By Alistair Barr
Amazon.com Inc. reported another quarter of skimpy profits,
despite better-than-expected revenue growth, as the Web-commerce
giant spent heavily on shipping, cloud computing and other
initiatives.
The e-commerce giant also dispelled concern about a recent
increase in the cost of its popular Prime unlimited shipping and
video service.
Amazon said first-quarter revenue jumped 23% to $19.74 billion,
from $16.1 billion in the same period a year earlier. Analysts were
expecting quarterly revenue of $19.43 billion.
Chief Financial Officer Tom Szkutak said revenue growth was
driven by new customers, new products, overseas expansion and the
success of the company's cloud-computing offering. Revenue in
Amazon's "Other" division, which includes the cloud business Amazon
Web Services, rose 60% from a year earlier, to $1.2 billion.
Net income totaled $108 million, or 23 cents a share, up from
$82 million, or 18 cents a share, a year earlier. The per-share
number matched analysts' projections, according to Thomson
Reuters.
Amazon's gross-profit margin, or the share of revenue remaining
after paying for goods and related costs, came in at 28.8%, up more
than two percentage points from a year ago. Mark Mahaney, an
analyst at RBC Capital Markets, was looking for a gross margin of
28.6%.
"The revenue beat is positive given concerns investors had
following slower unit growth during the holiday period," said Colin
Sebastian, an analyst at RW Baird.
R.J. Hottovy, an equity analyst at Morningstar, called the
revenue growth and higher gross margin "encouraging."
Amazon shares were little changed in after-hours trading.
Earlier, shares rose $12.57, or 3.9%, in 4 p.m. trading on the
Nasdaq Stock Market. The shares are down 15% so far this year.
Amazon is spending heavily on its network of warehouses,
cloud-computing offering Amazon Web Services and new hardware such
as the Fire TV set-top box. That sucks up a lot of the company's
revenue each quarter, leaving slim earnings. However, if analysts
and investors see signs of growth from this spending, they usually
give Amazon the benefit of the doubt.
Shipping costs grew 31%, faster than revenue, to $1.8 billion.
Net shipping costs, which include fees that Amazon charges for
delivering goods, totaled $980 million, or 5% of sales, up from
4.7% of sales in the first quarter of 2013.
Revenue growth accelerated in Amazon's international business,
but its operating loss grew, to $60 million, from $16 million.
During a conference call, Justin Post, an analyst at Bank of
America Merill Lynch, asked Mr. Szkutak how much patience the
company has for continued losses overseas. Mr. Szkutak said Amazon
is investing "very heavily" in countries such as Spain, Italy and
China because it sees big growth opportunities.
Mr. Szkutak said the company had not seen any impact from
raising the cost of its Prime service by $20, or 25%, in late
March.
Since the announcement, "we've seen memberships increase
week-over-week, " Mr. Szkutak said, adding the numbers exceeded
Amazon's internal predictions. "We certainly think that Prime
members will continue to grow nicely over time."
For the current quarter, Amazon forecast revenue of $18.1
billion to $19.8 billion, a range whose midpoint is just below
analysts' average estimate of $19.03 billion.
For the bottom line, Amazon projected an operating loss between
$55 million and $455 million, an outlook that includes about $455
million for stock-based compensation and amortization of intangible
assets, among other things.
That's below the expectations of analysts. But Mr. Sebastian,
the RW Baird analyst, said Amazon's projections are "typically
conservative, and that is seen as the low-case scenario."
Write to Alistair Barr at alistair.barr@wsj.com.
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