Amazon delivers huge profit surprise, stock surges

JP Mangalindan
Chief Tech Correspondent

Amazon (AMZN) posted first-quarter 2018 earnings on Thursday afternoon that blew past Wall Street expectations.

The Seattle tech giant reported earnings of $3.27 per share on $51 billion in revenues for the quarter. Wall Street analysts were generally expecting $1.27 per share on revenues of $49.96 billion. In the same quarter last year, earnings were $1.48 per share on $35.7 billion in revenue.ca

The stock surged over 6% in after-hours trading.

Amazon CEO Jeff Bezos pointed to Amazon Web Services, or AWS, as one of the company’s ongoing, key revenue drivers. The rapidly evolving service remains one of the most widely used go-to cloud computing services for over 1 million businesses and organizations, including McDonald’s (MCD), Netflix (NFLX), Spotify (SPOT), and UnderArmour (UAA).

“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” Bezos said in the earnings release published on Thursday . “As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row. A huge thank you to all our AWS customers, and you can be sure we’ll keep working hard for you.”

One of the biggest bit of news Amazon dropped on Thursday? It’ss raising the price on its popular Amazon Prime program, from $99 a year to $119 a year, effective May 11. Previously, the company announced Prime had over 100 million subscribers.

The last several months have been busy for Amazon. In late March and early April, President Trump criticized Amazon via Twitter and said Amazon’s agreements with the U.S. Postal Service are “not a level playing field” and that Amazon is putting “many thousands of retailers out of business.” Amazon stock temporarily took a hit in the immediate wake of President Trump’s unfavorable tweets but has since recovered.

President Trump’s current anti-Amazon stance could affect AWS’ odds of landing an exclusive 10-year multibillion-dollar contract it’s competing for — alongside Alphabet (GOOG, GOOGL) and Microsoft (MSFT) — that would modernize the U.S. Department of Defense’s information technology system.

In an interview with Yahoo Finance this month, Amazon CTO Werner Vogels declined to offer an update on the process, other than to suggest that the company remained unfazed by Trump’s attacks. Regardless, Amazon’s chances of scoring the government contract are pretty good, given the company already hosts classified systems with the CIA, as well as other top defense contractors like Lockheed Martin.

Amazon executives have also been preoccupied in recent months with its ongoing search for a second U.S. headquarters, dubbed HQ2. Since Amazon announced last year it planned on opening a new $5 billion headquarters outside of Seattle, the company has narrowed its search down from 238 U.S. cities and towns to 20 finalists, with news outlets speculating Washington D.C. and Boston could have the edge, based on those markets’ local talent pool, Amazon’s significant presence in those areas, not to mention the fact Amazon CEO Jeff Bezos purchased a $26 million home in D.C.

JP Mangalindan is the Chief Tech Correspondent for Yahoo Finance covering the intersection of tech and business. Email story tips and musings to jpm@oath.com. Follow him on Twitter or Facebook.

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