Amazon, listed as (NASDAQ: AMZN), recently unveiled its first-quarter earnings report on April 30, showcasing stellar performance. The e-commerce and cloud empire witnessed a 13% year-over-year surge in revenue, hitting $143.3 billion. This figure surpassed analysts’ projections by $764 million. Furthermore, its diluted earnings skyrocketed more than threefold to $0.98 per share, surpassing the consensus estimate by $0.15.
Image source: Amazon.
The Rejuvenated Core Businesses
Amazon’s revenue breakdown reveals that 60% originated from its North American segment, 22% from the international sector, and 17% from Amazon Web Services (AWS), the premier cloud infrastructure platform globally. These essential segments underwent notable growth over the past year.
Metric | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
|---|---|---|---|---|---|
North America sales growth (YOY) | 11% | 11% | 11% | 13% | 12% |
International sales growth (YOY) | 1% | 10% | 16% | 17% | 10% |
AWS sales growth (YOY) | 16% | 12% | 12% | 13% | 17% |
Total sales growth (YOY) | 9% | 11% | 13% | 14% | 13% |
Data source: Amazon. YOY = Year over year.
Amazon’s core retail segments in North America and internationally regained stability following the post-pandemic e-commerce sector’s slowdown in 2022. Improved delivery speeds in North America drove increased purchases of everyday essentials and bolstered its integrated advertising business. The international sector saw growth from expansion into promising markets. AWS’s growth accelerated in the past two quarters, dispelling concerns of lagging behind competitors in the cloud race, such as Microsoft’s Azure and Alphabet’s Google Cloud.
The Surge in Operating Margins
Concurrent with sales growth stabilization, Amazon observed escalating operating margins in all core sectors over the past year.
Metric | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
|---|---|---|---|---|---|
North America operating margin | 1.2% | 3.9% | 4.9% | 6.2% | 5.8% |
International operating margin | (4.1%) | (3%) | (0.3%) | (1%) | 2.8% |
AWS operating margin | 23.8% | 24.4% | 30.3% | 29.8% | 37.6% |
Total operating margin | 3.8% | 5.7% | 7.8% | 7.8% | 10.7% |
Data source: Amazon.
The amplified margins in North America stemmed from increased third-party sales, streamlined deliveries, and reduced logistics expenses through localized operations. Internationally, economies of scale led to a positive margin, driven by a growing advertising business. AWS optimized its operations by cutting costs, enhancing margins significantly and providing funds for retail expansion.
The Stable Outlook and the Rivian Conundrum
Amazon foresees a 7%-11% year-over-year sales increase in Q2 and an expected operating margin midpoint of 8.2%. Analysts predict an 11% annual sales growth with a 9.4% operating margin for the entire year.
Despite a stable outlook, investors should remain cautious regarding Amazon’s investment in the struggling electric-vehicle manufacturer, Rivian Automotive (NASDAQ: RIVN). In the first quarter, Amazon’s net income of $10.4 billion was significantly impacted by a substantial pre-tax valuation loss of $2 billion on Rivian, highlighting potential risks intertwined with such ventures.