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Amazon Shares Rise After Surpassing Earnings Expectations, Credits AI for Boosting Cloud Growth

Amazon announced impressive first-quarter results on Tuesday, with earnings of 98 cents per share on $143.3 billion in revenue, marking a 13% year-over-year increase. These figures outstripped analyst forecasts from FactSet, which had predicted earnings of 84 cents per share on $142.7 billion in revenue.

Compared to the same period last year, when Amazon earned 31 cents per share on $127.4 billion, the growth is notable. Particularly, Amazon Web Services, its cloud-computing arm, recorded a 17% year-over-year sales increase to $25 billion, surpassing the anticipated 15% growth.

Despite these strong results, Amazon projected lighter sales for the June quarter, expecting between $144 billion and $149 billion, slightly below the $150.12 billion analysts expected. This guidance led to a modest rise in Amazon’s stock, which increased by over 2% to $180 in after-hours trading.

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Amazon Web Services Hits $100 Billion Run Rate, Outpaces Rivals

Amazon Web Services (AWS) recently achieved a significant milestone by reaching a $100 billion annual revenue run rate, as announced by AWS CEO Andy Jassy. This surge in AWS’s growth can be attributed to increased enterprise investment in infrastructure modernization and the burgeoning demand for AWS’s artificial intelligence offerings.

Amazon maintains its dominance in the cloud-computing sector, standing ahead of key competitors such as Microsoft and Alphabet’s Google, both of which have also experienced growth spurts in their cloud businesses.

This quarter marks the first occasion AWS has seen growth acceleration in consecutive quarters since the industry-wide deceleration that started in early 2022. Notably, AWS has bolstered Amazon’s profitability, with operating income for the division soaring to $9.4 billion—an 84% increase year-over-year. The division’s operating margin impressively rose to 37.6%, a significant jump from 24% in the same quarter the previous year.

Key Points:

  • AWS reaches a $100 billion revenue run rate, indicating robust growth.
  • Operating income for AWS climbed significantly, enhancing Amazon’s profitability.
  • AWS’s success helps Amazon lead over Microsoft and Google in the cloud sector.

Amazon Q2 Operating Income Surpasses Expectations, Highlights Strong International Growth

Amazon has reported a noteworthy rebound in its international retail operations, marking an operating income of $900 million—the sector’s first profit since 2021. This performance starkly contrasts with the $1.2 billion loss observed in the first quarter of 2023, illustrating a robust recovery. Additionally, the segment saw a 9.6% increase in year-over-year sales, reaching $31.9 billion.

In the U.S., Amazon’s North American operations showcased remarkable growth, with operating income soaring to $5 billion, an increase of 450% compared to the previous year. Sales in this segment also saw a healthy 12% rise year over year, totaling $86.3 billion.

Overall, for the first quarter, Amazon announced an operating income of $15.3 billion, significantly exceeding the $11.3 billion forecast by analysts, according to FactSet. While there was speculation about Amazon potentially initiating a dividend similar to other Big Tech firms like Meta Platforms and Google, the company has not confirmed any plans for a dividend as part of this announcement.

Key Points:

  • Amazon’s international operations turn profitable, earning $900 million in operating income.
  • North American segment sees a 450% increase in operating income, with sales up by 12%.
  • Total operating income significantly beats analyst expectations, reaching $15.3 billion.

Amazon’s Q1 Earnings: Strong Ad Revenue and Steady Growth in Online Sales

Amazon’s first-quarter results showcased a notable 24% year-over-year growth in its advertising business, hitting $11.8 billion in sales and narrowly beating the anticipated $11.7 billion, as reported by FactSet. CEO Andy Jassy highlighted that the expansion of Amazon’s retail stores and Prime Video offerings significantly contributed to this surge in ad sales.

The company’s online store sales also saw healthy growth, increasing by 7% year-over-year to reach $54.7 billion, aligning with market expectations. Despite Amazon issuing sales guidance that fell short of forecasts, its operating income projections for the June quarter are set at $10 billion to $14 billion, aligning closely with the analyst consensus of $12.7 billion. RBC analyst Brad Erickson noted Amazon’s tendency for conservative guidance in a recent client update.

Amazon’s Stock Performance and Outlook

Prior to the earnings announcement, Amazon’s stock experienced a 3.3% drop during regular trading on Tuesday. Nonetheless, the stock has accumulated a 15% gain over the year and an impressive 65% increase over the past twelve months.

According to the IBD Stock Checkup tool, Amazon held an IBD Composite Rating of 94 out of a possible 99 before the earnings report, indicating strong investment potential. Stocks with a Composite Rating of 90 or higher are typically considered top growth stocks, underscoring Amazon’s robust market position.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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