Amazon Focuses on Delivery, AWS Following Blockbuster Earnings

Amazon Focuses on Delivery, AWS Following Blockbuster Earnings

While analysts used headlines like “All In On Amazon” and “Amazon 1Q Earnings Smash Estimates”, the online giant will remain focused on its delivery and Amazon Web Services in the second quarter of this year. It will be the final quarter with CEO Jeff Bezos, who announced he will step away from Amazon this fall.

Highlights from Amazon’s first quarter earnings report include $108.5 billion in revenue, which is about $3.9 billion more than expected, 200 million Amazon Prime subscribers, which is up by 50 million accounts since 2020, and expectations that Amazon’s revenue will grow between 24%-30% over the second quarter of 2020, when many people turned to online shopping at the beginning of the pandemic. Amazon also announced its Prime Day will be in the second quarter of this year, which should create a financial boost. As of Friday morning, April 30, Amazon’s stock price is up nearly 2% to $3,524 a share, which makes Bezos’ personal worth $201 billion.

During the earnings report conference call with reporters, Amazon executives talked at length about its commitment to “the last mile” which is a key part of the company’s delivery strategy. Sales have been so heavy, that the company admits it has a hard time delivering all orders within one day, although it is hitting its delivery goals in Europe right now. “We are in the process of getting our 1-day shipment percentages back up to where they were pre-pandemic,” Brian Olsavsky, Senior Vice-President and CFO told reporters during the conference call. “We’re there in Europe, and we’re starting to see in Europe not only strong 1-day, but also more broad, same-day selection, so they tend to go hand-in-hand. In the U.S., we’ve made improvements. I would say the end delivery is really a function of everything before it, and how well we can handle and process in a timely manner all the orders in North America. It’s been challenged by the volumes, but it’s also been challenged by the rapid expansion of space. But we’re making progress nonetheless, and we hope to get that even higher in 2021.”

Amazon executives told reporters it is investing heavily in expenses related to what it calls “middle mile” needs like planes, over the road trucks, and distribution centers. Amazon says that expense alone has gone up 80% over the past 12 months. Amazon will also lean heavily on its Delivery Services Partner program, which provides financial aid to help people start small businesses to deliver Amazon packages. “That employs more than 100,000 drivers, and it’s been growing for the past few years,” Dave Fildes, Director of Investor Relations told reporters. “And it’s a program with an incentive for those folks to become small business owners and start their own package delivery business. So it’s a great way for those folks to access the delivery technology and the package volumes we have and tapping on the network.”

Amazon Web Services is also a key area of growth, with expectations for that to continue. “To put it little bit in perspective for you,” Olsavsky explained to reporters, “In Q1 of 2019, we were at $31 billion run rate. By last year, we had increased that to $41 billion revenue run rate, which is a 32% increase. This year, we’re up to a $54 billion annualized run rate, which is also a 32% year-over-year growth.”

The expansion of AWS will include sports leagues around the world. “Last quarter, we announced new commitments and migrations from some of the world’s most renowned sports leagues, the National Hockey League, the PGA Tour, Formula 1 and the German Bundesliga. We continue to expand our AWS infrastructure footprint to support the strong growth we’re seeing. AWS offers 80 availability zones across 25 geographic regions around the world. And we’ve announced plans to launch 15 more availability zones in 5 more regions,” Olsavsky explained.

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