Amazon's Profit Run Continues, Bolstered by Sustained Demand
April 29 2021 - 4:46PM
Dow Jones News
By Sebastian Herrera
Amazon.com Inc. reported record results for the first quarter of
the year, as demand remained robust for the company's e-commerce
services and revenue continued to grow in its cloud-computing and
advertising businesses.
Seattle-based Amazon said first-quarter sales hit $108 billion,
a 44% increase from the same period a year earlier, and profits
more than tripled to $8.1 billion. Revenue far exceeded the $105
billion predicted on average by analysts polled by FactSet.
Amazon said it expects sales from April to June to reach between
$110 billion and $116 billion, which would mark three consecutive
quarters with more than $100 billion in revenue.
Amazon shares shot up about 5% in after-hour trading
Thursday.
Amazon's success in the past year has catapulted the company to
new heights, after consumers flocked to online shopping during
pandemic lockdowns. The tech giant's dominant grip over e-commerce
and continued expansion into new industries have strengthened its
power, although the company continues to face challenges from
regulators and some employees.
Amazon's first quarter is typically slower than its preceding
end-of-year results, which are aided by holiday shopping sales. Yet
the company has exceeded expectations in recent quarters. It
shattered sales records last year as homebound Americans turned to
its delivery services. The company's stock price rose 76% in
2020.
Amazon's dominance in online retail also parallels the strength
of Amazon Web Services, the business line that rents server
capacity and software tools to other corporations. AWS is Amazon's
main profit center, though its recent growth has slowed as the
cloud units of Microsoft Corp. and Google have moved aggressively
to sign up new customers. AWS Chief Executive Officer Andy Jassy is
set to take over as Amazon's CEO in the third quarter after Jeff
Bezos said in February that he would depart the role to become
executive chairman.
The company's advertising business has also become a major
player in its industry. The fast-developing unit has put Amazon in
competition with Google's and Facebook Inc.'s leading ad
businesses.
The coronavirus pandemic helped Amazon, Facebook and Google grow
even stronger, with the tech titans for the first time collecting
the majority of all ad spending in the U.S. last year, The Wall
Street Journal reported in March. Amazon also recently said it
would begin streaming the National Football League's Thursday-night
games by 2023, a deal that will expand Amazon's ad dollars and
compete more directly with traditional television broadcasters.
"What we always get back to with Amazon is the optionality --
they have multiple businesses firing off," said John Blackledge, an
analyst with investment firm Cowen Inc. Mr. Blackledge said with
the pandemic's end in sight, investors are eager to see Amazon
expand its one-day shipping offerings.
Amazon's earnings follow strong performances by its big tech
peers this week. Google parent Alphabet Inc. set sales records for
the first quarter, fueled by a surge in digital ad spending, while
Microsoft posted a 19% increase in quarterly sales because of
strong demand for its cloud and videogame services. Apple Inc.'s
profit more than doubled to $23.6 billion because of surging sales
of new, higher-price iPhones and pandemic-induced buying of
products such as Mac computers and iPads.
The largest U.S. tech companies recorded staggering growth last
year as consumers and businesses relied more on online shopping,
software and cloud services, as well as their smart devices and
video streaming. The combined revenue for Amazon, Google, Facebook,
Apple and Microsoft grew by one-fifth to $1.1 trillion. Their
collective market capitalization soared to almost $8 trillion at
the end of 2020, compared with about $5 trillion at the end of
2019.
Amazon's achievements have come as regulators increasingly
scrutinize the company's market power. Congress has considered
changes to antitrust laws that could make it easier for the
government to challenge certain business strategies and practices
or force tech giants to separate certain units. Last year, a
congressional panel found Amazon had amassed "monopoly power" over
sellers on its site, bullied retail partners and improperly used
seller data to compete with rivals.
Amazon has said that it is wrong to presume its success can only
result from anticompetitive behavior and that it is focused on
keeping prices lower for consumers.
The company has also faced activism from employees. It said
Wednesday that it is raising wages for its hourly workers,
providing more than 500,000 of its employees with pay increases of
between 50 cents and $3 an hour. Amazon announced the wage
increases after workers at one of its warehouses voted not to
unionize earlier this month in Alabama. More than 70% of those who
participated in the election rejected unionization, ensuring for
now that Amazon retains full control over how it manages and pays
employees as well as its expectations of warehouse workers.
Despite the company's victory at the Alabama facility, Mr. Bezos
said the company aims to improve how it handles its workforce. In
his last annual letter to shareholders as CEO, released this month,
Mr. Bezos said Amazon is working to invent solutions to reduce the
number of injuries at warehouses. He defended the company against
accusations by critics that it treats its workers unfairly.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com
(END) Dow Jones Newswires
April 29, 2021 16:31 ET (20:31 GMT)
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