Amazon reported a first-quarter profit of $3.6 billion, or $7.09 cents a share, rocketing past analyst expectations.
The Seattle-based commerce giant said Thursday afternoon that net sales through the first three months of 2019 were $59.7 billion, up 17 percent from the year-earlier period. That was at the high-end of the company's revenue guidance and in line with analyst expectations.
Amazon chief financial officer Brian Olsavsky said the outsize profit in the quarter was a result of operating efficiencies and lower-than-expected costs. Specifically, he cited slower cost growth in fulfillment capacity, Amazon's network of warehouses and logistics operations; employment and infrastructure investment. Spending growth in those areas had declined significantly in 2018 from the previous two years, as Amazon built up capacity. That decline continued through the beginning of this year.
"We probably overestimated a bit how much we would spend and hire in the first quarter of the year," Olsavsky said. He added that the company will likely have to increase spending to build out warehouse capacity in the future.
"But right now, we're on a nice path where we're getting the most out of the capacity we have," he said.
The company said it expects sales to grow in the current quarter by 13 percent to 20 percent, weighed down by foreign-exchange rates, to $59.5 billion to $63.5 billion.
Olsavsky said Amazon's decision not to build a major office in New York City will not have a meaningful impact on its capital spending this year. Spending on Amazon's so-called HQ2 expansion, which is going forward in Virginia, is yet to come.
"A lot of that is going to be in future years," he said. "We're just getting going with planning and lining up temporary office space for the most part in 2019."
Amazon's cash-gushing cloud-computing business brought in $7.7 billion in revenue, up 42 percent year-over-year, excluding foreign-exchange impacts. It generated more than half of Amazon's $4.4 billion operating income while accounting for only 13 percent of the company's net sales.
Amazon's "other" business segment, which primarily includes advertising _ a closely watched source of growth and profit margin for the company _ grew at its slowest rate in the last six quarters. Revenue from other businesses was $2.7 billion, up 36 percent. Olsavsky said accounting changes mask what's really going on with the advertising business. While it appears to be slowing on a reported basis, "Advertising is actually growing faster than this," Olsavsky said.
Shipping costs continue to outpace revenue growth, amounting to $7.3 billion in the first quarter, up 21 percent.
Sales growth in Amazon's fleet of physical stores, including Whole Foods Markets, was up just 1 percent, to $4.3 billion. There again, Olsavsky said Amazon's revenue recognition practices mask stronger growth at Whole Foods. Online orders for goods from Whole Foods don't count toward physical store revenue. Counting those orders, physical store sales growth would have been closer to 6 percent in the quarter, Olsavsky said.
The company reported 630,600 full- and part-time employees, not including contractors or temporary workers, a 12 percent increase from a year ago. That's a slight slowdown from 2018, when the year-over-year employment growth rate was 14 percent, but Olsavsky sees hiring accelerating again.
