What To Expect From Amazon’s Q1 2016 Earnings

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Amazon (NASDAQ:AMZN) is scheduled to report its financial results for the first quarter on Thursday, April 28th.  The year 2015 was a blockbuster for Amazon, with the online retailer surpassing the $100 billion sales figure for the first time in its history driven by 25% year-over-year retail sales growth in North America and 70% growth in Amazon Web Services (AWS) revenue. In the fourth quarter, Amazon’s net sales grew about 22% year over year to $35.7 billion and its net income more than doubled year over year to $482 million or $1.00 per share. In Q1 2016, the company expects net sales between $26.5 billion and $29 billion and EPS of 55 cents.

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In terms of margins, Amazon’s company-wide operating margin in 2015 improved considerably over 2014. It improved from 3.5% in Q4 2014 to 3.9% in Q3 2015 to 4.9% in Q4 2015. This was driven by a significant year-over-year increase in profitability across the North American and cloud-services businesses. This indicates that both gross margin improvements (due to growing third-party business) and efficiency improvements are offsetting the increased investments on Prime and other growth initiatives. While the company should continue to see improved profitability going forward, Amazon’s margins could witness a slight drop in the near term owing to increased investments.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Amazon 

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