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Amazon more than doubles profit in the first quarter but revenue growth slows

Amazon announced that it will spend US$800mln in the second quarter on plans to cut shipping times to one day for Prime members
Profit beat analysts' expectations Inc.'s (NASDAQ:AMZN) profit more than doubled in the first quarter as lower-than-expected costs offset the slowest rate of sales growth in four years.

Net income rose to US$3.6bn, or US$7.09 per share, in the quarter ended March 31 from US$1.6bn, or US$3.27 per share, a year ago. Analysts had predicted earnings of US$4.65 a share.

Revenue increased 17% to US$59.7bn, marking the lowest growth rate since the first quarter of 2015 but in line with estimates and near the top end of the company’s guidance range of US$56bn to US$60bn.

READ: Amazon plans to launch thousands of satellites for global internet access

Amazon in January issued a cautious forecast on sales, saying new regulations in India had created uncertainty around one of its key growth markets.

At the time, the e-commerce giant also said it would step up investments this year after pulling back on hiring and capital expenditure last year.

While revenue growth eased, Amazon did not increase spending as planned. 

Operating expenses edged up 13% to US$55.3bn, down from a 42% jump in the first quarter of 2018.

Delivery costs gained 21% to US$7.4bn in the quarter, compared to increases of more than 30% in 2017 and early 2018.

Cloud computing arm the star performer 

The company’s cloud computing arm, Amazon Web Services, delivered a 41% gain in revenue to US$7.7bn and a 59% surge in operating profit to US$2.2bn.

The North American retail business posted a 17% increase in revenue to US$35.8bn, decelerating from the 46% jump reported a year ago. Operating profit nearly doubled to US$2.3bn.

International revenue was up 9% to US$16.2bn, slower than last year’s 34% growth while operating losses narrowed to US$622m to US$90m.

Other revenue, consisting mainly of the advertising business, advanced 36% to US$2.7bn.

Second quarter profits to be hit by spending on roll out of one-day shipping

For the second quarter, Amazon expects net sales to rise between 13% and 20% to US$59.5bn to US$63.5bn.

Operating income is expected to be in the range of $2.6bn to $3.6bn, compared with US$3bn a year ago.

Analysts were expecting second-quarter net sales of US$62.4bn and operating income of US$4.2bn.

Amazon also announced that it plans to cut shipping times to one day for Prime members.

It will spend US$800mln in the second quarter to roll out the change.

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February 14 2019

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