Amazon's Q1 stronger than expected; Is it the Kindle effect?

Amazon's Q1 stronger than expected; Is it the Kindle effect?

Summary: Amazon gave a wide range for the second quarter, but first quarter results were strong. CEO Jeff Bezos touted the Kindle.

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Amazon's first quarter sales and earnings were much better than expected as the company touted its Kindle ecosystem.

The company reported first quarter earnings of $130 million, or 28 cents a share, on revenue of $13.18 billion, up 34 percent from a year ago. Earnings were down 35 percent from a year ago, but well ahead of estimates.

Wall Street was expecting Amazon to report first quarter earnings of 7 cents a share on revenue of $12.9 billion. Going into the earnings report, analysts were worried about gross margins and slowing media sales.

Amazon acknowledged that it was hurt by currency rates.

The company touted its Kindle and Amazon Prime services. Amazon CEO Jeff Bezos said that the Kindle is the top e-reader and added that Prime subscribers get a free library of books. Kindle Fire remains the top seller on Amazon.com.

Amazon CFO Tom Szkutak elaborated a bit on the Kindle Fire effect:

In terms of the Kindle Fire, we are pleased with the growth that we are seeing. And customers are buying a lot of content and you are seeing that when you look at particularly in North America look at our North American media growth from Q4 two Q1, you are seeing that accelerate. We are very pleased with what's happening and we are going to continue to add more and more content for customers across all of our digital categories, and we think we have a great value proposition for customers today and we are going to continue to make that better over time.

As for the outlook, Amazon gave a wide range for the second quarter. The company projected revenue to be between $11.9 billion and $13.3 billion. Operating income will range from a loss of $260 million to a gain of $40 million. Wall Street is expecting second quarter revenue of $12.82 billion.

Szkutak said the company will continue to invest heavily in infrastructure. On a conference call, he said:

Our Q1 2012 capital expenditures were $386 million. The increase in capital expenditures reflects additional investments in support of continued business growth consisting of investments in technology infrastructure including the Amazon Web services and additional capacity to support our film and operations. -- fulfillment operations.

Shares jumped 10 percent in afterhours trading.

By the numbers:

  • Amazon product sales were $11.25 billion. Services sales were $1.94 billion in the first quarter.
  • Technology and content expenses were $945 million, up from $579 million a year ago.
  • Fulfillment expenses were $1.29 billion, up from $855 million a year ago.
  • 56 percent of Amazon's first quarter sales were in North America with international representing 44 percent.
  • Other revenue---Amazon Web Services---was $500 million in the first quarter, up from $311 million a year ago.

Here's the breakdown of revenue by product group.

Topics: Mobility, Amazon, Banking, Hardware

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16 comments
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  • of course it is!

    I said 4 Months ago that the Amazon Profit would improve as prime subscribers and content purchases came in from all the newly purchased Fires...

    I would not be surprised if the replacement beat all tablets In sales.
    slickjim
    • Profit was down...

      by 35%.
      msalzberg
      • Revenues Were Up

        And still profits went down.

        Could they be selling a lot of stuff at break even or a slight loss?
        DannyO_0x98
      • and

        The more of these that hit the market the more they are going to sell.
        slickjim
  • And, according to Comscore,

    The Kindle Fire makes up 54% of the Android market, followed by the Tab at 15%
    themarty
    • umm

      In the USA.
      slickjim
      • Yup

        Still fascinating.
        themarty
      • Maybe

        I think it is great that Android is growing, regardless of the front end... I just think only counting the USA is a mistake when Samsung does better in Europe and Asia yet, they still have 15% here.
        slickjim
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  • Why ask? Don't they break it down? If not... Why not?

    Pagan jim
    James Quinn
  • 130 million profit vs Apple's 11,600 million (11.6 billion)

    over and over again I hear bloggists and analysts lumping amazon in the same basket as Apple ("two technology powerhouses" etc) as if they were the same league or worse spouting "amazon with Kindle Fire is Apple's biggest threat and nightmare,'...

    ok, like the corner hotdog stand is a threat to McDonalds.
    Davewrite
    • Excellent point there!

      Pagan jim
      James Quinn
    • The Revenge of Netscape...

      Everyone thinks that Apple and Android compete against each other. Not so. Android and Apple has always been about one thing, the revenge of Netscape against the big guy on the block. The wedge was the free operating system. The sledge to drive the wedge home was the tablet, necessary to make Windows useless. It is poetic justice that Apple was the one that found the solution to the Microsoft problem, since they were one of Bill's first victims...
      Tony Burzio
    • This article is about Amazon...

      ...not Apple. Amazon had a great quarter and should be congratulated. Perhaps you should see someone about that nasty fixation of yours.
      itpro_z
    • And why do you think that is?

      Because, once Amazon gets a foothold their profits will increase, they already have a decent amount of App revenue and yes they give a lot back but their rewards will be big.

      You can compare them right now but it is a lack of vision of you think Amazon will not grow and it is poor knowledge of history if you think Apple was always the top dog.

      Here is something else, these numbers are predominantly for the USA and if Amazon were to send the fire worldwide, you likely would see iPad like sales numbers.
      slickjim
      • Apple will lose marketshare, sure

        But Apple won't be losing the "highest profit" spot anytime soon, if at all.
        Michael Alan Goff