Amazon shares surge as earnings beat expectations
Online retailer Amazon says it has been able to make speedy deliveries to customers despite cutting back ranks of employees that swelled when internet shopping surged during the pandemic
San Francisco – Shares in Amazon leapt on Thursday after the online retail colossus reported it made a lot more money than expected in the first quarter of 2023.
“For the first time in several quarters, Amazon may finally have a bit of wind at its back,” said Insider Intelligence principal analyst Andrew Lipsman.
Amazon reported a profit of $3.2 billion on sales that climbed 9 percent to $127.4 billion in the quarter.
The net income was about a billion dollars more than analysts had forecast, and Amazon shares were up about 7 percent to $117.25 in after-market trades.
“There’s a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy,” said Amazon chief executive said Andy Jassy.
“Our Stores business is continuing to improve the cost to serve in our fulfillment network while increasing the speed with which we get products into the hands of customers.”
Jassy in March laid out a plan to cut 9,000 more jobs from the online retail giant’s workforce, following the 18,000 that were axed in January.
“Given the uncertain economy… and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and headcount,” Jassy said in a memo at the time.
The layoffs account for a smaller percentage of Amazon’s total workforce, which ran up to 1.5 million people in December 2022, than the cuts seen at some other tech giants.
Amazon’s Jassy told his workers that the extra layoffs were necessary as the company seeks a way to downsize after years of sustained hiring.
This was largely caused by the coronavirus pandemic when users in Amazon’s major markets turned to the internet for shopping and entertainment, in a massive boost to the Seattle-based company.
The layoffs are part of the giant’s cost-cutting campaign that also saw a pause in plans to open a new company headquarters in the Washington, DC area.
Amazon said that the number of packages handled by a “Robin” robotic system used across its operations in North America and Europe eclipsed a billion during the quarter.
Robin uses computer vision and artificial intelligence to help workers sort and handle packages being shipped to Amazon customers, according to the company.
– Rising clouds –
Amazon’s AWS cloud computing unit saw revenue climb 16 percent to $21.4 billion, but costs ate into operating income, which tallied $5.1 billion as compared to $6.5 billion in the same quarter a year earlier, according to the earnings report.
“Amazon’s stronger-than-expected performance for its key profit centers of AWS and advertising indicate that the enterprise and the digital ad sectors may be turning the corner,” analyst Lipsman said.
AWS is prioritizing long-term customer relationships as it “navigates companies spending more cautiously in this macro environment,” Jassy said.
Microsoft’s results for the first three months of the year also pleased investors this week, lifted by its industry-leading business cloud products.
The company founded by Bill Gates reported that revenue from Cloud and AI offerings more than offset drops in money made from licensing Windows software to computer makers, as sales suffer in that market.
Meanwhile, Google parent Alphabet this week reported that its cloud computing business turned a profit for the first time since it began reporting separate figures for that unit.
“I’m pleased with the ongoing momentum in cloud,” Alphabet chief executive Sundar Pichai said on an earnings call.
Alphabet beat market expectations in the first quarter of 2023 in a sign that the search engine behemoth is regaining its footing.
The internet titan became a focus of worry when Microsoft-backed ChatGPT was released and quickly went viral late last year.
The Windows maker has added the technology to its Bing search engine and office software.
The search giant has since rushed out Bard, its own version of the language-based AI, but the release was seen as clumsy and has so far disappointed observers and company insiders, according to media reports.