【Financial Analysis Amazon Q1 2021: 3 Factors Behind the Strong Performance】



In recent years, the spread of technology has made it possible to purchase a wide variety of items from household goods to home appliances online from the comfort of your own home. One of the largest online stores in the world is Amazon. What started out as an online bookstore is now one of the most valuable brands in the world.

On April 29, 2021, Amazon announced its financial results for the first quarter of fiscal year 2021. The company has three main businesses: 1) e-commerce, 2) cloud computing, and 3) advertising. e-commerce grew 44% YoY, AWS grew 32% YoY, and advertising grew 77% YoY. Net sales increased 44% YoY to $108.5 billion, and net income increased 220% YoY to a record $8.1 billion. The strong performance was largely due to demand for nest eggs caused by the new coronavirus, and there are three major factors behind this. I would like to examine each factor.











First, the increase in the number of Amazon Prime members in the e-commerce business. Amazon Prime is a service that offers a wide range of benefits in a convenient manner. The demand for nest eggs due to the new coronavirus caused the number of Amazon Prime members to surpass 200 million, and a variety of services were used. Amazon Prime Video, one of the Amazon Prime services, saw streaming time increase by over 70% year over year. It can be said that the constant release of content that kept people entertained matched the demand for nest eggs.


Secondly, consumer demand for food delivery has increased. In order to control the spread of the new coronavirus, it was necessary to set up strong regulations by locking down cities and entire towns, even to the point of stopping the growth of the economy. In such a case, it became difficult for some countries to procure food. Under such circumstances, whole foods, a subsidiary of Amazon, contributed to the sales of groceries and sundries, which not only improved consumer satisfaction but also led to the company's growth.


Finally, a major factor behind the acceleration of the cloud business is the shift to DX by companies. The reality is that companies need to grow in the Corona disaster. As part of their various efforts, they needed to reform the way they work, such as teleworking and telecommuting, and they needed to implement systems to do so. 32% year-over-year growth in AWS has enabled them to meet the needs of corporate DX.



The performance was so good that net income reached a record high due to the above three factors. In the still unsettled Corona Peripherals, we can expect further growth. However, there are concerns that tighter regulations against monopolistic control of the market will slow down future growth. It will be interesting to see how the company deals with the issue of tighter regulations.


Financial Results for the First Quarter of 2021 - Net sales: $108.5 billion (+44% YoY) Product sales: $57.5 billion (+37% YoY) Services revenue: $51 billion (+52% YoY)

- Operating profit: $8.9 billion (+123% YoY) - Net income: $8.1 billion (+224% YoY) (3.2x) = record high (Factors: Shipping costs down 20% y-o-y) - EPS: $15.79 (+215% YoY) - Operating cash flow: $4.2 billion (+37.5% YoY) - Operating cash flow in the last 12 months: $67.2 billion (+69% YoY) - Free cash flow in the last 12 months: $26.4 billion (+9% YoY)


By Region North America - Net sales: $64.4 billion (+40% YoY) - Operating profit: $3.5 billion (+163% YoY) - Operating margin: 5.4% (vs. 2.8% in the same period last year)

Outside North America: - Net sales: $30.6 billion (+60% YoY) - Operating income: $1.3 billion (vs. $(0.4) billion in the same period last year) - Operating margin: 4.1% (vs. (2.1)% in the same period last year)

AWS: - Net sales: $13.5 billion (+32% YoY) - Operating profit: $4.2 billion (+35% YoY) - Operating Margin: 30.8% (YoY: 30.1%)

Advertising: - Revenue: $6.9 billion (+77% YoY)