01 May 2024
If you are covering Amazon's latest results, please see the following comment from Mamta Valechha, equity research analyst at Quilter Cheviot:
"Amazon reported strong Q1 numbers last night with group revenues up 13%, coming in at the high end of the guided range, with both ecommerce and AWS beating top line expectations. In ecommerce, North America and International both delivered sales growth in the low teens, while growth in AWS accelerated to +17%.
"Group operating income also came in ahead of both guidance and consensus at 10.7%, +280bps ahead of consensus. In ecommerce, North America margins (5.2%) continued to benefit from improving cost to serve within the fulfilment network, consolidated customer shipments, leverage from strong unit growth, and lower transportation rates. The International segment also turned profitable at 2.8%, which was welcome news.
"However, the biggest stand out was AWS with margins reaching 38%. Though this margin is not sustainable and is tied to some timings of infrastructure spending, it is nevertheless still strong. Given the strong demand and backlog in AWS, Amazon plans to accelerate capital expenditures with new data centres and servers, which is a positive signal, and this will be in addition to ongoing improvements in the fulfilment network.
"At the midpoint, guidance is for Q2 revenue growth of 9%, which is below consensus. Similarly, the operating income guide is below at the midpoint, but there has been no suggestion of weakness by management, just general weakness in consumer demand, alongside an unfavourable impact from changes in foreign exchange rates, pull-forward demand from the spring sale, calendar effects such as the leap day, as well as Easter falling into Q1.
"The stock price reaction after hours was broadly flat. Amazon is a much-loved name with expectations increasing into results given strong performances from other cloud names such as Microsoft and Google. But nevertheless, we have a company producing record profits and using these profits to fund the next leg of growth."
