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Amazon posts record profits amid wave of pandemic buying

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NEW YORK: Amazon.com, one of the biggest winners in the pandemic, posted record profits on Thursday (April 29) and reported that consumers will continue to spend in a growing US economy and that converts to purchases in line should not go.

Since the onset of the coronavirus epidemic, shoppers have increasingly relied on Amazon for the delivery of basic home goods, and the company sees this trend continuing after the pandemic, especially for home products. ‘grocery.

As brick-and-mortar stores have closed, Amazon has now posted four consecutive record quarterly profits, attracted more than 200 million Prime subscribers and recruited more than 500,000 employees to meet growing demand.

Amazon said it expects operating profit for the current quarter to be between US $ 4.5 billion and US $ 8 billion, which includes around US $ 1.5 billion. costs related to COVID-19.

The shares rose 4 percent in after-hours trading.

Throughout the pandemic, the world’s largest online retailer has been at the center of workplace uproar, with an unsuccessful attempt by organized unions to unionize an Amazon warehouse in Alabama and litigation in New York City over whether it put profit above employee safety.

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Amazon’s business has not been disrupted by the developments. Michael Pachter, analyst at Wedbush Securities, said that an increase in Prime subscriptions, consumer adoption of grocery delivery amid COVID-19, and an improving economy have worked to the advantage of ‘Amazon.

“Habit. Good quality groceries. Stimulus checks,” Pachter said. “They will prosper.”

The slower sales growth in the current period compared to last quarter reflects a more difficult comparison to last year, when lockouts were in full swing, Pachter said.

CEO Jeff Bezos touted the results of the company’s Amazon Web Services (AWS) cloud computing unit in a press release, saying, “In just 15 years, AWS has grown into a company with an annual sales rate of 54 billion US dollars competing with the world’s largest technology companies, and its growth is accelerating. “

The applause was a nod to Andy Jassy, ​​longtime AWS cloud chief, who will succeed Bezos as CEO of Amazon this summer. Amazon announced a deal with Dish Network Corp to build its 5G network on AWS last week, and the division increased revenue 32% to $ 13.5 billion, ahead of the analyst’s average estimate of 13. $ 2 billion, according to IBES data from Refinitiv.

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Brian Olsavsky, chief financial officer of Amazon, said companies increasingly want to outsource their technology infrastructure to AWS.

“We expect this trend to continue as we move into post-pandemic recovery,” he said.

Prime Day, the company’s annual marketing blitz, will add to Amazon’s revenue in the second quarter. Amazon revealed that the event will take place in June rather than July, as is more common, to reach customers before they go on vacation.

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Grocery sales based on Amazon subsidiary Whole Foods Market also remain a positive. Olsavsky called the grocery store “a big revelation in the post-pandemic period.”

The company’s first-quarter profit more than tripled to US $ 8.1 billion from a year ago, on sales of US $ 108.5 billion, ahead of analyst estimates.

GROWTH IN ADVERTISING SALES

Amazon saw its stock price almost double in the first part of 2020 as it benefited from the pandemic. This year, however, it has underperformed the S&P 500 market index. Its stocks are up about 8.5% year-to-date compared to the index’s 13% gain.

Spending on COVID-19 and logistics reduced Amazon’s bottom line. The company has invested money in purchasing cargo planes and securing new warehouses, with the goal of bringing items closer to customers to expedite delivery. He announced Wednesday that he plans to raise the salaries of more than half a million employees, which will cost more than US $ 1 billion – and he is still hiring for tens of thousands of additional positions.

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Olsavsky said Amazon is still working to restore one-day parcel delivery rates to pre-pandemic levels.

He told reporters that the company also plans to increase its spending on video content this year. Consumers have been watching content for more hours on Amazon, Olsavsky said.

Although far behind the Facebook and Google ad sales leaders of Alphabet Inc, Amazon is growing its advertising business as brand placements often translate directly into sales, reaching customers who are on Amazon with the intention of making purchases. .

Jesse Cohen, senior analyst at Investing.com, said: “Outside of its core retail and cloud units, ad revenue is increasingly becoming another substantial growth driver for Amazon.”

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Amazon said ad and other sales rose 77% to $ 6.9 billion, ahead of analysts’ estimate of $ 6.2 billion.

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