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Amazon's (AMZN) Q1 Earnings & Sales Beat Estimates, Up Y/Y
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Amazon.com (AMZN - Free Report) reported first-quarter 2023 earnings of 31 cents per share, beating the Zacks Consensus Estimate by 47.6%. Further, the figure compares favorably with a loss of 38 cents per share reported in the year-ago quarter.
AMZN’s net income, totaling $3.2 billion, is inclusive of a pretax valuation loss of $0.5 billion in the non-operating income associated with its investment in Rivian Automotive.
Net sales of $127.4 billion rose 9% year over year. The figure exceeded management’s guided range of $121-$126 billion. Further, the metric surpassed the Zacks Consensus Estimate of $124.8 billion.
Amazon witnessed a $2.4 billion impact of unfavorable fluctuations in foreign exchange rates, without which year-over-year net sales growth would have been 11%.
Solid momentum across North America and Amazon Web Services (AWS) segments contributed well. Moreover, improvement in the international segment was a positive.
Strength in the advertising business benefited the company in the reported quarter.
However, shares of Amazon fell 2.1% in after-hours trading due to a slowdown in AWS growth. The company even mentioned that the sales growth of AWS slowed further in April. This is attributed to the recent cost-cutting trend seen among customers. These customers are making efforts to optimize their cloud spending in response to the current tough economic scenario. This remains a negative for the company.
Rising inflationary pressure, global supply-chain constraints and unfavorable foreign currency fluctuations remain concerns for Amazon in the days ahead.
Its deepening focus on generative AI and Large Language Models is likely to aid it in gaining momentum among cloud customers.
Amazon’s strong global presence, growing Prime momentum, strengthening AWS portfolio, improving Alexa skills, expanding smart devices portfolio and growing efforts toward gaining strong traction among small and medium businesses are likely to drive its near-term financial performance.
AMZN has gained 39% in the year-to-date period, outperforming the industry’s growth of 12.3%.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Product sales (44.7% of sales) increased 0.9% year over year to $56.98 billion. Service sales (55.3% of sales) rose 17.3% from the year-ago quarter’s level to $70.4 billion.
By segment, North America revenues (60% of sales) rose 11% from the year-ago quarter’s level to $76.9 billion. International revenues (23% of sales) increased 1% year over year to $29.1 billion. Amazon Web Services’ (AWS) revenues (17% of sales) rose 16% year over year to $21.3 billion.
Excluding the unfavorable impact of foreign exchange fluctuations, the International sales growth rate stands at 9% on a year-over-year basis.
This apart, strengthening relationships with third-party sellers remained a positive. In the reported quarter, sales generated by third-party seller services rose 18% on a year-over-year basis to $29.8 billion.
Additionally, sales from robust advertising services increased by 21% to $9.51 billion.
AMZN experienced year-over-year growth of 7% in its physical store sales, which stood at $4.9 billion in the reported quarter.
However, the company witnessed sluggishness in its online stores’ performance due to a slowdown in online shopping activities. Its online store sales stood at $51.1 billion, down 0.1% year over year.
Strength in Prime was a positive. Amazon witnessed 15% growth in its subscription services sales, which were $9.7 billion in the reported quarter.
Growing momentum with same-day delivery was another positive. The company witnessed 50% growth in its customer base ordering items for same-day delivery. There were around 26 million such customers in the reported quarter.
The expanding original content and overall content portfolio on Prime Video continued to accelerate Prime engagement.
Operating Details
Operating expenses were $122.6 billion, up 8.7% from the year-ago quarter’s level. As a percentage of revenues, the figure contracted 60 basis points (bps) on a year-over-year basis to 96.2%.
Cost of sales, fulfillment, technology and content, marketing, and general and administrative expenses increased 1.9%, 3.1%, 37.8%, 22.2% and 17.3% to $67.8 billion, $20.9 billion, $20.5 billion, $10.2 billion and $3.04 billion, respectively, on a year-over-year basis.
Other operating expenses were $223 million in the reported quarter, down 10.4% year over year.
Overall operating income increased by 30.1% from the year-ago quarter’s level to $4.8 billion. The operating margin expanded 60 bps from the year-ago quarter’s level to 3.7%.
Operating income for AWS was $5.4 billion, down 21.4% year over year.
The North America segment reported an operating income of $898 million against an operating loss of $1.6 billion in the prior-year quarter. Also, the International segment reported an operating loss of $1.25 billion, down from the loss of $1.28 billion in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2023, cash and cash equivalents were $49.3 billion, down from $53.9 billion as of Dec 31, 2022. Marketable securities totaled $15.1 billion at the end of the first quarter, down from $16.1 billion at the end of the fourth quarter.
Long-term debt was $67.08 billion in the reported quarter, down from $67.15 billion in the previous quarter.
In the first quarter, AMZN generated $4.8 billion of cash from operations, significantly down from $29.2 billion in the fourth quarter.
On a trailing 12-month basis, operating cash flow came in at $54.3 billion. Free cash flow was an outflow of $3.3 billion.
Guidance
For second-quarter 2023, Amazon expects net sales between $127 billion and $133 billion. Net sales are expected to grow 5-10% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for net sales is pegged at $129.38 billion.
Management projects an unfavorable foreign exchange impact of 30 bps.
Operating income is anticipated between $2 billion and $5.5 billion.
Image: Bigstock
Amazon's (AMZN) Q1 Earnings & Sales Beat Estimates, Up Y/Y
Amazon.com (AMZN - Free Report) reported first-quarter 2023 earnings of 31 cents per share, beating the Zacks Consensus Estimate by 47.6%. Further, the figure compares favorably with a loss of 38 cents per share reported in the year-ago quarter.
AMZN’s net income, totaling $3.2 billion, is inclusive of a pretax valuation loss of $0.5 billion in the non-operating income associated with its investment in Rivian Automotive.
Net sales of $127.4 billion rose 9% year over year. The figure exceeded management’s guided range of $121-$126 billion. Further, the metric surpassed the Zacks Consensus Estimate of $124.8 billion.
Amazon witnessed a $2.4 billion impact of unfavorable fluctuations in foreign exchange rates, without which year-over-year net sales growth would have been 11%.
Solid momentum across North America and Amazon Web Services (AWS) segments contributed well. Moreover, improvement in the international segment was a positive.
Strength in the advertising business benefited the company in the reported quarter.
However, shares of Amazon fell 2.1% in after-hours trading due to a slowdown in AWS growth. The company even mentioned that the sales growth of AWS slowed further in April. This is attributed to the recent cost-cutting trend seen among customers. These customers are making efforts to optimize their cloud spending in response to the current tough economic scenario. This remains a negative for the company.
Rising inflationary pressure, global supply-chain constraints and unfavorable foreign currency fluctuations remain concerns for Amazon in the days ahead.
Its deepening focus on generative AI and Large Language Models is likely to aid it in gaining momentum among cloud customers.
Amazon’s strong global presence, growing Prime momentum, strengthening AWS portfolio, improving Alexa skills, expanding smart devices portfolio and growing efforts toward gaining strong traction among small and medium businesses are likely to drive its near-term financial performance.
AMZN has gained 39% in the year-to-date period, outperforming the industry’s growth of 12.3%.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote
Top-Line Details
Product sales (44.7% of sales) increased 0.9% year over year to $56.98 billion. Service sales (55.3% of sales) rose 17.3% from the year-ago quarter’s level to $70.4 billion.
By segment, North America revenues (60% of sales) rose 11% from the year-ago quarter’s level to $76.9 billion. International revenues (23% of sales) increased 1% year over year to $29.1 billion. Amazon Web Services’ (AWS) revenues (17% of sales) rose 16% year over year to $21.3 billion.
Excluding the unfavorable impact of foreign exchange fluctuations, the International sales growth rate stands at 9% on a year-over-year basis.
This apart, strengthening relationships with third-party sellers remained a positive. In the reported quarter, sales generated by third-party seller services rose 18% on a year-over-year basis to $29.8 billion.
Additionally, sales from robust advertising services increased by 21% to $9.51 billion.
AMZN experienced year-over-year growth of 7% in its physical store sales, which stood at $4.9 billion in the reported quarter.
However, the company witnessed sluggishness in its online stores’ performance due to a slowdown in online shopping activities. Its online store sales stood at $51.1 billion, down 0.1% year over year.
Strength in Prime was a positive. Amazon witnessed 15% growth in its subscription services sales, which were $9.7 billion in the reported quarter.
Growing momentum with same-day delivery was another positive. The company witnessed 50% growth in its customer base ordering items for same-day delivery. There were around 26 million such customers in the reported quarter.
The expanding original content and overall content portfolio on Prime Video continued to accelerate Prime engagement.
Operating Details
Operating expenses were $122.6 billion, up 8.7% from the year-ago quarter’s level. As a percentage of revenues, the figure contracted 60 basis points (bps) on a year-over-year basis to 96.2%.
Cost of sales, fulfillment, technology and content, marketing, and general and administrative expenses increased 1.9%, 3.1%, 37.8%, 22.2% and 17.3% to $67.8 billion, $20.9 billion, $20.5 billion, $10.2 billion and $3.04 billion, respectively, on a year-over-year basis.
Other operating expenses were $223 million in the reported quarter, down 10.4% year over year.
Overall operating income increased by 30.1% from the year-ago quarter’s level to $4.8 billion. The operating margin expanded 60 bps from the year-ago quarter’s level to 3.7%.
Operating income for AWS was $5.4 billion, down 21.4% year over year.
The North America segment reported an operating income of $898 million against an operating loss of $1.6 billion in the prior-year quarter. Also, the International segment reported an operating loss of $1.25 billion, down from the loss of $1.28 billion in the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 31, 2023, cash and cash equivalents were $49.3 billion, down from $53.9 billion as of Dec 31, 2022. Marketable securities totaled $15.1 billion at the end of the first quarter, down from $16.1 billion at the end of the fourth quarter.
Long-term debt was $67.08 billion in the reported quarter, down from $67.15 billion in the previous quarter.
In the first quarter, AMZN generated $4.8 billion of cash from operations, significantly down from $29.2 billion in the fourth quarter.
On a trailing 12-month basis, operating cash flow came in at $54.3 billion. Free cash flow was an outflow of $3.3 billion.
Guidance
For second-quarter 2023, Amazon expects net sales between $127 billion and $133 billion. Net sales are expected to grow 5-10% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for net sales is pegged at $129.38 billion.
Management projects an unfavorable foreign exchange impact of 30 bps.
Operating income is anticipated between $2 billion and $5.5 billion.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the retail-wholesale sector are The Kroger Co. (KR - Free Report) , Ulta Beauty (ULTA - Free Report) and Rush Enterprises (RUSHA - Free Report) . While Kroger sports a Zacks Rank #1 (Strong Buy), Ulta Beauty and Rush Enterprises carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kroger has gained 7.8% on a year-to-date basis. The long-term earnings growth rate for KR is currently projected at 5.99%.
Ulta Beauty has gained 15.1% on a year-to-date basis. The long-term earnings growth rate for ULTA is currently projected at 12.26%.
Rush Enterprises has gained 0.2% on a year-to-date basis. The long-term earnings growth rate for RUSHA is currently projected at 15%.