Although the revenue exceeded expectations, the epidemic-related expenses dragged down profits.

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E-commerce giant Amazon announced its first quarter financial report for fiscal year 2020. Although the revenue exceeded expectations, the epidemic-related expenses dragged down profits. The EPS fell short of expectations. Amazon experienced the most difficult time so far. After-hours stock price fell more than 4%.

From e-commerce, AWS, video to Fire TV business, the current crisis is showing the unprecedented applicability of Amazon’s business, e-commerce and cloud computing business show vitality in a special period. But at the time when this part of the business volume is rising rapidly, Amazon is also facing unprecedented challenges. Workers’ salary increases, personal protective equipment expenditures, and Covid testing related costs have greatly weakened profitability.

Shopping demand surges, and net profit declines instead

In the first quarter, total revenue was US $ 75.5 billion, an increase of 26% year-on-year, maintaining a steady growth.

In terms of business, net sales from online stores were US $ 36.6 billion, up 26% year-on-year, accounting for only 50%; net sales from physical stores were US $ 4.65 billion, up 8% year-on-year; from third parties Net sales of seller services was 14.4 billion US dollars, a year-on-year increase of 30%.

During the epidemic, Amazon ushered in high-growth shopping demand, and a large number of shoppers were looking for emergency supplies including hand sanitizer. However, the closure of a large number of physical stores and restrictions on business hours are driving demand for online shopping, this trend may continue into the second quarterEnd of degree.

In order to meet the increasing user demand, Amazon increased the order capacity of Prime Now, Amazon Fresh and Whole Foods this quarter, expanded the receipts of Whole Foods supermarkets from about 80 to more than 150, and adjusted the store operations Time to focus on completing online orders within a specific time.

Operating costs drag down profits

Amazon ’s first-quarter net profit was $ 2.5 billion, compared with $ 3.3 billion in the same period last year, which was not as expected by analysts.

Including warehousing, worker wages, logistics costs, and efforts to fight the epidemic have put pressure on profits, but in special periods, we should pay more attention to Amazon ’s contribution to users and society.

1) Employee side: Amazon has purchased 100 million masks and requires all employees to wear them. The company purchased more than 1,000 thermal cameras and more than 31,000 thermometers for mandatory daily temperature checks of employees and support staff at the business premises and Whole Foods supermarket.

2) User side: Amazon is prioritizing the purchase and delivery of essential items to ensure the fastest delivery of household essential items, medical supplies, and other key products.

3) AWS is helping medical workers, medical researchers, scientists and public health officials understand and fight against COVID-19. AWS provides a centralized repository that stores the latest, pre-processed and publicly readable data set.

Amazon said that it plans to use the entire profit (about 4 billion US dollars) in the second quarter of this year to deal with the epidemic. It can be seen that Amazon has completely sacrificed profits to support the anti-epidemic work. The sense of mission came into being.

Cloud computing market share is expected to further penetrate

Unlike the e-commerce business that has changed significantly in the quarter, the revenue of the Amazon cloud computing business has continued to grow in the past 5 years and is the main source of profit. This quarter, AWS net sales of 10.2 billion US dollars, an increase of 33% year-on-year, accounting for 14% of total revenue.

During the epidemic, applications such as core computing and storage, remote desktops, databases, and other applications have skyrocketed. In addition, companies such as Slack and Zoom have high demand for Amazon Web Services. While these companies are meeting high demand, they are alsoPartly depends on Amazon’s infrastructure.

On April 23, the international research organization Gartner released the 2019 cloud computing market data. Data shows that the global cloud computing IaaS market continues to grow rapidly in 2019, up 37.3% year-on-year, and the overall market size reached 44.5 billion US dollars.

Among them, Amazon, Microsoft and Alibaba Cloud are still the top three in the world, with global market shares of 45%, 17.9% and 9.1% respectively. Compared with the data in 2018, both Microsoft and Alibaba Cloud’s market share have increased in 2019, while Amazon’s market share has declined.

Although the second and third places squeeze the first place, from the perspective of total market share, Amazon still occupies nearly half of the global market share, and there is still no rival.

AWS is using EdTech ’s customers and partners to help schools around the world quickly deploy and transition to online learning. AWS has also partnered with Blackboard, the world ’s largest educational technology and services company, to enable it to expand its usual capacity to 50 times in 24 hours to meet the surge in demand for virtual teaching platforms from everyday users worldwide.

Next quarter guidelines

The guidance for the next quarter includes only the expectations as of April 30 this year, and there is great uncertainty in the future.

  • Net revenue is expected to be between 75 billion and 81 billion US dollars, an increase of 18% to 28% compared to the second quarter of 2019.
     

  • Operating profit is expected to be between US $ 1.5 billion and US $ 1.5 billion, compared with US $ 3.1 billion in the second quarter of 2019, and the cost associated with COVID-19 is approximately US $ 4 billion.

    Although short-term profits are under pressure, Amazon is still one of the most worthy companies in the current environment. Supported by user demand, core businesses such as e-commerce and AWS are accelerating growth, and businesses that have performed in the past under the epidemic In the search for breakthroughs, such as the food delivery business, changes in orders and delivery methods will eventually allow Amazon to penetrate into emerging areas such as restaurant delivery and pharmaceuticals.

    According to the business scope, logistics scale, inventory and delivery capacity, after the Amazon has passed the painful period of profit pressure, the stock price will hit anotherA record high.

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