Amazon Q1 2019 Financial Results Represented a Huge Beat on Profit


Amazon made an announcement that it has beat optimistic profit expectations for Quarter 1 on 25 April 2019. The financial results for its first quarter ended on 31 March. Although having slowed a bit, the e-commerce giant greatly benefits by ever-increasing profit margins.

Impressive figures for the trailing 12 months

According to the financial statement, Amazon’s cash flows increased dramatically for the trailing twelve months compared with the results for the same months ended on 31 March 2018. Operating cash flow increased by 89% to $34.4, compared with $18.2 billion. Free cash flow increased to $23.0 billion, compared with $7.3 billion. Moreover, free cash flow less principal repayments of finance leases and financing obligations increased to $15.1 billion, compared with $1.1 billion. Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations increased to an inflow of $11.8 billion, compared with an outflow of $3.0 billion.

Common shares outstanding plus shares underlying stock-based awards totaled 507 million on 31 March 2019, compared with 504 million one year ago.

Impressive results within the first quarter

Net sales increased by 17% to $59.7 billion in the first quarter, compared with $51.0 billion in 2018’s first quarter. Excluding the $1.1 billion unfavorable impacts from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased by 19% compared with the first quarter of 2018.

Operating income increased to $4.4 billion in the first quarter, compared with operating income of $1.9 billion in the first quarter of 2018.

Net income increased to $3.6 billion in the first quarter, or $7.09 per diluted share, compared with net income of $1.6 billion, or $3.27 per diluted share, in first quarter 2018. This number broke Amazon’s record in terms of net income. Much of those inflated margins can be attributed to online services including advertising and, most notably, cloud services through AWS.

The earnings report demonstrates just how much the site has diversified its portfolio, with earnings that now include results from Whole Foods, which was absorbed by Amazon last year. The grocery store chain has benefited from multiple rounds of price cuts since becoming a part of Amazon, though growth on that side is slow compared to the company’s cloud offerings.

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Backsteps in the financial results

Amazon’s revenue came to a slowdown across the board. Its total revenue grew 16.9% compared with the year-ago period, representing the slowest expansion since the first quarter of 2015. Its North American revenue saw a 17% increase, a slight increase compared with last year’s 46% growth. Meanwhile, international growth dropped to just 9%, down from the previous year’s 34% growth rate.

Amazon’s advertising business significantly slowed down, seeing only 34% revenue growth to $2.7 billion, after growing at least 60% in the past five quarters. Its physical stores revenue, primarily comprising Whole Foods sales, grew just 1% year over year to $4.3 billion.

Though experiencing slower growth, the company benefits from wider profit margins. Thus, investors are seeing more profitability from Amazon in exchange.

Amazon’s increased investment in education

Jeff Bezos took the opportunity to note the company’s increased investment in education. Amazon’s been pushing to highlight its softer side of late, as it has been the target of negative publicity over working conditions in its fulfillment centers and has since shuttered plans for opening an HQ2 in Queens.

“The son of a working single mom, Leo Jean Baptiste grew up speaking Haitian Creole in a New Jersey home without internet access. He’s also one of our inaugural group of 100 high school seniors to receive a $40,000 Amazon Future Engineer scholarship and Amazon internship,” he said in a statement. “Our passion for invention led us to create Amazon Future Engineer so we could help young people like Leo from underrepresented groups and underserved communities across the country.”

Final thoughts

It’s a rosy perspective for a company that has been killing it on earnings, though the company was less optimistic when quarter 2 has come as its growth has been slowing. Amazon offered guidance of as much as $1.6 billion below Wall Street’s $4.2 billion expectations. As CNBC notes, that could well point to the company’s intentions of making additional investments going forward.

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