Amazon Web Services killing it: revenue up 64%

Amazon.com on Thursday US time reported profit and revenue that blew past analysts' expectations, sending its shares soaring in after-hours trading and demonstrating the growing market power of its core retail business and new cloud services division.

Amazon's performance assuaged concerns about a broader slowdown among tech and internet companies after Apple, Microsoft and Intel all reported disappointing earnings.

"It did restore my faith," said Dan Conde, an analyst at the Enterprise Strategy Group, who keeps a close eye on Amazon's cloud business.

While Amazon displayed impressive growth for a company its size - revenues rose 28.2 percent to US$29.13 billion (AU$38.2 billion) - its Amazon Web Services (AWS) cloud computing division was the highlight with revenues climbing 64 percent to US$2.56 billion (AU$3.36 billion) while operating income more than tripled to US$604 million (AU$792 million).

Even though operating margins fell at the unit compared to last quarter, as Amazon spends heavily to compete with rivals like Microsoft and Google, they remain a healthy 27.9 percent. That compares to 28.5 percent last quarter, and 16.9 percent a year earlier.

Web services, launched 10 years ago, delivered more profit in the quarter than Amazon's retail business. Research firms say AWS has more than 30 percent of the fast-growing cloud-computing market and it remains far ahead of rivals including Microsoft and Google.

Amazon founder Jeff Bezos also touted the success of new hardware products. "Amazon devices are the top selling products on Amazon," he said in a press release, citing the Echo voice-response system and the Fire TV Stick.

The Echo has been a surprise hit and Bezos said in the statement that the company could not keep it in stock, but he declined to provide sales figures.

Amazon has seen strong growth in subscribers to its Prime loyalty program, which offers one-hour delivery, original TV programming and access to its digital entertainment products such as Prime Music and Prime Video for an annual fee of US$99.

The company recently launched a monthly subscription to the program for US$10.99. Amazon has also said it plans to offer its video streaming service for a monthly fee of US$8.99.

Amazon's growth on the revenue side suggests that the relationship model around Amazon Prime is working, said Frank Gillett, a senior analyst at Forrester Research.

The results are a sharp contrast to the disappointing fourth quarter Amazon reported in January, which renewed worries among some shareholders about the company's comparatively thin profit margins. Shares of the world's biggest online retailer jumped nearly 13 percent to US$679 in extended trading on Thursday US time.

Amazon's net sales in North America, its biggest market by revenue, increased 26.8 percent to US$17 billion in the first quarter.

Amazon reported net income of US$513 million, or US$1.07 per share, for the quarter ended 31 March. The company had a loss of US$57 million, or 12 US cents per share, a year earlier.

Analysts on average had expected a profit of 58 US cents per share and revenue of US$27.98 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Narottam Medhora in Bengaluru and Sarah McBride in San Francisco; Editing by Kirti Pandey, Jonathan Weber and Bernard Orr)