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E-commerce giant Amazon had quarterly results last week, and they were excellent. The share price rose by 7% on the day.
Amazon is enjoying a resurgence in its profitability, along with sparkling revenue growth. CEO Andy Jassy (pictured below) has done a fine job since taking over from founder Jeff Bezos, who has retired to spend more time with his space rockets, superyacht, and trendy fiancée.
They doubled the size of their already massive logistics network during Covid, and now they're reviewing this cost centre, line by line. They've lowered the unit cost per package delivered by $0.45. They added same-day delivery service in another 65 cities. They now have retail (EBIT) margins of 8% in North America, the highest level in five years, despite fierce competition from Chinese e-commerce players like Temu and Shein.
The market-leading Amazon Web Services (AWS) business is really doing well. AWS growth accelerated a bit from last quarter and management expects that to continue into 2024. It's not giving up market share to Microsoft Azure or anyone else.
Advertising revenue rose by 27% year over year to $14.7 billion. That includes ads on the retail platform, and on Prime (video). Amazon is now a not-too-distant number three in that market after Meta and Google.
We've owned Amazon shares for clients since November 2010. It's been a bumpy road, with some big losses and sketchy profitability. We are reaping the benefits of that early confidence in their business model.
You can still buy Amazon shares now. They are not quite back at the all-time high levels last seen in late 2021. There's lots more upside to come from this one.
