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Amazon posts profit and revenue growth as Q1 results highlight impact of Covid-19 on its business

Online retail giant and its cloud arm have benefited from Covid-19-induced changes to consumer and enterprise buying patterns

The shift in consumer habits brought about by the onset of the Covid-19 pandemic are writ large over the first quarter results of online retail giant Amazon, with the company posting a profit three times larger than it was 12 months ago.

During the three months to 31 March 2021, the company banked a profit of $8.1bn, compared with $2.5bn a year ago, which covered the period just before governments across the world began issuing stay-at-home orders.

The company’s revenue was also up nearly 44% on last year, rising from $75bn in Q1 2020 to $108.5bn now, which is markedly higher than the revenue range of $100bn to $106bn Amazon previously predicted for its Q1 results.

These year-on-year jumps in profit and revenue can be attributed to a shift in consumer buying habits brought about by the Covid-19 lockdowns, as people turned to streaming platforms, such as Amazon Prime, for entertainment, while the closure of non-essential bricks and mortar shops prompted consumers to embrace online shopping like never before.

At the same time, enterprises across the world had to shift from predominantly office-based working arrangements to ones that could accommodate remote working on a mass-scale, forcing many to accelerate their digital transformation plans as a result.

Amazon Web Services (AWS), the company’s public cloud arm, certainly seems to have reaped the benefits of the latter trend during the pandemic, with its annual revenue growth rate hitting 32% during the first quarter, as sales of its services generated $13.5bn in revenue.

Amazon CEO Jeff Bezos, who is due to relinquish his leadership of the company during the second half of 2021, picked out AWS for praise while reflecting on the company’s Q1 results. “In just 15 years, AWS has become a $54bn annual sales run rate business competing against the world’s largest technology companies, and its growth is accelerating – up 32% year over year,” he said. “Companies from Airbnb to McDonald’s to Volkswagen come to AWS because we offer what is by far the broadest set of tools and services available, and we continue to invent relentlessly on their behalf.”

Revenue growth

During a conference call to discuss the results, transcribed by Seeking Alpha, Amazon chief financial officer Brian Olsavsky also started his remarks by hailing the revenue growth AWS notched up during the first quarter, before discussing the acceleratory impact Covid-19 is having on enterprise cloud migrations.

“During Covid, we’ve seen many enterprises decide they no longer want to manage their own technology infrastructure,” he said. “They see that partnering with AWS and moving to the cloud gives them better cost, better capability and better speed of innovation. We expect this trend to continue as we move into the post-pandemic recovery.”

While the company’s revenue and profit has soared during the pandemic, Olsavsky was quizzed during the analyst call on whether the firm has seen any drop-off in sales within geographies where lockdown restrictions are lifting.

“I would say we’re seeing strength pretty much across the board in international, and it does vary by country, but if you step back a minute… we grew 50% in the quarter,” he said.

“If you look at the growth rate prior to Covid and post-Covid, in the international segment… [they have] been tripling their prior growth rate in revenue anyway.”

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Against the backdrop of revenue and profit growth, the company has also upped its spending in several areas, including the creation of Covid-19 vaccination programmes and testing hubs for its frontline employees and contractors.

The company has also embarked on a series of hiring sprees to ensure it has the staffing capacity in its fulfilment centres to keep up with the demand for online orders, while also building out its transportation fleet. These investments look set to continue, suggested Olsavsky.

“We increased our capacity by 50%, and you can see from our [capital expenditure] numbers… including infrastructure… increased to 80% in the trailing 12 months over the prior trailing 12 months, so [it was] certainly a large area of investment,” he said.

“We are continuing to invest, and we’ll see a large investment in this area through 2021 as well,” said Olsavsky.

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