Amazon’s first-quarter results have come in ahead of Wall Street forecasts, driven by cloud services and advertising businesses. However, online product sales were flat in the first three months of the year as cash-strapped consumers reined in their spending.
Overall sales were up 9% to $127.4bn – comparable to the growth recorded at the end of last year – but well down on the highs achieved during the pandemic when sales surged more than 40% in some quarters.
Operating income increased to $4.8bn, compared with $3.7bn in the first quarter of last year, suggesting the firm’s cost-cutting drive may be starting to pay off.
“There’s a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy,” said Chief Executive Andy Jassy.
Amazon’s online sales have been sluggish in recent quarters, also because people have returned to shopping in physical stores.
This has been offset by strong growth in its other businesses. In Amazon’ss advertising unit, revenue jumped 23% in the quarter, while sales at Amazon Web Services – a key profit driver – grew 16%.
However, Amazon signalled yesterday that growth in its cloud business would slow as business customers braced for more economic turbulence and clamped down on spending. This overshadowed the company’s better-than-expected results and knocked an initial strong gain in its share price.
Olsavsky noted that the economy had brightened internationally. “It’s good to see inflation going down there,” he said. “It’s good to see consumer confidence increasing.”
In North America, Amazon’s largest market, demand held up, he said. But “you see signs that customers are looking for value” and “probably putting off some discretionary purchases.”
Insider Intelligence principal analyst Andrew Lipsman suggested that recent moves by Jassy to improve Amazon’s performance may be starting to pay off. These have included winding down some non-core programmes, halting its property expansion plans, overhauling its delivery network, and announcing thousands of job cuts.
“For the first time in several quarters, Amazon may finally have a bit of wind at its back,” Lipsman said.
“Amazon did what it needed to do in Q1 by reversing – or at least stalling – its most troublesome declining growth trends.”
NAM Implications:
- Amazon have scope to reduce costs.
- And they have cut to fit the market…
- With lots of potential growth in Web Services and Retail Media.
- But few will forget their potential impact in most categories…
- …for instance, Healthcare provision…
- …from diagnosis to treatment and aftercare…
- …to name but one.
