Amazon Revenue Increases, Profits Fall

In its most recent quarterly report, Amazon posted a substantial increase in revenue, but that didn’t translate into earnings, as profits fell sharply. Ironically, those lower earnings beat analyst expectations, but the higher revenue numbers failed to live up to Wall Street’s predictions.

According to Andrea Chang with the Los Angeles Times, “Amazon.com reported a 22% increase in revenue in the first quarter but a hefty decline in profit. For the three months ended March 31, the e-commerce behemoth said profit fell 37% to $82 million, or 18 cents a share, from $130 million, or 28 cents, a year earlier. Revenue totaled $16.07 billion, up 22% from $13.18 billion. Despite the sharp decline in profit, the results came in well ahead of expectations. Analysts polled by FactSet were expecting earnings of 7 cents a share. Revenue, however, came up a tad short, with analysts expecting $16.14 billion.”

The Verge’s Ben Popper noted, “Part of the reason Amazon’s profits are so small is that the company invests heavily in new markets, as well as research and development. It has transitioned from being an e-commerce company to having its own line of e-book readers, tablets, and is rumored to be working on a phone and TV set-top box.”

CNBC added, “For the second quarter, Amazon expects its results to be between a loss of $340 million and a gain of $10 million. It expects revenue to be between $14.5 billion to $16.2 billion vs. estimates of $15.9 billion.”

Nick Wingfield with The New York Times commented, “The seeming indifference of many investors to Amazon’s slim profits shows how much more effective the company has been at articulating its vision of future opportunities to Wall Street than another tech favorite, Apple. Apple, which made a profit 116 times bigger than that of Amazon last quarter, has been plagued by investor doubts about its growth prospects, driving its stock down 33 percent over the last year. Amazon’s shares are up 38 percent in that period.”