E-commerce giant Amazon.com (AMZN) likely turned a profit in the first quarter—even as rival cloud providers gained market share and restricted Amazon Web Services (AWS) to its slowest growth in at least a decade.
Amazon will probably post a net income of $2.39 billion, or 22 cents a share, compared with a loss of $3.84 billion in the same quarter of 2022. Sales likely rose 7.4% to $125 billion. Revenue from its AWS cloud business gained just 14.7%, the slowest pace in at least a decade. Amazon reports its first-quarter earnings after markets close on Thursday.
- First-quarter revenue from Amazon's cloud subsidiary likely rose 14.7% year-over-year, the slowest pace in at least a decade.
- Total revenues were likely up 7.4% to $125 billion.
- Despite slowing revenue growth, the company likely returned to profitability with net income just below $2.4 billion, compared with a $3.8 billion loss in the year-ago quarter.
- Earnings per share (EPS) are projected at 22 cents, versus a loss of 38 cents per share in the year-ago quarter.
Growth in online sales, Amazon’s main source of revenue, also likely experienced a slowdown, rising 9.5% year-over-year versus 21% and 14% in the two preceding quarters. Revenue growth has slowed markedly from the blistering pace witnessed early in the pandemic, when stay-at-home orders and closures of brick-and-mortar stores, along with extra income from stimulus checks, caused a surge in online shopping. Revenue from online sales rose 50% in the second quarter of 2020, the height of pandemic lockdowns, from a year earlier.
|Amazon Key Metrics|
|Q1 FY 2023 (Projected)||Q1 FY 2022||Q1 FY 2021|
|AWS Revenues ($M)||21,144||18,441||13,503|
|Net Income ($M)||2,388||-3,844||8,107|
|Earnings Per Share ($)||0.22||-0.38||0.80|
Amazon Web Services (AWS), the company’s cloud-computing subsidiary founded in 2006, faces rising competition from other cloud providers like Microsoft (MSFT) and Alphabet (GOOG; GOOGL) as well as a broader downturn in tech spending.
While AWS still dominates the cloud market with a 33% market share, Microsoft’s Azure is steadily catching up. It captured 23% of global cloud revenue in the last quarter of 2022, compared with just 13% in 2017. Google Cloud has the third-highest market share at 11%. The three biggest providers account for two-thirds of global cloud revenue.
Amazon eliminated 9,000 jobs last month as part of a cost-cutting campaign, bringing the number of positions cut this year to 27,000.
"The overriding tenet of our annual planning this year was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences," Amazon CEO Andy Jassy said in the announcement.
In a company report, analysts at Wedbush Securities pointed out that recent layoffs could be a sign of slowing growth prospects and weakness in the company’s core business, but highlighted that due to its large workforce, Amazon can "weather layoffs with little impact on revenue growth." The company expects Amazon to hit its revenue and profit targets for the quarter.
Amazon shares are up 26% year-to-date, outperforming the broader S&P 500 Consumer Discretionary sector, which has risen 14% over the same period.
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Wedbush Securities. "Amazon’s Recent Workforce Reductions Could Signal Slowing Growth."