Amazon (AMZN) on Thursday extended a string of first-quarter earnings beats from mega-cap tech companies, even as caution around its cloud operations weighed on shares in late trading — making clear the ecommerce firm needs to further streamline operations to maintain growth in a slowing economy. Revenue increased 9.4% year-over-year, to $127.36 billion, beating analysts’ expectations for $124.55 billion, according to estimates compiled by Refinitiv. Earnings-per-share (EPS) on the basis of generally accepted accounting principles, or GAAP, increased to 31 cents, compared with a loss of 38 cents per share last year. Operating income increased 30% on annual basis, to $4.77 billion, significantly exceeding analysts’ forecasts of $3.08 billion, according to FactSet. Notably, the EPS figure included a pre-tax valuation loss of $500 million related to Amazon’s investment in Rivian Automotive (RIVN), while the figure from the same period a year prior included a loss of $7.6 billion. Due to its significant stake in the electric vehicle maker, Amazon is required to record changes in Rivian’s fortunes as non-operating income when there are gains, or as an expense when there are declines, as was the case in the first quarter of this year and that of 2022. Given that analysts don’t include Rivian’s swings in their estimates, the consensus forecast for EPS of 21 cents does not offer an accurate comparison. As a result, the operating income estimate is a more telling metric on how Amazon fared relative to Wall Street’s expectations. Bottom line Club holding Amazon delivered a strong first quarter despite growing economic uncertainty. But the stock is struggling to get any credit for it in afterhours trading, a result of a large slowdown in growth this month at cloud division Amazon Web Services (AWS), one of the company’s big profit engines. While it’s disappointing to see the stock down about 2.5% on the news — overshadowing Amazon’s relative resilience and the steps management has taken to restore margins — the decline is more bearable when factoring in the stock’s jump in the run up to the earnings results. Over the past two trading sessions, Amazon stock saw a 7% rally, as the market extrapolated the strength of Club names Microsoft (MSFT), Alphabet (GOOGL) and Meta Platforms (META) in anticipation of strong numbers from the e-commerce giant. The numbers delivered, but without a guidance raise for second-quarter operating income, the stock is likely to continue to give up recent gains in Friday trading. Taken together, Amazon must do more to rein in costs in a slow-growth environment. Progress has been made, but there is more work to be done. We remain patient investors on the expectation that management will find religion. First-quarter results Amazon’s results were strong across the board, with revenue beats in every reporting segment. Retail was a beat and about flat year-over-year, despite customers spending less on discretionary items….
Read More: Amazon must do more to rein in costs to keep growing in 2023