Amazon topped estimates for its first quarter earnings, reporting $143.3 billion in revenue, up 13% year-over-year, and earnings per share of $0.98.
Analysts expected Q1 revenue of $142.7 billion and earnings per share of $0.83.
Amazon’s two big profit drivers, Amazon Web Services and advertising, posted year-over-year revenue growth of 17% and 24%, respectively.
Overall operating income reached $15.3 billion in the first quarter, compared to $4.8 billion a year ago, and well ahead of estimates.
Shares were up 5% in after-hours trading on Tuesday. Amazon stock is up more than 70% in the past 12 months.
Here’s a breakdown of Amazon’s financials for the first quarter.
Online stores: Revenue was up 7% year-over-year at $54.6 billion.
Amazon Web Services: Amazon’s cloud business was up 17% at $25 billion, with $9.4 billion in operating income, up 84% from the year-ago period. AWS is now officially a $100 billion annual revenue run rate business.
- AWS reported 16% growth in the year-ago quarter. It reported $24.2 billion in revenue in Q4, which was up 13% year-over-year.
- Demand for generative AI tools and services is boosting business for cloud providers. Microsoft and Google posted reported cloud revenue growth of 23% and 28%, respectively, last week.
- Amazon is making an effort to appeal to AI application developers by offering access to a variety of AI models through its Bedrock managed services. On Tuesday it announced general availability of its AI assistant for developers called Amazon Q.
Advertising: The company’s ad business brought in $11.8 billion in revenue in the quarter, up 24% over a year ago. That compares to 21% revenue growth in the year-ago quarter, and a 27% growth rate in Q4.
- Results from Meta, Alphabet, and Snap last week indicate that the digital ad market is bouncing back after a rough 2022.
- Growth in retail media advertising spend is a tailwind for Amazon, which sells advertising space to sellers on its marketplace.
- Amazon recently launched new advertisements within its Prime Video platform.
Third-party seller services: Revenue from third-party seller services was up 16% to $34.6 billion.
- Analysts have pointed to recent changes in U.S. third-party seller fees which could help Amazon drive substantial revenue.
- Amazon has been expanding services and products for third-party merchants in recent years; independent businesses now account for a majority of total retail sales.
Shipping costs: Amazon spent $21.8 billion on shipping in Q1, up 10%.
- Amazon on Monday announced that it set new records for Prime delivery speeds in the first three months of this year, touting a shift to regional fulfilment centers.
Physical stores: The category, which includes Whole Foods and Amazon Go stores, posted revenue of $5.2 billion, up 6%.
- Amazon closed two clothing-focused stores in November but said it will continue to invest in physical grocery stores.
- The company is shifting away from “Just Walk Out” in its large grocery stores, which uses cameras and sensors to detect what people put in their carts, letting them avoid the checkout line.
Headcount: Amazon now employs 1.52 million people, up 4% year-over-year. That figure does not include seasonal and contract workers.
- After going on a hiring spree as the pandemic drove demand, Amazon laid off 27,000 employees last year and continues to cut from its corporate workforce.
- Related: Amazon keeping corporate headcount ‘flat’ but hiring in select areas including generative AI
Prime: Subscription services revenue, which includes Prime memberships, came in at $10.7 billion, up 11%.
Guidance: The company forecasts Q2 sales of $144 to $149 billion, slightly below estimates. Operating income for the second quarter is expected to range between $10 billion and $14 billion.
