Amazon Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
EPS Beat $15.79 $9.56
Revenue Beat $108.5B $104.5B
Amazon Web Services (AWS) Revenue Beat $13.5B $13.1B

Source: Predictions based on analysts' consensus from Visible Alpha

Key Takeaways

  • Amazon delivered a strong beat on earnings for Q1 2021.
  • Both total revenue and Amazon Web Services (AWS) revenue also exceeded analysts' estimates.
  • AWS growth remains a key driver of profitability, representing 12.4% of total revenue but 47.0% of total operating profits this past quarter.

Amazon (AMZN) Financial Results: Analysis

Amazon.com Inc. (AMZN) reported Q1 2021 earnings that beat the consensus estimate by a wide margin. Earnings per share (EPS) were $15.79. That's 65.2% above the $9.56 that analysts projected. Amazon's total revenue was $108.5 billion, coming in 3.8% higher than the analysts' prediction of $104.5 billion.

Amazon's Key Metric: Amazon Web Services (AWS) Revenue

Amazon Web Services (AWS) revenue for the quarter was $13.5 billion, 3.1% higher than the $13.1 billion consensus estimate.

There are two principal reasons why AWS revenue is a vital metric for Amazon. First, it represents a steady revenue stream, while revenue from Amazon's core e-commerce business can be seasonal and volatile. Secondly, AWS has a much higher operating profit margin than the e-commerce business.

In Q1 2021, AWS's operating profit margin was 30.8%. Amazon's two e-commerce-based segments had a combined operating profit of just 4.9%. As a result, each incremental dollar of AWS revenue raises total profits much more than an additional dollar of e-commerce revenue. For perspective, in Q1 2021 AWS represented 12.4% of total revenues but 47.0% of total operating income for Amazon.

Amazon's Guidance and Stock Performance

Amazon offered guidance regarding Q2 2021 in its Q1 2021 earnings release. Amazon projects that revenues will be between $110.0 billion and $116.0 billion, representing a year-over-year (YOY) increase ranging from 24% to 30%. A key assumption in this forecast is that Amazon will get "a favorable impact of approximately 200 basis points from foreign exchange rates."

Amazon expects that operating income will be between $4.5 billion and $8.0 billion, versus $5.8 billion in Q2 2020. This forecast assumes about $1.5 billion of costs related to COVID-19. Other key assumptions are that Prime Day will occur in Q2 2021, and there will be no additional business acquisitions, investments, restructurings, or legal settlements in Q2 2021.

Over the past year, Amazon's shares have provided a total return of 46.3%, slightly outperforming the S&P 500, which returned 43.3%.

Amazon (AMZN) Earnings Call Recap

As in past quarters, management's conference call presentation focused on Amazon's long-term goal of "optimizing" free cash cash flow (FCF). Amazon defines FCF as cash flow from operations minus purchases of property and equipment, net of proceeds from sales and incentives. Amazon looks at this measure on a trailing twelve months (TTM) basis.

For the twelve months ending in March, this figure was $26.4 billion, up by 9% YOY.

Next Earnings Report

Amazon's next earnings report is estimated to be released on July 29, 2021.