Amazon cloud and ad revenue grows as shoppers remain cautious

Online retail titan Amazon on Thursday reported that its cloud and ads units helped it beat earnings expectations in the first quarter of this year despite shoppers and businesses being more careful about spending.

"For the first time in several quarters, Amazon may finally have a bit of wind at its back," said Insider Intelligence principal analyst Andrew Lipsman.

Amazon shares spiked more than 10 percent shortly after release of the earnings figures, only to sink slightly below the day's closing price as it warned that customers were remaining watchful of their budgets.

Amazon reported a profit of $3.2 billion on revenue that climbed 9 percent to $127.4 billion in the quarter.

The net income was about a billion dollars more than analysts had forecast.

"There's a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy," said Amazon chief executive said Andy Jassy.

"Our Stores business is continuing to improve the cost to serve in our fulfillment network while increasing the speed with which we get products into the hands of customers."

Jassy in March laid out a plan to cut 9,000 more jobs from the online retail giant's workforce, following the 18,000 that were axed in January.

The layoffs account for a smaller percentage of Amazon's total workforce, which ran up to 1.5 million people in December 2022, than the cuts seen at some other tech giants.

Jassy told workers that the extra layoffs were necessary as the company seeks to downsize after years of hiring, particularly during the coronavirus pandemic when people turned to the internet for shopping.

Amazon said that the number of packages handled by a "Robin" robotic system used across its operations in North America and Europe eclipsed a billion during the quarter.

Robin uses computer vision and artificial intelligence to help workers sort and handle packages being shipped to Amazon customers, according to the company.

Amazon's AWS cloud computing unit saw revenue climb 16 percent to $21.4 billion, but costs ate into operating income, which tallied $5.1 billion as compared to $6.5 billion in the same quarter a year earlier, according to the earnings report.

"Amazon's stronger-than-expected performance for its key profit centers of AWS and advertising indicate that the enterprise and the digital ad sectors may be turning the corner," analyst Lipsman said.

AWS is prioritizing long-term customer relationships as it "navigates companies spending more cautiously in this macro environment," Jassy said.

Microsoft's results for the first three months of the year also pleased investors this week, lifted by its industry-leading business cloud products.

The company founded by Bill Gates reported that revenue from Cloud and AI offerings more than offset drops in money made from licensing Windows software to computer makers, as sales suffer in that market.

Meanwhile, Google parent Alphabet this week reported that its cloud computing business turned a profit for the first time since it began reporting separate figures for that unit.

"I'm pleased with the ongoing momentum in cloud," Alphabet chief executive Sundar Pichai said on an earnings call.

Alphabet beat market expectations in the first quarter of 2023 in a sign that the search engine behemoth is regaining its footing.

The internet titan became a focus of worry when Microsoft-backed ChatGPT was released and quickly went viral late last year.

The Windows maker has added the technology to its Bing search engine and office software.

The search giant has since rushed out Bard, its own version of the language-based AI, but the release was seen as clumsy and has so far disappointed observers and company insiders, according to media reports.