According to a news report by MarketWatch, Amazon.com Inc. reported another round of record earnings for the 4th successive quarter on Thursday, April 25. The company stated that it had doubled its profits in the first quarter of 2019.
The company also announced the bad news that it would see a sharp cut in its operating profit for the current quarter in order to cut down on delivery time for its Prime customers.
During the earnings call, when analysts asked about its guidance for this quarter, the Chief Financial Officer of Amazon Brian Olsavsky stated that the company was expecting $800 million in expenses to change its free delivery timeline for Prime customers from 2 days to 1 day.
While Amazon already offers its customers a 1-day delivery option for some of its products, and even a same-day delivery for some others, the company is looking to reduce the standard 2-day free delivery promise to a 1-day free delivery promise. The 2-day free delivery is the biggest selling point for Prime subscribers.
Olsavsky stated that the company had already been offering its customers faster delivery services such as 1-day, same-day and even 2-hour delivery services for its Prime Now.
The markets first reacted positively to the news that Amazon had delivery record profits once more time, with the company’s stocks going up by 1% in late trading. Then, as news of its guidance filtered through, the online retail giant’s shares started sliding. However, once Oslavsky explained why there would be an impact on its profit margins, the company’s shares rose once again.
In the earnings call, Amazon reported that it had made a Q1 profit of $3.6 billion on sales of $59.7 billion, which comes to $7.09 per share. The same time a year ago, the company had reported profits of $3.27 per share on sales of $51 billion.
The previous record was in the fourth quarter of last year – the holiday season for 2018 – when Amazon had made $3 billion in profits. It is also a record net income for the e-commerce behemoth.
The market analysts had predicted that the e-commerce giant would bring in profits to the tune of $4.70 per share on revenues of $59.68 billion. The company itself had given a guidance that it would deliver revenues in the range of $56 billion to $60 billion.
The company gave a forecast that in this quarter, it would deliver revenues of between $59.5 billion and $63.5 billion, however its operating income would be lower, between $2.6 billion and $3.6 billion.
In the breakup of revenues, Amazon revealed that its core e-commerce business had been the largest contributor to Q1 revenues, delivering $35.81 billion in North America and another $16.19 billion in international markets. The operating income from the domestic market was at $2.29 billion and an operating loss of $90 million from international markets.
Analysts had been expecting an operating profit from domestic markets of about $1.52 billion. They had also forecast that the company would show an operating loss of $605 million.
In fact, the last quarter’s loss of $90 million is the closest that Amazon has come to making a profit in its international operations.
The company’s cloud-computing division, Amazon Web Services, reported a revenue of $7.7 billion, with an operating income of $2.22 billion. The same time a year ago, the division had reported revenues of $5.44 billion and an operating income of $1.44 billion.
Amazon.com’s shares closed the trading day with a less than 0.1% increase in its share price of $1902.25. For this year, however, the company’s stocks have risen by 27%, vis-à-vis the S&P 500, which has gained 16.8% for the same time period.