Amazon (AMZN 2.29%) stock was climbing today after the tech giant topped estimates in its first-quarter earnings report. Once again, the “Magnificent Seven” stock delivered huge expansion in margins as it benefited from the growth of higher-margin businesses and recent cost cuts after laying off nearly 30,000 employees.
Amazon stock was up 2% as of 1:55 p.m. ET after gaining as much as 4.1% earlier in the session.
Image source: Amazon.
Amazon calms investor’s nerves
Coming into the earnings report, the biggest fear among investors was that Amazon Web Services (AWS), the cloud computing service comprising the majority of its profits, had slowed permanently after posting growth in the low teens in the last few quarters. Amazon blamed that deceleration on cost optimizations by its customers.
However, the company reported its fastest growth in AWS in five quarters in Q1, with a growth rate of 17%, and AWS’s operating margin expanded significantly along with the rest of the business. Operating income at AWS rose from $5.1 billion to $9.4 billion, benefiting in part from cost-cutting and layoffs.
Is Amazon a buy after earnings?
It was hard to find fault with Amazon’s earnings report. The company reported double-digit revenue growth in all three of its business segments and significant margin expansion as well. It flipped a loss in the international segment to a $903 million operating profit. And management continues to believe it has a long runway of growth in front of it in areas like artificial intelligence, grocery, and advertising, as it just rolled out advertising on Prime Video.
Amazon’s valuation also continues to come down as its profits soared. After the latest report, Amazon looks like one of the easiest stocks to own on the market. It’s still a buy.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
