Amazon Q1: Benefits Of Scale, Focus On Same Day Delivery

by Trefis Team
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Amazon (NASDAQ:AMZN) reported its Q1 on April 25. The company beat consensus expectations on revenue (+17% y-o-y) and EPS (+$2.44 per share). Below are some highlights from the earnings announcement and call:

  • Management’s announcement of moving the two-day delivery to same day delivery for Prime members, leveraging Amazon’s 20 plus years of experience in logistics.
  • Investments made in AWS bearing fruit at a marginal cost of addition for new business leading to margin strength.
  • The launch of multiple partnerships with the likes of Apple, Google and others to make Alexa and Prime even more attractive for consumers.

We have an estimated price of $2,056 per share for Amazon. Our interactive dashboard on Amazon’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see more Trefis technology company data here.

 

Overview Of Q1 Results:

  • North America: Revenue grew to $36 billion (+17% y-o-y), while the segment operating margin improved to 6.4% (+260 bps y-o-y).
  • International: Revenue grew to $16 billion (+9% y-o-y), while the segment operating margin improved to -0.6% (+360 bps y-o-y).
  • AWS: Revenue grew to $8 billion (+41% y-o-y), while the segment operating margin improved to 28.9% (+320 bps y-o-y).
  • Advertising: Other revenue grew to $3 billion (+36% y-o-y), while advertising revenue grew faster than the total other revenue. The growth rate of 36% is much lower than the ~100% y-o-y revenue growth seen for advertising over the last five quarters.
  • Guidance for Q2: Revenue is expected to be $59.5-$63.5 billion (+13%-20% y-o-y, including a 150 bps forex headwind) and operating income of ($2.6-$3.6 billion)/
  • Traction in Prime: In addition to the sustained momentum in Prime benefits, shipping, hours watched on video, hours listened to on music, the company also plans to enhance its program to same day delivery for Prime members. Owing to the compression of one day, the management expects an incremental cost of $800 million in Q2 (which has been included in the operating income expectations).
  • AWS: While the benefits of scale and the ensuing efficiencies have been helping the business grow, management pointed to the lumpiness of the business when asked about the sequential deceleration.

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