Amazon crushes earnings estimates with $108.5B in Q1 revenue, up 44%, profits of $8.1B, up 224%

The Amazon Spheres in Seattle. (GeekWire Photo / Kurt Schlosser)

Amazon blew past expectations for its first fiscal quarter earnings, posting revenue of $108.5 billion, up 44% year-over-year, and earnings per share of $15.79, up from $5.01. Profits of $8.1 billion and an operating margin of 8.2% set new records. Analysts expected Q1 revenue of $104 billion and earnings per share of $9.54.

The Seattle-based giant has surged amid the pandemic as more consumers turn to online shopping and companies rely on its cloud arm, Amazon Web Services. Its advertising and grocery delivery businesses are also gaining momentum, and streaming hours on Prime Video are up 70% year-over-year.

Even as life returns to some level of normalcy in parts of the world, Amazon’s growth continues to accelerate, much like other tech powerhouses such as Microsoft, Facebook and Apple, which all reported giant revenue gains this week.

In a report this week, Wedbush Securities analyst Michael Pachter said “we think that new habits learned during the pandemic may be difficult to break for many Prime customers.”

Shares were up more than 4% in after-hours trading. Amazon’s stock is up nearly 10% this year, and has almost doubled since the pandemic began in 2020, trading Thursday at around $3,470/share. The company’s market capitalization is now $1.75 trillion.

Here’s a quick breakdown of Amazon’s financials from the quarter.

Amazon Web Services: Amazon’s cloud business was up 32% at $13.5 billion, with $4.1 billion in operating income, continuing to help drive Amazon’s profits. AWS is now a $54 billion annual sales run rate business.

Advertising: The company’s growing advertising arm doesn’t have its own category, but makes up a majority of the revenue under a category called “Other.” That category brought in $6.9 billion in revenue for the quarter, up 73% from a year ago. The company is using new deep learning models to show customers more relevant sponsored products, Amazon CFO Brian Olsavsky said Thursday in a call with analysts. Amazon’s reported $1 billion streaming deal with the NFL should also boost ad revenue.

Shipping costs: Amazon’s shipping costs have ballooned in recent years as the company aims to speed up delivery with its push for one-day shipping. During Q1, Amazon spent $17.1 billion on shipping, up 57%. Amazon grew its fulfillment center footprint by 50% in 2020.

Physical stores: The category, which includes Whole Foods and Amazon Go stores, posted revenue of $3.9 billion, down 16%.

Headcount: Amazon now employs 1.27 million people, up 51% year-over-year, and down slightly from Q4’s mark of 1.29 million. That figure does not include seasonal and contract workers. Amazon hired 500,000 people total in 2020, 80% of which came in operations and logistics. The company on Wednesday said it plans to invest more than $1 billion in wage increases for its operations workers, promising raises of between 50 cents and $3 an hour to more than 500,000 employees.

Prime: Subscription services revenue, which includes Prime memberships, came in at $7.5 billion, up 34%. In his annual shareholders letter published this month, Bezos said the company had more than 200 million Prime members. That’s up from 150 million in January 2020.

Prime Day: Amazon said Prime Day, its annual shopping bonanza, will take place in June, instead of July. It was delayed to the fourth quarter in 2020 due to the pandemic.

Outlook: Amazon expects Q2 2021 sales between $110 billion and $116 billion. Operating income is projected at $4.5 billion to $8 billion. COVID-19-related costs are expected to be $1.5 billion.