Amazon Reports Strong Q1 2023 Earnings, Led by Advertising Business and Continued Growth in Net Sales and Operating Income
Amazon has reported its Q1 2023 earnings, beating Wall Street estimates with revenue of $127.4bn, up 9% YoY. Net income was $3.2bn, compared with a net loss of $3.8bn in Q1 2022.[0] Amazon expects Q2 revenue to be between $127bn and $133bn, up 5% to 10% YoY, while operating income could be up or down depending on a range of factors unfolding during the second quarter but will come in between $2bn and $5.5bn, compared with $3.3bn a year ago.[1] Despite the cloud slowdown, Amazon's Q2 projected sales were in line with estimates, and it expects net sales and operating income to continue to grow this year. Analysts had called for Q2 sales of $129.8bn, according to Refinitiv.[2]
Amazon's advertising business, in particular, continues to deliver robust growth, largely due to ongoing machine learning investments that help customers see relevant information when they engage with the platform, which in turn delivers strong results for brands.[3] Amazon CEO, Andy Jassy, said, “Our Stores business is continuing to improve the cost to serve in our fulfilment network while increasing the speed with which we get products into the hands of customers, and we expect to have our fastest Prime delivery speeds ever in 2023”.[4] Amazon Web Services (AWS) revenue rose 16% YoY to $21.4bn in Q1, surpassing Wall Street estimates, but this was a record low since Amazon began breaking out AWS sales.[5]
The growth of Amazon Web Services, long a major source of profit, slowed to 15.8% in the first quarter, while recession-wary businesses have slowed their spending.[6] CFO Brian Olsavsky told analysts on the earnings call, “As expected, customers continue to evaluate ways to optimise their cloud spending in response to these tough economic conditions in the first quarter.[2] We are seeing these optimisations continue into the second quarter with April revenue growth rates about 500 basis points lower than what we saw in Q1”.[2] Amazon has announced 27,000 layoffs since November due to high inflation and tighter monetary policy.[2]
Despite the cloud slowdown, Amazon's Q2 projected sales were in line with estimates, and it expects net sales and operating income to continue to grow this year. Analysts had called for Q2 sales of $129.8bn, according to Refinitiv.[2]
0. “Amazon stock rises, then drops after beating Q1 estimates with $127.4B in revenue” GeekWire, 27 Apr. 2023, https://www.geekwire.com/2023/amazon-stock-rises-11-after-beating-q1-estimates-with-127-3b-in-revenue/
1. “Amazon delivers upbeat outlook as Q1 results topped estimates; Shares jump By Investing.com” Investing.com, 27 Apr. 2023, https://www.investing.com/news/stock-market-news/amazon-delivers-upbeat-outlook-as-q1-results-topped-estimates-shares-jump-3066912
2. “Amazon stock dips as uncertain cloud outlook overshadows revenue beat” CNBC, 27 Apr. 2023, https://www.cnbc.com/2023/04/27/amazon-amzn-q1-earnings-report-2023.html
3. “Amazon stock soars after revenue, operating income top expectations” Seeking Alpha, 27 Apr. 2023, https://seekingalpha.com/news/3961628-amazon-soars-after-revenue-operating-income-top-expectations
4. “Amazon.com Announces First Quarter Results” Business Wire, 27 Apr. 2023, https://www.businesswire.com/news/home/20230426005960/en/Amazon.com-Announces-First-Quarter-Results
5. “Amazon Stock Down As Earnings, Revenue Beat Amid Cost Cutting” Investor's Business Daily, 27 Apr. 2023, https://www.investors.com/news/technology/amazon-stock-amazon-earnings-amzn-stock-q12023/
6. “Amazon records $3.2 BILLION profit as it lays off thousands of workers and sales rocket to $127.4B” Daily Mail, 27 Apr. 2023, https://www.dailymail.co.uk/news/article-12022689/Amazon-records-3-2-BILLION-profit-lays-thousands-workers-sales-rocket-127-4B.html
