Amazon reported strong first-quarter earnings, with revenue growing by 13% year-over-year to $143.3 billion. The standout performers were the online stores, advertising, and Amazon Web Services (AWS) segments, with AWS experiencing accelerated growth both year over year and sequentially.
Operating profit reached a record high of $15.3 billion, resulting in an operating margin of 10.7%, a significant increase from the previous year. Profitability enhancements were seen across various segments, with cost savings from fulfillment and cost-to-serve contributing to the positive results.
AWS has transitioned from stabilization to growth, with a focus on generative AI. Amazon is set to increase data center investments in 2024 to meet the rising demand for AI-related services. The company is confident in the revenue potential of generative AI over the coming years and has already achieved a multibillion revenue run rate from AI services.
In retail, Amazon continues to improve the customer experience by expanding its selection and enhancing delivery speed without incurring higher costs. The company’s regional hub model has led to cost savings and improved delivery speeds, contributing to overall profitability improvements.
Looking ahead, Amazon’s outlook for the second quarter includes revenue of $144.0 billion to $148.0 billion and operating income of $10.0 billion to $14.0 billion. While slightly below analyst estimates, Amazon’s long-term profitability outlook remains strong, with a path for continuous margin improvement over time.
With a fair value estimate of $193 per share and a Morningstar rating of 3 stars, Amazon’s positive quarterly performance and continued profitability enhancements position the company well for future growth and success in the competitive market landscape.
