Amazon’s cost-cutting and online sales lift earnings

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Stronger than expected online sales and signs that the slowdown in its cloud computing division had bottomed out lifted Amazon’s sales and earnings well above Wall Street’s expectations in the latest quarter.

The revenue acceleration, along with cost-cutting that included large-scale lay-offs earlier this year, also boosted Amazon’s profit margins and contributed to after-tax earnings that were nearly double expectations. The news lifted Amazon’s share price 6 per cent in after-market trading, adding to a stock rebound that had added 50 per cent this year.

Much of Wall Street’s attention this year has been on a sharp slowdown at its cloud division, Amazon Web Services, as customers have grown more cautious in the face of economic uncertainty.

Revenue growth at AWS slowed to 16 per cent in the first quarter, compared to 29 per cent for all of 2022. The company said earlier this year that growth at the division had slowed to just 11 per cent in April.

For the second quarter as a whole, however, Amazon said AWS’s revenue had climbed 12 per cent, beating most analysts’ forecasts by two percentage points and feeding hopes that the cloud division has turned a corner.

Microsoft and Google both beat Wall Street expectations last week with revenue growth of more than 20 per cent in their cloud businesses, though both also said customers were still trying to seek greater savings on their existing cloud spending.

Job cuts and other cost reductions also contributed to better than expected profits for the period, after a jump in spending last year. Amazon’s operating profit margin increased three percentage points from a year before, to 5.7 per cent, well ahead of expectations. Renewed confidence that the company had got to grips with its ballooning costs had been a big factor in this year’s share price rebound.

Overall, the US ecommerce company reported an 11 per cent increase in revenue, to $134.4bn, while earnings per share reached 65 cents, compared to a loss of 20 cents the year before. Wall Street had been expecting revenue of $131.5bn, with earnings per share of 35 cents.