Amazon said Thursday that it made a record $3.6 billion in profit for the first three months of 2019, more than doubling from $1.6 billion in the year prior. The ecommerce giant also is beefing up its Prime service, planning to offer one-day rather than two-day delivery.
The company hopes that cutting delivery times in half will make its $119-a year Prime membership more attractive, since every other online store offers free deliveries in two days. Amazon also can’t compete with Walmart and Target, where ordering online and picking up at a store is becoming more popular with shoppers.
The increase in Amazon’s profits is all the more remarkable given how it continues to pour money into fulfillment centers, premium video content, bricks and mortar stores and health care.
It’s next big effort is super-fast deliveries. Amazon said Thursday that it plans to invest $800 million in the second quarter of 2019 toward making one-day shipping the standard offering of Prime instead of two-day.
‘Smart change’
“It is a smart change, but it is also one that is becoming increasingly necessary,” said Neil Saunders, managing director at GlobalData Retail. “Other retailers have really upped their game in terms of delivery.”
Still, Saunders said the shift is likely to put even more pressure on Amazon’s retail rivals, as shoppers become accustomed to even faster shipping times.
Amazon used to be known for bleeding money as it invested heavily in its businesses and rapidly increased revenue. Now it has entered a new era with comparatively sluggish sales growth, but consistent profits.
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Brian Olsavsky, Amazon’s chief financial officer, said the shift means costs will rise as it hires more workers and builds more warehouses to pack and ship orders. Amazon did not say when it plans to offer Prime one-day shipping.
The earnings
Overall, Amazon reported net income of $3.56 billion, or $7.09 per share. That beat expectations of $4.61 per share, according to Zacks Investment Research.
In the same time a year ago, it reported net income of $1.63 billion, or $3.27 per share.
The company has boosted its profits by expanding into businesses beyond selling goods online. Its cloud computing business, which powers the video-streaming service Netflix, digital scrapbooking site Pinterest and many other companies, saw its revenue soar 41% from a year ago. The area is getting more competitive: Microsoft has also been growing its cloud business, and both Amazon and Microsoft are vying for a multibillion contract with the U.S. military.
Amazon’s fast-growing advertising business has also become a big money maker, selling ads to companies that want their products to show up first when shoppers search on the site. Amazon doesn’t say exactly how much its ad business makes, but lists it as part of its “other” revenue, which was up 34% from a year ago.
Total revenue rose 17% to $59.7 billion, which also beat expectations.
For the current quarter ending in July, Amazon said it expects revenue in the range of $59.5 billion to $63.5 billion. Analysts expected revenue of $62.53 billion.
Shares of Seattle-based Amazon.com Inc., which are up 27% so far this year, were little changed in after-hours trading from Thursday’s closing price of $1,902.25.
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