Markets

Amazon pulls in a record $5.4 billion profit

Amazon pulls in a record $5.4 billion profit

The move comes as Amazon gets its fulfillment network ready for the transition to free next-day delivery for Prime members, who now get free 2-day shipping.

Amazon has long offered delivery in a day or quicker for some items, but the change will mean free one-day shipping will be the default, rather than two-day. Brian Oslavsky, Amazon's chief financial officer, says that the "other" category is primarily ad sales but includes more parts of the business, and that in fact advertising growth was higher than 36 percent. "We're now working on evolving our Prime shipping program, which has historically been a two-day program, to a one-day shipping program", he said. Overall, first-quarter sales rose 17 per cent to US$59.7b, compared to sales growth of 46 per cent a year ago. The upcoming faster delivery will come at no additional cost or conditions for paying Prime members, though.

The company has been building warehouses around the world to ensure its edge in delivering goods to customers the fastest.

Amazon's AWS segment saw net sales grow 40 per cent year-on-year, from $5.4 billion to nearly US$7.7 billion ($7.7 billion to $10.97 billion), contributing US$2.2 billion ($3.14 billion) in income to the business' quarterly results. Due to the large investment, Amazon predicts its earnings will drop below expectations next quarter.

What Amazon Prime gets you - shipping-wise. For years, Amazon has made expensive bets on new technology and programs, like its $13.7 billion purchase of Whole Foods Market in 2017 to become a player in the United States grocery business.

Total revenue rose 17 per cent to US$59.7b, which also beat expectations.

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Now, Amazon is spending big to cut that shipping window in half.

There are signs that the company's growth is slowing, even in its cloud and advertising businesses.

Olsavsky didn't specify when this option would be standard for all Prime customers, but he said Amazon expects to "make steady progress quickly and through the year".

The CFO said Amazon will use its own AMZL logistics as well as third-party carriers to meet its next-day promise.

The company forecast net sales of between US$59.5 billion and US$63.5 billion for the second quarter, the midpoint of which was below analysts' average estimate of US$62.37 billion, according to IBES data from Refinitiv.