Amazon’s Q1 Earnings Skyrocket Backed by Robust Sales and Flourishing Cloud Division

Amazon recently unveiled its Q1 earnings, spotlighting its public cloud service – Amazon Web Services (AWS) as the shining star. Let’s delve into the details and break down the protagonists behind Amazon’s staggering success.

The firm’s AWS was a solid pillar supporting this miraculous financial performance. Revenue soared 42 percent in Q1 2017 to an impressive $3.66 billion, rising from $2.57 billion during the same period in 2016. Operating income increased by 47 percent, reaching $890 million, rendering AWS the largest contributor to Amazon’s operating income.

As reiterated in Amazon’s official press statement on its Q1 earnings, the healthy financials are manifest in numerous contributing factors. The operating cash flow escalated 53% to a dazzling $17.6 billion in the trailing twelve months, a significant leap from the $11.6 billion recorded in the preceding year ending March 31, 2016.

Free cash flow rose to $10.2 billion, a considerable increase from the $6.7 billion noted for the same duration ended March 31, 2016. Another noteworthy point in the financial repertoire is the rise in free cash flow less lease principal repayments which swelled to $6.2 billion, a significant surge from the $3.8 billion of the previous period ended March 31, 2016. Amazon achieved this while keeping an eye on asset acquisitions under capital leases, allowing an increase of available cash flow to $3.3 billion.

In terms of equity, common shares outstanding plus shares underlying stock-based awards summed up to 497 million on March 31, 2017, showing a slight increment from the 490 million shares a year earlier.

Looking closely at the sales figures, net sales experienced a robust 23% growth to $35.7 billion in the first quarter, in comparison with the $29.1 billion of Q1 2016. Setting aside the unfavorable impact of $492 million from the deviations in foreign exchange rates during the quarter, net sales yield a growth of 24% compared to the first quarter of 2016.

Interestingly, despite the escalating sales, operating income witnessed a 6% drop to $1.0 billion in the first quarter, which was slightly below the operating income of $1.1 billion in the first quarter of 2016.

Compared with a net income of $513 million or $1.07 per diluted share in Q1 2016, Amazon boasted a net income of $724 million or $1.48 per diluted share in the first quarter of 2017.

According to Amazon’s founder and CEO, Jeff Bezos, “Our team in India is rapidly advancing and producing remarkable results for our customers and sellers”. This progress can be seen in their successful endeavors which have seen a 75% increase in Prime selection since its introduction nine months ago, an impressive 26% increase in fulfillment capacity for sellers this year alone, and the introduction of a Fire TV Stick optimized for Indian customers.

Projecting ahead into Q2 2017, Amazon anticipates net sales to land between $35.25 billion and $37.75 billion, displaying a growth between 16% and 24% compared with Q2 2016. This presumes an impending unfavorable impact of approximately $720 million from foreign exchange rates. Operating income is anticipated to range between $425 million and $1.075 billion, in comparison with the $1.3 billion recorded in Q2 2016.

Amazon’s future calculations presume among other aspects, that there won’t be any additional business acquisitions, investments, restructurings, or legal settlements in the next quarter. Given Amazon’s focus on organic growth and continuous improvement, the future seems to be pointing toward even brighter financial horizons.