Amazon Doubles Profit

Amazon.com Inc. on Thursday delivered a double punch, reporting its best revenue growth in more than six years while topping $1 billion in profit for the second straight quarter. The results surprised investors who were already expecting Amazon to post strong numbers as it extends its dominance in online retailing and builds on gains in cloud-computing services. But this quarter, Amazon was expected to post a more modest profit as it refocused on longer-term investments after a blowout holiday period.

Instead, Amazon more than doubled its quarterly net profit to $1.6 billion—just under its record of $1.9 billion from the holiday quarter—as revenue surged about 43%. The profit feat is an achievement for a company with a reputation for plowing nearly every dollar it earns into investments.

Amazon also said it will hike its Prime membership fee 20 percent to $119 a year for new members beginning May 11. Members who renew their Prime memberships will have to pay the new rate beginning June 16. The company said this month that it has 100 million Prime members, the first time it has released the number. “The Prime program continues to drive great strength to our top line,” Brian Olsavsky, Amazon’s chief financial officer, said in a Thursday earnings call with analysts.

The Prime membership program has been an important cornerstone of Amazon’s flagship retail business. Prime members receive free two-day shipping on 100 million items, up from 20 million in 2014, Olsavsky said. Shares of Amazon spiked as much as 7 percent to a record $1,619 in after-hours trading, erasing recent losses following tweets from President Trump that attacked the company. The president also launched a study of whether Amazon is getting too good a deal from the U.S. Postal Service. 

“Amazon continues the trend of investment-fueled revenue expansion,” Charlie O’Shea, lead retail analyst for Moody’s, wrote in a note to clients. Cash flow “remains formidable, buttressed by $25 billion in cash and short-term investments, providing ample cushion as the company continues to invest across its many platforms.”

 

Keep those stops tight

Todd “Bubba” Horwitz