Amazon Reports Q1-2024 Earnings: Here are the Results
Amazon, the e-commerce behemoth, reported strong first-quarter results for 2024, achieving a growth and higher profitability. The company's revenue reached $143.3 billion, a 13% increase year-over-year, surpassing the expected $142.65 billion. This demonstrates a strong start to the year, fueled by robust sales and operational efficiencies.
Earnings per share (EPS) also topped expectations at $0.98, compared to the predicted $0.84. This performance is indicative of Amazon's successful cost-cutting measures and strategic initiatives aimed at boosting profitability.
Sales dynamics across various segments were particularly impressive. The North America segment saw a 12% rise to $86.3 billion. Internationally, sales grew by 10% to $31.9 billion, or 11%, excluding the impact of foreign exchange rates.
Amazon Web Services (AWS) continues to be a major growth driver, with sales increasing by 17% to $25 billion and operating profits coming in at $9.4B ($5.1B in the same quarter last year). That’s a 37.6% operating margin. AWS’s annual revenue run rate also reached $100B for the first time.
Operating income showed a significant uptick, surging to $15.3 billion compared with $4.8 billion in the first quarter of 2023. This was mirrored in the segment-specific performances, with North America generating $5.0 billion in operating income, a substantial improvement from $0.9 billion. The International segment turned a profit of $0.9 billion, reversing a previous loss of $1.2 billion, and AWS contributed a robust $9.4 billion in operating income, up from $5.1 billion. See its historical operating income below.
Net income also saw a dramatic rise to $10.4 billion, or $0.98 per diluted share, up from $3.2 billion, or $0.31 per diluted share, in the same period last year. This increase includes a pre-tax valuation loss of $2.0 billion from Amazon's investment in Rivian Automotive, compared to a smaller loss of $0.5 billion in the previous year.
Free cash flow was another area of strength, turning positive with an inflow of $50.1 billion for the trailing twelve months, a stark contrast to the outflow of $3.3 billion in the prior period.
Free cash flow less principal repayments of finance leases and financing obligations came in at $46.1B for the trailing 12 months compared to negative $10.1B in the same period last year.
Here’s a breakdown of Amazon’s Q1-2024 income statement, courtesy of @EconomyApp on X
Amazon’s Q2-2024 Forecast
For the upcoming second quarter of 2024, Amazon expects revenue between $144.0 billion and $149 billion (estimate was $150.07B) and operating income ranging from $10 billion to $14 billion.
Amazon's CEO Andy Jassy commented on the results, emphasizing the strong start to the year across all business sectors. He highlighted the significant role of AWS, driven by increasing demand for its AI capabilities and infrastructure modernization, which is reaccelerating its growth. Additionally, improvements in the Stores business, including expanded selection, competitive pricing, and faster delivery, are enhancing customer experiences and reducing operational costs.
Is AMZN Stock Undervalued?
Let’s do some calculations to see if Amazon stock is undervalued.
TTM free cash flow of $50.1B
FCF per share = $4.695
Free cash flow less principal repayments of finance leases and financing obligations of $46.1B.
Adjusted FCF per share = $4.32
So, is AMZN stock undervalued? Let's do some calculations Using our reverse DCF calculator, the market is pricing AMZN to grow its free cash flow per share by 16.826% annually for the next 10 years and then by 3% every year after that. See the first image below.
If you use the more conservative -- and better -- measure of FCF per share ($4.32), then the market-implied growth rises to 17.965%. See below.
The 10.4% discount rate (cost of equity) was taken from Finbox.
Essentially, if you think AMZN can surpass this growth rate, then it's underpriced, and vice versa.
