Amazon 1Q numbers - AWS showing strong growth

As we chatted about last week, Amazon.com released their 1Q 2016 numbers and they smashed expectations pushing the stock back to record highs. Here are the numbers, Revenue up 28% to $29.1 billion, operating income up 331% to $1.1 billion and Net Income is $513 million from a loss of $57 million. The net income number is not of huge importance, as Amazon is spending most of the cash that comes through their front door on infrastructure development.

What is important is the growth rates being achieved and the customer loyalty being built as they grow. Sales in North America grew 27%, International sales grew 24% and Amazon Web Services (AWS) grew 64%. AWS is the big reason for the Amazon share price being up 58% over the last year, that segment of the business makes a healthy 64% operating margin unlike the 3.5% operating margin on the e-tail part of the business. The result is that North American net sales amount to $17 billion and have a profit of $588 million compared to AWS who has net sales of $2.5 billion but profits of $604 million.

On a customer service front, Prime same-day delivery grew by 11 metros in the US to now include 27 metros. This commitment to customer service is what distinguishes Amazon.com from their competitors. I think that the company is fairly priced considering its huge growth rates which are likely to continue for years to come. As a comparison Alibaba (who is the other global online seller) trades on a price to sales of 12 times, Amazon "only" trades on a price to sales of 3 times. The company is run by one of our generations great visionaries and operates in a sector that will become of greater importance to society, Buy Amazon.com.