© Reuters. FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016. REUTERS/Mike Segar/File Photo
By Akash Sriram and Jeffrey Dastin
(Reuters) -Amazon.com Inc on Thursday reported quarterly sales and profit ahead of expectations but said that it was seeing a sharp drop in cloud revenue growth as businesses grappled with an uncertain economy.
April growth rates for Amazon (NASDAQ:) Web Services (AWS) were about 5 percentage points lower than in the first quarter, Chief Financial Officer Brian Olsavsky told analysts on a conference call. Shortly after he spoke, Amazon lost after-hours share gains of about 12% to trade near its price at the close of the regular session.
“AWS growth slowing is a signal for investors to take profits,” said Dennis Dick, equity trader and market structure analyst at Triple D Trading. “I think AMZN is priced for perfection, any signs of slowing growth and the stock likely gets hit.”
Addressing ongoing worries about the economy, CEO Andy Jassy has aimed to slash spending across Amazon’s vast array of divisions.
Last month, he said the company would axe jobs from its lucrative cloud and advertising businesses, expanding Amazon’s corporate layoffs since November to 27,000 employees. Its full and part-time head count dropped 10% as of the just-ended quarter to about 1.47 million workers, including changes to warehouse staffing.
The company likewise has ended entire services, including on Wednesday when it said it would pull its lineup of Halo health trackers.
In the middle of such cost cuts, Amazon has sought new revenue. Olsavsky told reporters that the economy had brightened internationally at the same time as Amazon increased its ad sales.
Regarding international sales, he said: “It’s good to see inflation going down there. It’s good to see consumer confidence increasing.”
In North America, he said, demand had held up, even though “you see signs that customers are looking for value” and “probably putting off some discretionary purchases.”
Ultimately, the online retailer reported better-than-expected sales of $127.36 billion in the first three months of the year, and it forecast revenue between $127 billion and $133 billion in the second quarter.
Amazon’s outlook has long been intertwined with the fortunes of AWS. The growth of AWS slowed to 15.8% in the first quarter, while recession-wary businesses scrutinized their spending. That is poised to fall further, the company said.
Still, Olsavsky told reporters, Amazon had seen no shift in the competitive balance among cloud providers. His comments followed a financial report by Microsoft Corp (NASDAQ:) this week that exceeded analysts’ expectations as the Amazon rival drew business through AI.
“We like the fundamentals we are seeing in AWS and believe there is much growth ahead,” Jassy added in a statement.
Amazon’s net profit stood at $3.17 billion in the quarter ended March 31, compared with a loss of $3.84 billion, a year earlier.