What's going on?
Amazon’s first-quarter results delivered more than investors expected on Thursday, helping push the stock to all-time highs. Perhaps money does grow on trees in the digital jungle…
What does this mean?
Amazon – a.k.a. “The Everything Store” to some – grew its revenues by more than 40% in North America and over 30% internationally. But it was the company’s cloud computing business, AWS, that sailed above the treetops this quarter – its sales were almost 50% higher than this time last year. While Thursday also saw Microsoft’s competing cloud service, Azure, reveal approximately 90% growth over the same period, investors will likely be reassured by AWS’s sustained success given recent reports that large customers like Netflix were flirting with other providers. Perhaps mindful of this, Amazon trumpeted its “seven-year head start before facing like-minded competition” in cloud services, resulting in products it described as “by far the most evolved and most functionality-rich.” In other words: back off, Bill.
Why should I care?
For markets: Amazon’s shares shot up 6% to their highest ever.
Amazon’s stellar results were topped off by the company increasing its profit forecasts beyond market estimates [tweet this], confounding observers’ predictions that it would pile more investment into areas like delivery and Alexa, as it has done in past quarters (or cloud computing, like Alphabet announced on Monday).
The bigger picture: Regulatory concerns remain.
An ongoing US Supreme Court case could yet result in legal changes that hurt Amazon, if the court decides companies have to charge additional sales taxes on products they sell no matter where they’re sold (President Trump is watching closely). Amazon’s strong quarter leaves it in a clearing for now, but the European Union’s proposed tech tax and the rising primacy of data privacy (witness the forthcoming General Data Protection Regulation in Europe) might mean that Amazon – along with other big tech players – isn’t out of the regulatory woods yet.