Amazon Crushes Estimates: Ad Sales Jump 24%

Amazon reported another big set of numbers, marking the fifth consecutive quarter that has topped the high end of profit forecasts. Sales came in strong across the board, especially in the company’s computing business. Revenue from the advertising division continued to outperform, up 24% to $11.82 billion, powered by sales of ad units in both stores and video.

In the first quarter of the company’s fiscal year, sales grew 13% to $143.3 billion, compared with $127.4 billion in the same period last year. In North America, sales rose to $86.3 billion. And at AWS, the company's cloud computing division, sales shot up 17% to $25 billion.

However, analysts are most impressed with Amazon’s bottom-line performance, with the company’s operating income of $15.3 billion. That is the company’s best ever and more than triples the $4.8 billion it posted in 2023. The gains come from “continued cost efficiencies within its fulfillment network as well as the ongoing mix shift towards higher-margin AWS and advertising revenue,” writes Scott Devitt, an analyst who follows Amazon for Wedbush. He also notes “emerging success in monetizing generative AI, which is already on a multibillion dollar revenue run rate and should contribute more meaningfully to AWS growth as the year progresses.”



Andy Jassy, president and chief executive officer of Amazon, also called out improvements in customer experience in the announcements. “Our stores business continues to expand selection, provide everyday low prices, and accelerate delivery speed,” he says, setting another record on speed for Prime customers.

Investor reactions to the numbers were “somewhat muted,” says Devitt, as Amazon’s forecast for second-quarter revenues came in a bit below expectations. At the same time, its plans for capital expenditures on data centers were somewhat higher.

Wedbush remains bullish on Amazon’s prospects. “We think the associated monetization opportunity is already contributing to AWS growth and should continue to do so, with management expecting AI to generate tens of billions of revenue in the next several years.” 

Dan Romanoff, an analyst who follows the company for Morningstar, is also impressed. “Overall demand continues to trend favorably across business units,” he writes. And while “the company’s second-quarter outlook was shy of our aggressive estimates,” he is upbeat about profitability enhancements: “Many positive trends from the last several quarters continued, with notable improvement in AWS demand and additional cost savings arising from fulfillment and cost to serve.”

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