Amazon Reports Sales Soar, Profits Pinched

Amazon.com Inc. reported soaring quarterly sales as homebound customers flooded it with online shopping orders.

The Wall Street Journal reports the Seattle-based tech giant said Thursday that revenue rose 26% from a year earlier to $75.5 billion in the three months through March—by far the highest on record for what is usually Amazon’s slowest period of the year. The boom in sales came at a cost, though, as profit fell 29% from a year earlier to $2.5 billion, well short of analysts’ average estimate of $3.26 billion, according to a survey by FactSet. Operating profit for the quarter also missed the estimate Amazon gave in January.

The results reflect the central role Amazon has played during the coronavirus crisis, delivering goods to people stranded at home by government shelter-in-place orders. The surge in online buying taxed Amazon’s fulfillment centers, which saw unprecedented volumes for this part of the year. In response, Amazon temporarily stopped taking inventory for products deemed nonessential and hired 175,000 more staffers for its warehouses and delivery network. Amazon said it ended the quarter with 840,000 employees.

Reuters reports Grocery sales in March were a bright spot for Amazon, which owns Whole Foods Market, Chief Financial Officer Brian Olsavsky said on a call with analysts. Household staples and home office supplies have been in high demand, while interest in discretionary items like apparel dipped, he said.

Last month, the number of people who streamed video on Amazon for the first time nearly doubled, Olsavsky said. Subscription revenue grew 28% to $5.6 billion in the first quarter.

Still, advertising, a lucrative business in which merchants pay for top placement of their goods on Amazon, was somewhat of a “mixed bag,” Olsavsky said.

Merchants had less reason to sponsor products in March when the company paused accepting non-essential items into warehouses for delivery. Some pulled back on placing ads, the price of which went down; however, strong traffic to Amazon’s websites helped offset the trend, Olsavsky said.

Advertising and other revenue was up 44% in the first quarter to $3.9 billion.

Amazon Web Services (AWS), the company’s cloud computing unit, also is seeing demand vary by industry. Hospitality and travel customers quickly and severely cut their spend. Remote education and entertainment services had much higher AWS usage, and overall, revenue increased 33% to $10.2 billion, short of analysts’ estimate of $10.3 billion