Amazon.com Q1 - Earnings Update
Amazon Q1 Results: Cloud growth soars, strong performance across the board
Amazon delivered another impressive quarter, defying expectations with solid growth and impressive profit margins. Let's break down the key highlights:
Operational Profit
Amazon's operational profit surged by 221% to reach $15.3 billion this quarter. Below, you can see the company's operational profit trend since December 2019.
Revenue growth and cost reductions are both factors driving the increase in profits. For instance, AWS demonstrated a record profit margin of 38%, leading to an 84% increase in profit. Here you can see the quarterly change in profit at AWS.
AWS: The growth engine
AWS cloud revenue growth accelerated from 13% last quarter to a remarkable 17% this quarter. This solidifies Amazon's position as a dominant player in the cloud market.
CEO Andy Jassy sees massive potential in the untapped cloud space and the upcoming surge in AI development, saying
“We remain very bullish on AWS. We're at $100 billion-plus annualized revenue run rate, yet 85% or more of the global IT spend remains on-premises. And this is before you even calculate gen AI, most of which will be created over the next 10 to 20 years from scratch and on the cloud. There is a very large opportunity in front of us.”
Cost optimizations and renewed customer investment are fueling growth, alongside an emerging multi-billion dollar annual revenue stream from AI advancements.
Profitability reaches new heights
Amazon's overall Q1 profit margin surged to 10.7%, exceeding predictions. While quarterly fluctuations may occur, this indicates strong underlying profitability.
Advertising continues to be a cash cow, with 24% growth and a 221% surge in operating profit, reaching $15.3 billion.
AWS achieved a record-breaking 38% profit margin, driving an 84% profit increase for the segment. While this margin may not be the standard going forward, it demonstrates AWS's powerful position in the market.
Other notable developments
It was also encouraging to see the return to profitability of Amazon's international division, apart from AWS and North America. This profitability has never been present except for the surge during the pandemic, and now it suddenly is. This is mainly due to the diminishing losses in markets like the Netherlands. I suspect mature international markets like Germany, UK, and Japan have been profitable for some time. The international division accounts for 22% of revenue and will continue to weigh on Amazon's overall margin for the time being. You can see here that AWS accounts for 18% of revenue. However, out of the $15.3 billion in profit, a whopping $9.4 billion comes from AWS.
Amazon's valuation outlook remains positive, with a strong possibility of reaching a $1 trillion revenue milestone and potentially $150 billion in net profit within the next five years.
CEO's Outlook
Andy Jassy maintains a confident and optimistic stance about Amazon's future.
"It's very early days in all of our businesses and we remain excited by how much more we can make customers' lives better and easier moving forward."
In conclusion
Amazon's Q1 results showcase a robust business with its growth engine, AWS, firing on all cylinders. Strong profit margins across core segments suggest a healthy trajectory. As Amazon continues to innovate, the company seems well-positioned for long-term success.