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Amazon profit trounces estimates, sales forecast muted

(Reuters) – Amazon.com Inc on Thursday trounced in the first quarter profit estimates on growing demand for cloud and advertising services, but a weak forecast renewed concerns that the company would spend away a part of the windfall on the more investment this year.

FILE PHOTO: The logo of Amazon is seen in the company’s logistics centre in Boves, France, August 8, 2018. REUTERS/Pascal Rossignol

Shares rose 1 percent in after-hours trading. Amazon’s first-quarter net profit more than doubled to $3.56 billion, or $7.09 per share, while analysts were only expecting $4.72, according to the IBES data of Refinitiv.

However, forecast second-quarter operating profit of $3.6 billion, while analysts had expected $4.2 billion, according to FactSet.

Chief Financial Officer Brian Olsavsky told reporters that Amazon saw no material impact in India from the actions that the company has to comply with the new regulations affecting foreign investments in the e-commerce sector. Prime member sign-ups in India, one of Amazon’s most important growth markets continue to rise the fastest in the history of the company.

The news is a familiar refrain for the world’s largest online retailer. For years, Amazon has made expensive bets on new technology and programs, such as the $13.7 billion purchase of Whole Foods Market in 2017 to a player in the AMERICAN supermarket business.

Amazon’s investments had long meant a low profit margin. However, the constant, often successful four-day new industries have harvested shareholders rewards, including founder Jeff Bezos, who had become the richest man in the world.

The luster of this bet still shone bright on Thursday.

The company’s loyal customer base has attracted traders to sell more and more advertising through its website in exchange for fees, the help of Amazon transform from largely due to the low margins in the retail sector a more lucrative market.

The turnover of the seller, the services jumped 20 percent to $11.1 billion in the first quarter, while ad and other revenue rose by 34 percent to $2.7 billion, the company said.

Meanwhile, Amazon’s cloud unit kept the pace of the growth as more companies move data and computing operations to the ict company of the servers. Sales for Amazon Web Services increased 41 percent to $ 7.7 billion in the first quarter.

But Amazon expects to be a part of profit of these companies to dwindle away.

Amazon is building warehouses all over the world to ensure that the edge with the delivery of goods to customers the fastest. It is spending more on video, of live sports on a planned prequel series “The Lord of the Rings” to people logging on to the website to look, and while they are there, buy socks.

And the company is delving into less familiar terrain. The recently announced investment in self-driving and electric car companies, bullying, how it thinks that this high-tech, capital-intensive companies can pay dividends may be in the form of autonomous deliveries in the long term. Amazon has not described in detail the thinking behind the bets.

In China, where the company had long struggled to compete with Alibaba Group Holding Ltd, Amazon said this month would be the closing of the warehouses and of the domestic market in July.

A silver lining for investors: Bezos, who many consider to be a management guru, kept his closely watched divorce in such a way that he remains fully majority of his family stock, save Amazon a boardroom battle. However, his fortune, which is the largest of any married couple in the world, will be divided.

FILE PHOTO: Amazon boxes are seen stacked for delivery in the district of Manhattan of New York City, January 29, 2016. REUTERS/Mike Segar

The company forecast net sales of between $59.5 billion and $63.5 billion for the second quarter, the center was lower than analysts average estimate of $62.37 billion, according to the IBES data of Refinitiv.

Net sales in North America, the largest market, jumped 17 percent to $35.81 billion in the quarter.

Amazon’s operating expenses have increased from 12.6 percent in the fourth quarter of $55.28 billion if invested in electric car maker Rivian and self-driving car startup Aurora and the expenditure for the excellent program, grocery delivery from Whole Foods-shops and original video content.

Reporting by Jeffrey Dastin in San Francisco and Arjuna Panchadar in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker

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