Amazon profit crushes estimates as cloud-service revenue soars

Thu Apr 28, 2016 8:12pm EDT
 
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By Sarah McBride and Narottam Medhora

(Reuters) - Amazon.com Inc AMZN.O on Thursday reported profit and revenue that blew past analysts' expectations, sending its shares soaring in after-hours trading and demonstrating the growing market power of its core retail business and new cloud services division.

The results draw a sharp contrast to the disappointing fourth quarter Amazon reported in January, which renewed worries among some shareholders about the company's comparatively thin profit margins. Shares of the world's biggest online retailer jumped nearly 13 percent to $679 in extended trading on Thursday.

Amazon's performance also assuaged concerns about a broader slowdown among tech and internet companies after Apple AAPL.O, Microsoft MSFT.O and Intel INTC.O all reported disappointing earnings.

"It did restore my faith," said Dan Conde, an analyst at the Enterprise Strategy Group, who keeps a close eye on Amazon's cloud business.

The company also offered a bright outlook, with revenue guidance for the current quarter of $28 billion to $30.5 billion, compared to the $28.33 billion analysts had expected.

While Amazon displayed impressive growth for a company its size - revenues last quarter rose 28.2 percent to $29.13 billion, the biggest revenue growth since 2012 - its Amazon Web Services (AWS) cloud computing division was the highlight. Revenues at the division climbed 64 percent to $2.56 billion while operating income more than tripled to $604 million.

Even though operating margins fell at the unit compared to last quarter, as Amazon spends heavily to compete with rivals like Microsoft and Google GOOGL.O, they remain a healthy 27.9 percent. That compares to 28.5 percent last quarter, and 16.9 percent a year earlier.

AWS, launched 10 years ago, delivered more profit in the quarter than Amazon's retail business. Research firms say AWS has more than 30 percent of the fast-growing cloud-computing market and it remains far ahead of rivals including Microsoft and Google.   Continued...

 
An Amazon logo is seen on a worker's jacket at an Amazon Fulfilment Center in Wroclaw, Poland, in this file photograph dated December 3, 2015.  REUTERS/Kacper Pempel/files