Amazon’s Profits Decline $48 Million but Still Beat Expectations

Michael Teague |

Jeff Bezos, CEO of Amazon.comAmazon.com, Inc. (AMZN), the omnipresent online retailer, reported earnings after Thursday’s close indicating that for the first quarter of 2013, the company’s net income was $82 million, or $0.18 cents per share on revenue of $16.07 billion.

This compares to the prior year period during which the company made $130 million, or $0.28 cents per share on revenue of $13.18 billion. Analysts, meanwhile, had expected Amazon to earn $0.07 cents per share on revenue of $16.14 billion.

Sales of electronics and other merchandise increased 28 percent for a total of $10.2 billion, while operating income of $181 million was nearly double expectations of $96.8 million.

After a brief spike in late trading, however, shares dipped over 4 percent to $263.39, after the company had advanced in regular trading by 2.2 percent to close at $274.70.

The drop was a result of Amazon’s forecasts for the current period, which put revenue between $14.5 and $16.2 billion, against analyst estimates of $15.9 billion. And while analysts had been expecting operating income to come in at around $109 million, the company said that it expects more or less to break even.

Sales for the web service business, AWS, increased nearly 45 percent over the prior year, though Amazon claims that has lowered the price of the service some seven times so far in 2013. Furthermore, CEO Jeff Bezos reiterated the company’s plan to expand its streaming business with the 14 new pilot ideas it will be testing against user feedback in order to decide whether or not to proceed with a full-on original series.

Investors were presumably not pleased with the dip in profits from the previous year, though this should not come as a surprise given Amazon’s long history of aggressive reinvestment that has helped it grow from an online book seller into what it currently is.

The company indicated that this strategy would not be coming to a conclusion any time soon, given its continued heavy investment in delivery centers across the country, as well as data centers for its AWS business, and last but not least a television box expected this fall that could make Amazon’s streaming services relevant even in the absence of a computer or mobile device.

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Companies

Symbol Name Price Change % Volume
AMZN Amazon.com Inc. 740.34 -3.31 -0.45 3,561,962
GNE Genie Energy Ltd. Class B Stock 5.66 -0.08 -1.39 24,650

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