Amazon's Profits Drop As Investments and Sales Rise

Amazon’s revenues jumped 38 percent during the first quarter, compared to the year-ago period, but net income fell as the giant retailer invested heavily in all sorts of businesses.

The Seattle-based company said revenues totaled $9.86 billion, compared with $7.13 billion in the year-ago period, and that net income decreased 33 percent to $201 million or 44 cents a share.

In a statement, Jeff Bezos, Amazon’s founder and CEO, said: “We love inventing on behalf of customers and have never been more excited about the long-term opportunities.”

But you have to wonder how much investors love it.

The company’s stock dropped $3.12, or 1.7 percent, in regular hours, and then slid another 90 cents in after-hours trading.

Besides investments, analysts questioned what impact the Japanese earthquake had on Amazon’s results, since the region is particularly strong for the company. Here’s updates from the call on that subject, as well as news from Amazon that it will start selling its ad-subsidized Kindle a week early.

In some regards the quarter demonstrates a return to the company’s frothy days when the motto was get big fast, and then later, that morphed into get bigger faster.

To be sure, the company is dipping its toes into a variety of pools, ranging from cloud computing to traditional e-commerce to digital commerce. It’s building hardware, such as the Kindle e-reader, announcing a new version recently that’s supported by advertising. It’s also just beginning to reveal where it’s mobile strategy is going with a promotion that crosses both its Android Appstore and its handset business.

To be sure, one of those growing pains was felt last week when when its cloud services crashed, leading to outages for nearly a week. The company did not comment on the crash in its earnings release, but it will likely have to answer analyst questions during this afternoon’s call.

Still, Amazon was able to meet its own sale forecasts, which predicted net sales of between $9.1 billion and $9.9 billion.

Sales also exceeded analyst expectations, who were hoping for revenues of $9.54 billion, representing a 34 percent increase from the same period last year, according to consensus forecasts from FactSet Research. However, Amazon fell way short of analyst’s earnings estimates of 61 cents a share. Amazon reported 44 cents a share for the quarter.

In the second quarter, Amazon is predicting software net sales ranging between $8.85 billion and $9.65 billion, representing year-over-year growth of 35 percent and 47 percent. Operating income is expected to be between $95 million and $245 million, declining by 9 percent to 65 percent.

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