Amazon (NASDAQ: AMZN) Q1 2020 Earnings – a Mixed Bag Performance

Apr 30
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Amazon (NASDAQ:AMZN) has, undoubtedly, emerged as one of the most prominent beneficiaries of the spatial distancing measures enacted across wide swathes of the globe in order to combat the ongoing coronavirus (COVID-19) pandemic. Consequently, the company’s Q1 2020 earnings announcement became one of the most anticipated events of the current earnings season, whereby, the relevant stakeholders aimed to gain valuable insight into the top-line and bottom-line metrics of Amazon.

Amazon released its quarterly earnings moments ago and the disclosure was a mixed bag with a beat on revenue but a miss on EPS.

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How Does Amazon Stack Up its Scorecard?

For the three months that ended on the 31st of March 2020, Amazon earned $75.5 billion in revenue, translating to an annual increase of 26 percent.

(All figures are in billions of dollars)

Amazon breaks down its overall revenue (in millions of dollars) as follows:

Product Lines Q1 2020 Q1 2019 Annual Change
Online Stores 36,652 29,498 24 percent
Physical Stores 4,640 4,307 8 percent
3rd Party Sellers 14,479 11,141 30 percent
Subscription Services 5,556 4,342 28 percent
Amazon Web Services 10,219 7,696 33 percent
Other (Ads) 3,906 2,716 44 percent

Amazon earned $39.7 billion in Operating Cash Flow during Q1 2020, translating to an annual increase of 16 percent.

(All figures are in billions of dollars)

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Finally, Amazon reported an EPS of $5.01, missing consensus expectations by $1.10. This was largely due to a substantial increase in hiring as well as other costs as the company worked feverishly to fulfil online orders.

(All figures are in dollars)

As far as the guidance is concerned, Amazon expects to earn between $75 billion and $81 billion in revenue during Q2 2020, translating to an annual growth that ranges between 18 percent and 28 percent relative to Q2 2019. Moreover, the e-commerce giant expects its bottom-line metric to range between an operating loss of $1.5 billion and an operating profit of $1.5 billion for the pertinent quarter. Crucially, this estimate incoroporates $4 billion in costs related to the coronavirus (COVID-19) pandemic.

The stock has reacted negatively to the earnings release, posting a loss of 5.69 percent in the after-hours trading. However, given the astonishing range of Amazon’s product portfolio, the stock has largely remained resilient to the recessionary waves currently propagating through the breadth and file of global commerce amid the coronavirus (COVID-19) pandemic. Year to date, the stock is up by an astonishing 28.40 percent even as the broader S&P 500 index has tumbled by 9.85 percent in the same timeframe. Based on Thursday’s closing price, Amazon retains a market capitalization of $1.17 trillion.

In a testament to the coronavirus-induced panic and the corresponding boom in the online retail space, Amazon announced in the past couple of weeks that it would hire 175,000 new full and part-time workers across the U.S. in order to meet the surging demand on its delivery and logistics segment. This development follows a recent surge in online orders for the delivery of household items and medical supplies amid spatial distancing measures enacted to curtail the spread of the COVID-19 infections. Moreover, in order to ease the strain on its logistics, Amazon has declared that it will not accept new customers for grocery deliveries. Instead, all such prospective customers will now be placed on a waitlist for the time being as the company works to add capacity.

Even so, analysts expected moderate headwinds for the company’s AWS segment as small and medium-sized businesses are currently trying to curtail expenditure in order to secure their cash flows. These measures include delaying a shift to the cloud, thereby, potentially reducing the overall demand for Amazon Web Services (AWS). However, these fears did not translate into reality as the segment posted a healthy annual growth of 33 percent. It should be noted though that this number falls on the lower side of analyst expectations.

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