Whoa, Amazon Isn't Just Making Money. It's Making More Than Ever

Amazon has long favored growth over profits, dampening Wall Street's expectations for years. Today was a different story.
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The latest earnings season has been rough on the tech sector. But today Amazon joined Facebook as a tech giant bucking the trend. Yes, Amazon is totally killing it.

But wait, doesn't Amazon always kill it? In short, no. For all its visibility, the company has long favored growth over profits, dampening the expectations of its investors for many years. Today was a different story.

The online retail giant just posted its fourth straight profitable quarter in a row—and the largest quarterly profit in its history. For the first quarter of 2016, the online retail giant said it pulled in a net income of $513 million, or a profit of $1.07 per share, on revenue of $29.1 billion. That’s up 28 percent compared to the same period last year. Even better, the results handily beat analyst estimates of 58 cents per share on revenue of $27.98 billion, not to mention Amazon’s own projected sales. Shares jumped by more than 12 percent in after-hours trading.

A New Normal

For Amazon, this is a big win. It shows the company's ability to reset expectations, proving it can consistently turn a profit even as it invests on resource-heavy initiatives like its Prime Now one-hour delivery service and its Echo voice-activated personal assistant.

As for Amazon’s core e-commerce business, it’s continued to perform strongly. The company's US retail business grew 32 percent in the quarter as Amazon pushed its Prime membership even more aggressively. Meeting customers’ instant gratification whims comes at a price, however. This quarter, the company’s shipping costs rose 42 percent to $3.28 billion, one of Amazon’s greatest expenses as it continues to invest in an elaborate and sprawling logistics system of warehouses, trucks, planes, and couriers.

But the star of the show once again is Amazon’s cloud-computing arm, AWS, which is still far ahead of the competition even as Microsoft and Google invest liberally in their own cloud businesses. In the first quarter of 2016, AWS sales rose to $2.57 billion, up 64 percent from a year ago, beating analyst estimates.

Jeff Bezos has said that he expects AWS to hit $10 billion in sales this year. At one time, such ambitions might have seemed as astronomical as Bezos' penchant for space travel. Not so much anymore.