The times they are a-changin’, with online behemoth Amazon reporting strong Q1 profits, driven by Prime subscription and growth in its cloud services division.
Amazon.com announced its quarterly profit and revenue on Thursday, significantly outpacing analyst expectations. The e-commerce behemoth reported net income of US$513 million on revenue of $29.13 billion for the quarter ended March 31. Those figures compare with a loss of $57 million and revenue of $22.72 billion a year earlier.
For an even more poignant comparison, Amazon posted $596 million in profit for the entirety of 2015.
Amazon’s strong performance represents the fourth straight quarter of profitability for a company that has long seemed indifferent to turning a profit. Could it be that Amazon has finally reached the point where all its shameless spending has started generating reliable profits?
While the company has continued with its penchant for wild spending, with operating expenses surging 25 percent for the quarter, revenue grew a healthy 28 percent.
Amazon shares jumped around 13 percent to $679 in trading on Thursday.
Amazon’s strong results have been largely driven by subscription revenue from its Prime loyalty program and the robust growth of its cloud services division, Amazon Web Services.
Amazon is still rolling out its Prime subscription service. Prime Now is currently operating in 25 US cities, has around 46 million members, with subscriptions growing by more than 50 percent for each of the past two years. For a membership fee of $99 a year, or $10.99 per month, subscribers can access one- or two-hour delivery options across about 25,000 items, as well as gaining access the video-streaming content and other digital content.
Amazon Web Services (AWS) represents that company’s fastest growing division, with revenue surging nearly 64 percent to $2.57 billion. AWS has been a major growth driver for the company, and also a major point of investment. Operating income from the division reached $604 million, up from $195 million just one year ago.
Revenue for North America — the company’s largest market — grew 27 percent to $16.99 billion. International revenue grew 24 precent to $9.57 billion. This represents Amazon’s strongest international growth in more than three years, according to Amazon CFO Brian Olsavsky, who emphasised the importance of investing in Prime, especially in international markets.
“We think there’s a lot of room to grow, not only in international countries but also in the US,” he said. “We plan on continuing to build the benefits of the Prime program, from music to video to two-day shipping to same-day shipping to Prime Now, so I don’t see that dissipating.”
Looking to the end of the current quarter, the company has forecast stronger sales of up to $30.5 billion and another period of robust operating profit, reaching up to $975 million.