Amazon stock rallies but gives up gains after profit beats estimates

Company reported net profit of $3.2 billion in first quarter

Amazon's revenue during the first quarter increased 9 per cent on an annual basis to $127.4 billion. Reuters

Amazon shares surged as much as 12 per cent in extended trading on Thursday before giving back their gains, after the e-commerce company reported first-quarter net profit of $3.2 billion and revenue that beat analysts’ estimates.

The January-March period’s net profit also included a pre-tax valuation loss of $500 million included in non-operating expense from the common stock investment in electric vehicle maker Rivian Automotive, the company said in a statement on Thursday.

The world’s biggest e-commerce company reported a net loss of $3.8 billion in the same period of 2022.

The Seattle-based company’s revenue during the first quarter increased 9 per cent on an annual basis to $127.4 billion, topping analysts' average estimate of $124.5 billion, Refinitiv reported. This was the tenth consecutive quarter with more than $100 billion in sales.

Amazon's operating income increased 30 per cent to $4.8 billion in the first-quarter, up from the same period a year earlier.

The company's stock, which is up about 28 per cent since that start of this year, was nearly 5 per cent higher to $109.82 at the close of trading on Thursday. It fell 2 per cent in after hours trading.

In 2022, Amazon’s share price dropped more than 50 per cent. It was the biggest decline since 2000, when it tumbled almost 80 per cent.

Andy Jassy, chief executive of Amazon. AP

North America market sales, which increased nearly 11 per cent year-on-year to $76.9 billion in the September quarter, contributed almost 60.3 per cent to the overall sales of the company.

However, the international markets sales surged only 1 per cent annually to $29.1 billion. It added 22.8 per cent to overall sales.

Amazon Web Services (AWS), the company’s subsidiary that provides on-demand cloud computing platforms to other businesses, had good momentum in sales.

AWS revenue reached $21.4 billion in the first quarter, rising annually by more than 16 per cent.

“We like the fundamentals we are seeing in AWS, and believe there’s much growth ahead,” said Andy Jassy, Amazon’s chief executive.

“There’s a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy.

“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.”

Amazon, which expects to reach the fastest prime delivery speeds ever this year, said it has rolled out new AWS tools in the last quarter that make generative artificial intelligence “easy, practical and cost-effective for organisations of all sizes”.

Amazon expects to reach the fastest prime delivery speeds ever this year. Reuters

“We continue to prioritise building long-term customer relationships both by helping customers save money and enabling them to more easily leverage technologies like large language models and generative AI with our uniquely cost-effective machine learning chips,” Mr Jassy said.

In its second-quarter sales guidance, Amazon expects revenue to hover between $127 billion and $133 billion, jumping 5 per cent to 10 per cent compared with the same period a year earlier.

However, industry analysts were expecting sales of about $129.8 billion, according to Refinitiv.

“This guidance anticipates an unfavourable impact of approximately 30 basis points from foreign exchange rates,” Amazon said.

Operating income is expected to be between $2 billion and $5.5 billion in the three months to June 30, the company said.

AWS revenue reached $21.4 billion in the first quarter, rising annually by more than 16 per cent. Reuters

In March, Amazon said it was laying off about 9,000 employees, or nearly 3 per cent of its workforce, as technology companies continue to cut jobs amid economic challenges and worries of a global slowdown.

The new layoffs were on top of the previous round that began in November last year and stretched into January. That round affected more than 18,000 Amazon workers.

Amazon also announced it would invest nearly $200 million on safety technologies across Amazon’s US transport network in 2023.

These innovations include front-collision warning, lane-departure warning, speed limiters and 360-degree camera detection systems.

The company has also expanded the use of electric delivery vehicles from Rivian. These custom vans are now been used to deliver more than 75 million packages in 500 US cities and regions, Amazon said.