Significant cost reduction effect! Amazon releases Q1 2024 financial report. Performance is impressive

Time: 2024-05-14 16:57

The financial report season is gradually coming to an end. A few days ago, Amazon released its Q1 2024 financial report, which greatly exceeded expectations.

The previous round of cost reduction and efficiency improvement achieved very positive results.

Amazon's Quarter 1 financial report was released, exceeding expectations

Recently, Amazon released its Q1 2024 financial report, with revenue of $143.30 billion, a YoY increase of 12.5%, Operating Profit of $15.30 billion, a YoY increase of 221%, operating profit margin of 10.7%, a YoY and QoQ increase of 6.9 and 2.9 percentage points respectively; Net Profit of $10.40 billion, a YoY increase of 229%, exceeding market expectations.

On the cost side, Amazon optimized its cost structure and achieved a gross profit margin of 49.3% in the quarter, an increase of 2.5 and 3.8 percentage points year-on-year and quarter-on-quarter, respectively. The performance expense ratio, R & D expense ratio, sales expense ratio, and administrative expense ratio all decreased year-on-year.

The performance on the revenue side is impressive, with stable growth in online retail business and a 17% year-on-year increase in revenue from Cloud Service AWS business.

Amazon has performed very well in terms of revenue growth, profit increase, and cost control.

Summary of Quarter 1 Financial Report Highlights

1. The cost reduction effect brought by logistics system reform is obvious, and the retail profit margin has increased significantly

Amazon's previous large investment in logistics systems is finally beginning to pay off.

The investment in logistics facilities and transportation capacity has improved the processing capacity of the logistics system. With the expansion of business scale, the logistics cost of a single order can be reduced.

At the same time, Amazon is also reforming its inbound logistics structure in the US, placing inventory closer to consumers to improve efficiency and reduce costs.

Therefore, Amazon's logistics costs and related expenses continued to decline this quarter, further improving the profit level of the retail business.

In the North American market, Amazon's retail business operating profit this quarter reached $4.98 billion, a year-on-year increase of 455%, and the profit margin reached 5.8%, which was 4.6 percentage points higher than the same period last year.

In the international market, Amazon's retail business made a profit of $900 million this quarter, with a profit margin of 2.8%, up 7.1 percentage points from the same period last year, finally reversing the previous loss situation. Sales in the North American market reached $86.30 billion, a year-on-year increase of 12%; sales in the international market were $31.90 billion, a year-on-year increase of 11%.

Specifically, advertising revenue 11.80 billion dollars, a significant increase of 24% year-on-year; service revenue from third-party sellers 34.60 billion dollars, a significant increase of 16% year-on-year; subscription service revenue 10.70 billion dollars, a year-on-year increase of 11%; online store revenue reached 54.70 billion dollars, a year-on-year increase of 7%; Amazon brick and mortar store revenue was 5.20 billion dollars, a year-on-year increase of 6%.

2.Amazon Cloud Services performed better than expected, and AI will bring new growth drivers

AWS sales exceeded expectations. In Q1 2024, AWS sales increased by 17% YoY to $25 billion, and Operating Profit recorded $9.40 billion, a significant increase of 84% YoY. The profit margin reached 37.6%, an increase of 13.6 and 8 percentage points YoY and QoQ, respectively.

AWS's annualized revenue scale has reached $100 billion, which is a very considerable number.

In AWS's total revenue, revenue from generative artificial intelligence (generative AI) related businesses has reached an annualized scale of billions of dollars.

This reflects that generative AI has become an important revenue growth point for AWS.

The impact of AI on AWS business is mainly reflected in two aspects:

First, the rapid development of AI technology is driving the strong demand for high-performance Cloud Service infrastructure.

As the world's leading provider of cloud infrastructure and platform services, Amazon Cloud as a Service (AWS) will fully benefit from this industry growth dividend.

It is reported that Amazon and chip giant NVIDIA are collaborating to create a new generation of AI-oriented cloud infrastructure. NVIDIA's highly anticipated Blackwell GPU platform is about to join the Amazon Cloud as a Service camp.

Once online, AWS users will be able to access ultra-high computing power based on new GPUs in the cloud, enabling them to efficiently build and run large language models with parameters up to trillions, greatly improving the performance of AI Model Training and Inference.

Second, Amazon has built a competitive advantage covering the entire industry chain in the field of artificial intelligence, not only having a strong cloud infrastructure, but also mastering the ecosystem of AI model development, powerful computing resources, and the ability to implement AI technology in various application scenarios.

With its existing comprehensive layout, Amazon is expected to make up for its shortcomings in the SaaS level in the near future, providing customers with a one-stop AI solution from underlying infrastructure to upper-layer applications.

Overall, AWS business maintains a strong growth trend, especially in the field of generative AI. The future layout and efforts of AWS in the AI direction are worth continuous attention.

Amazon is confident in its financial performance for the next quarter

Looking ahead, Amazon expects second-quarter net sales to reach $144 billion to $149 billion, up 7% to 11% year over year; operating profit is expected to reach $10 billion to $14 billion.

Amazon expects overall capital expenditures in 2024 to increase significantly from last year, primarily due to increased infrastructure capital expenditures to support the continued expansion of AWS Cloud as a Service and focused investments in artificial intelligence (Gen AI).

Amazon stated that the current market demand for AWS services is strong, and customers are signing longer-term contracts and making greater procurement commitments. Generative AI (Gen AI) technology and the broader Cloud Service market are still in their relatively early stages, and the company sees huge growth opportunities.

Therefore, Amazon is also confident about its financial performance in the second quarter of this year.

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