Amazon profit trounces estimates, sales forecast muted

Amazon.com Inc on Thursday trounced first-quarter profit estimates on soaring demand for its cloud and advertising services, but a weak forecast renewed concern that the company would spend away part of its windfall on larger investments this year.

Shares were up 1 percent in after-hours trade. Amazon`s first-quarter net income more than doubled to $3.56 billion, or $7.09 per share, while analysts were only expecting $4.72, according to IBES data from Refinitiv.

By contrast, it forecast a second-quarter operating income of up to $3.6 billion, while analysts were expecting $4.2 billion, according to FactSet.

Chief Financial Officer Brian Olsavsky told reporters that Amazon saw no material impact in India from actions the company took to comply with new regulations there affecting foreign investment in the e-commerce sector. Prime member signups in India, one of Amazon`s most important growth markets, continue to be rising the fastest in the company`s history.

The news marks a familiar refrain for the world`s largest online retailer. For years, Amazon has made expensive bets on new technology and programs, like its $13.7 billion purchase of Whole Foods Market in 2017 to become a player in the U.S. grocery business.

Amazon`s investments had long meant a low profit margin. However, its steady, often successful marches into new industries have reaped shareholders rewards, including its founder Jeff Bezos, who had become the richest man in the world.

The luster of these bets still shined brightly on Thursday.

The company`s loyal customer base has drawn merchants to sell and increasingly advertise through its site in exchange for fees, helping Amazon transform from a largely low-margin retail business to a more and more lucrative marketplace.

Revenue from seller services jumped 20 percent to $11.1 billion in the first quarter, while ad and other sales surged 34 percent to $2.7 billion, the company said.

Meanwhile, Amazon`s cloud unit kept up its pace of growth as more enterprises moved data and computing operations to the technology company`s servers. Sales for Amazon Web Services rose 41 percent to $7.7 billion in the first quarter.

But Amazon expects some of that profit from these ventures to dwindle away.

Amazon is building warehouses around the world to ensure its edge in delivering goods to customers the fastest. It is spending more on video, from live sports to a planned prequel series to "The Lord of the Rings," to draw more people to log on to its website, watch, and while they are there, buy socks.

And the company is delving into even less familiar terrain. It recently announced investments in self-driving and electric car companies, teasing how it thinks these high-tech, capital-intensive businesses could pay dividends potentially in the form of autonomous deliveries in the long run. Amazon has not described in detail its thinking behind the bets.

In China, where the company had long struggled to compete with Alibaba Group Holding Ltd, Amazon said this month it would close warehouses and its domestic marketplace in July.

One silver lining for investors: Bezos, who many regard as a management guru, settled his closely watched divorce such that he will retain full voting control of his family`s stock, sparing Amazon a boardroom battle. However, his fortune, which has been the largest of any married couple in the world, will be divided.

The company forecast net sales of between $59.5 billion and $63.5 billion for the second quarter, the midpoint of which was below analysts` average estimate of $62.37 billion, according to IBES data from Refinitiv.

Net sales in North America, its biggest market, jumped 17 percent to $35.81 billion in the quarter.

Amazon`s operating expenses rose 12.6 percent in the quarter to $55.28 billion as it invested in electric-car maker Rivian and self-driving car startup Aurora and continued spending on its Prime programme, grocery delivery from Whole Foods stores and original video content.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)