 per share.
Amazon’s operating profit of $4.4 billion, moreover, represented a 7.4% margin, up from last year’s 3.8% margin.
The wider margins reflect growth in businesses like cloud, advertising, and third-party seller services, where profits are larger but total sales are smaller. Whole Foods is also now fully integrated into Amazon’s results.
“For years, Amazon was known for bleeding money as it invested heavily in its businesses and rapidly increased revenue,” CNN reported. “Now it has entered a new era with comparatively sluggish sales growth, but a consistently profitable business.”
CNN added that the increase in profit “is all the more remarkable given how it continues to pour money into fulfillment centers, premium video content, bricks and mortar stores, and health care.”
The sales slowdown was across the board, with Amazon’s advertising business posting only 34% revenue growth to $2.7 billion after growing at least 60% in the past five quarters. Amazon Web Services’ growth decelerated to a 41% sales gain from last year’s 49% though it remains the leader in the cloud computing market.
Physical stores revenue, primarily consisting of Whole Foods sales, grew just 1% year over year to $4.3 billion.
Amazon is now forecasting operating profit for the second quarter in the range of $2.6 billion and $3.6 billion, far below analysts’ $4.2 billion street estimate, indicating heavier investments going forward. In an earnings call, CFO Brian Olsavsky attributed the lower guidance in part to an $800 million investment in making free one-day delivery shipping the default for Prime members. The $800 million figure is a forecasted spend for Q2 2019.