Amazon Q1 Revenue in 2020 Exceeds $75 Billion
Amazon’s Q1 2020 earnings are out. According to the reports, the first fiscal quarter of 2020 was better than the
- $75.5 billion in revenue
- $2.5 billion in net income
- $5.01 in earnings per share
Amazon is undoubtedly the leader in world online retail and cloud services. However, COVID-19 affected both revenue and income. Due to the pandemic, a significant impact on income is seen, however, the revenue went up.
Analytics, Forecast, and Facts
Amazon was expected to earn $73.61 billion in revenue. The earnings per share were expected to be at $6.25. When it comes to revenue, Amazon over-performed than what was expected. However, earnings per share were where Amazon had a tough time.
Amazon has also released guidance for the second fiscal quarter in 2020. The expected revenue is between $75 billion and $81 billion. The forecast is based on analytics expected revenue estimation for Q2 2020 to yield approximately $78 billion.
It is important to note that Amazon added one very important sentence to its guidance for the second fiscal quarter: “This guidance assumes approximately $4.0 billion of costs related to COVID-19.”
Coronavirus Impact on Amazon’s Bottom Line
Jeff Bezos, Amazon’s CEO, is famous for very short and concise statements. This time around, he took time to elaborate on the company’s plans for the future, the role it has to play in fighting the novel coronavirus outbreak, and the impact it will have on the company’s bottom line.
Bezos said that Amazon values essential workers, and the business they do is critical. But he also addressed investors referring to the “$4 billion of costs related to the pandemic” line released in the guidance:
“If you’re a share-owner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit.”
To spend $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe, is indeed a step taken to mend the issues that came up with the pandemic. It appears the company is being very careful and solicitous after the virus spreading its warehouses.
This includes investments in personal protective equipment, enhanced cleaning of our facilities, process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop COVID-19 testing capabilities.
The Strategy and Its Effect on the Stock
Before this guidance, Amazon’s stock was up 4% in regular trading. However, it went down 4% immediately after Amazon gave guidance. This didn’t come as a surprise, because investors never like hearing about the company spending cash instead of only making it.
Bezos explained that $300 million out of $4 billion would be invested in developing Amazon’s COVID-19 testing capabilities. Amazon has taken the pandemic very seriously, and to live up to the standards advised by the World Health Organization, it purchased 100 million face masks.
Today, all Amazon’s support staff, drivers, and associates are required to wear face masks. Amazon also invested in 31,000 thermometers and 1,000 thermal cameras. Mandatory daily temperature checks will be performed throughout Amazon’s sites, including Whole Foods Markets. Additionally, customers visiting Whole Foods Markets will be able to get face masks as well.
Amazon Web Services Business Growth
Amazon Web Services continue to generate profit despite the COVID-19 outbreak. The milestone set in Q1 2020 was $10 billion, and AWS successfully passed it in Q2. When it comes to growth, a slight slowdown is definitely noticeable, but it started in Q4 2019. At this point, we can’t be sure that it has anything to do with the coronavirus.
AWS growth fell to 37% in Q2 2019. In Q1 2020, it was 33%. However, Amazon remains the leader in the cloud computing market. Considering that it competes against Google Cloud and Microsoft Azure, this is a considerable achievement.
Subscription Services and “Other” Growth Rate
It went up 44% and generated $3.91 billion in revenue. Amazon uses machine learning to discover what customers want and don’t want to buy, thus being able to drive excellent ad relevance.
Besides the $4 billion set aside for dealing with COVID-19, Amazon’s bottom line seems to remain intact even with the impact of the novel coronavirus. We will have to wait for the Q3 report to be able to say with certainty to what extent the pandemic has changed things for the company, overall business, and its investors.
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