Amazon’s first quarter earnings (opens in new tab) results look to be a breath of fresh air in a continually troubled economy, showing signs of recovery and growth in a nod to what is hopefully a more positive year ahead, but there is a twist.
Across the board, net sales, operating income, net income, and cash flow all showed signs of improvement compared with previous quarters and the preceding year.
But a large part of the company’s 9% year-on-year increase in net sales, totalling $127.4 billion in the first quarter, is thanks to the company’s cloud division, Amazon Web Services (AWS).
AWS success
During the company’s first quarter of the 2023 fiscal year, AWS saw sales increase by 16% compared with the same period last year, to the sum of $21.35 billion. The figure represents almost 17% of the company’s entire net sales, and a slight lead ahead of analysts’ predictions of $21.22 billion.
Ultimately, more sales is good news for cloud companies and the economy more generally, and the news ties in to previous projections that cloud spend was on the rise again.
However, AWS is not out of the woods yet. Due to unmentioned factors, which are likely to entail at least partly the rising costs around the globe, the cloud division’s operating income reduce to $5.1 billion during the quarter, versus $6.5 billion the year before. That represents a 21.5% decline, despite a healthy boost to sales.
During the earnings call, CFO Brian Olsavsky warned investors that “customers continue to evaluate ways to optimize their cloud spending in response to these tough economic conditions” – a trend that he says continues to be seen into the second quarter.
This, along with the company’s continuing cost-cutting measures extending beyond the mammoth 27,000 layoffs, has left a bitter taste in some investors’ mouths.
