★ Amazon Reports Slightly Slower Growth, Lower Operating Margins in Q1 2017 (Apr 27, 2017)
Amazon today announced its earnings for Q1 2017. Revenues grew strongly, but as with Q4 the rate of growth was slower than it had been for most of last year. Operating margins also continue to fall, driven by a slight dip in AWS margins in the last couple of quarters and continued big losses in the International business. The feeling I have is that e-commerce growth is just a little slower than Amazon anticipated – several metrics it normally keeps within very narrow bands have crept out in the past couple of quarters. I take that as a sign that retailers like Walmart are fighting back more effectively, sacrificing margins in pursuit of higher growth, and that this is affecting Amazon’s growth rate (though it still remains far higher than any other retailer’s organic growth, online or otherwise). Following some additional disclosure in its 10-K last quarter, Amazon has now shaken up its reporting segments for the non-AWS business and provides a little more visibility into its subscription and fulfillment businesses. The subscription business – mostly Prime but also other smaller businesses like Audible – generated 5% of revenue. Fulfillment and related businesses generated 18% of revenues, and the growth of that third-party seller business on Amazon, which now accounts for 50% of units sold, continues to be an important driver of higher gross margins along with AWS. From the 10-K, I estimated that Amazon had roughly 70 million Prime subscribers at the end of last year, and though the quarterly numbers are a little harder to pass it looks like it may have seen decent growth this past quarter too. Prime continues to be one of Amazon’s greatest strengths as a driver of stickiness and revenue growth.
via Amazon
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