AMZN Stock: Key Takeaway’s From Amazon’s Q1 Earnings
Last week, Amazon (NASDAQ: AMZN)
announced its first quarter of 2021 results and reported net sales
of $108.5 billion, a year over year growth of 44%. Its net income
was up 224% year over year at $8.1 billion while earnings per share
rose by 215% to $15.79.
Comparatively, Wall Street forecast Amazon sales at $104.5
billion while earnings per share was estimated at $9.54. We can see
that Amazon surpassed analyst revenue estimates and crushed
earnings expectations in the March quarter.
While sales in North America soared 40% to $64.4 billion, Amazon
saw its international sales increase by 60% to $30.6 billion.
Amazon Web Services revenue was also up by 32% year over year at
The COVID-19 pandemic continues to
accelerate the shift towards online shopping as the second and
third wave of infections have kept people largely indoors.
Amazon large scale of operations has now allowed it to grow
bottom-line at a stellar rate as well. The company had forecast
operating profit between $ billion and $6.5 billion in Q1 but it
reported close to $9 billion in operating income, an increase of
123% year over year. Amazon’s operating cash flow soared 69% year
over year to $67.2 billion in the trailing 12-month period while
free cash flow was up 9% year over year at $26.4 billion.
Why Amazon will continue to grow its sales in 2021 and
Amazon just spent $45.4 billion on capital expenditures in the
last four quarters. This was twice the amount it spent in the
12-month period prior to Q1 of 2020. It continues to invest heavily
in multiple businesses that include cloud infrastructure as well as
voice-based technologies and new Amazon Fresh supermarkets.
However, according to company CFO
Brian Olsavsky Amazon is aggressively investing to expand its
logistics business. Amazon in fact has increased its fulfilment
capacity by 50% in the last year and opened new centers for its
Despite being a billion-dollar tech giant, Amazon continues to
invest in growth at a far higher pace compared to tech peers.
Comparatively, Apple (NASDAQ: AAPL),
Microsoft (NASDAQ: MSFT),
Alphabet (NASDAQ: GOOG) and
Facebook (NASDAQ: FB) have
spent $8.7 billion, $18.9 billion, $22.2 billion and $15.2 billion
respectively in CapEx in the last 12-month period.
Investors should be excited about the spending by Amazon as the
tech behemoth continues to enter into new segments driving
long-term revenue growth higher.
What next for AMZN stock and investors?
In the second quarter of 2021, Amazon has forecast sales between
$110 billion and $116 billion. It indicates the management expects
sales to grow between 24% and 30% year over year in Q2. This is
higher than analyst revenue estimates of $108.7 billion. While the
company does not provide earnings guidance, it expects operating
income between $4.5 billion $8 billion in Q2. In the June quarter
of 2020, its operating income stood at $5.8 billion.
While e-commerce is the largest business segment for Amazon, it
is also the least profitable business. The costs associated with
e-commerce is high as Amazon competes with traditional as well as
But, over the years Amazon has slowly shifted towards building a
third-party marketplace. This vertical was launched back in 1999
and it now accounts for a higher-portion of total revenue compared
to first-party sales. Third-party sales also have a higher profit
margin as it can take advantage of Amazon’s already huge customer
base and logistics network.
Amazon is also the third-largest digital advertising business
behind Alphabet and Facebook. In Q1, Amazon’s “Other” business
revenue which generally consists of online sales were up 77% at
The final takeaway
Amazon is firing on all cylinders. It is the largest player in
e-commerce, public cloud and digital advertising and continues to
expand its suite of services that makes it a top bet for long-term