Amazon Q1 2024: Solid Start Fuelled by AWS and Advertising

Amazon produced another strong set of results to kick start the year:

  • Net revenue beat expectations, reaching $143.3 billion, a 13% increase year-on-year

  • Advertising revenue for Amazon was $11.8 billion, a 24% increase year-on-year

  • Amazon achieved a record operating income of $15.3 billion, driven by strong operational performance across all segments

  • Amazon's international sales grew 10% year-on-year in Q1 2024, reaching $31.9 billion

  • Amazon Web Services (AWS) revenue grew 17% to $25 billion, exceeding analyst forecasts.

The Q1 2024 results show how Amazon’s profile is evolving. AWS and Advertising are the engines of growth and deliver more profit than their retail business. Prime Video is getting more investment as Amazon pushes to be the No.1 global entertainment destination. More and better content equals more Prime subscriptions, more eyeballs and more media dollars. Of course, the retail division is still important, it fuels the ecosystem and provides the data which enables targeting of ads, especially important in a cookie-less world.

There are some interesting parallels between Amazon’s results and other competitors which signifies their market positioning. Amazon Advertising revenues are now higher than the big three media networks combined (WPP, Publicis and Omnicom), enabling Amazon to exert more power in the market. Amazon is now very close to overtaking Walmart as the world’s biggest retailer with revenues of $143bn compared to Wallmart’s $152bn. To overtake Walmart would be a significant milestone.

Jassy is proving to be a different leader to Bezos. Bezos was visionary. Piloting, trialling and sunsetting many projects. This approach encouraged innovation but ate away at profit. jassy is more practical, more selective with investments and more focused on delivering shareholder value. Consequently, Amazon is more operationally efficient and robust in tough economic conditions.

Jassy’s cautious approach shone through in the Q1 Earning Report. There were very few new announcements. The most notable was their increased investment in AI with an additional $2.75bn investment in Anthropic, signifying their determination to catch up with other tech rivals like Google and Microsoft. Amazon is now both profitable and cash rich, so surely we will see more innovation and acquisition later this year?

The omissions from the report were more telling than the inclusions. It raises serious questions about Amazon's offline store strategy. Amazon Go expansion has halted, Just Walk Out Technology has been pulled from Fresh and Go stores. Offline net sales are in single digit growth and yet the only new idea they can muster is low-cost delivery subscription for regular grocery orders (a rehash of a previous idea). I used to be bullishly excited about Amazon’s Grocery expansion with bold affirmations about them buying up key market grocers in Europe and elsewhere. Now, I keep quiet when asked.

Looking into future quarters, we can be optimistic about amazon’s performance. Consumer spending remains resilient in many markets despite inflationary pressures and low economic output. Thanks to Jassy, Amazon will continue to drive operational efficiency and be focused on price and convenience which is a proven model in tough conditions. Unlike previous years they will step forward carefully and won’t over reach.

Paul Adams, CEO

Q1 results 2024