Amazon's revenue increases despite spending rise

Friday 25 April 2014 09.19
Amazon.com is investing heavily in new markets abroad, particularly China
Amazon.com is investing heavily in new markets abroad, particularly China

Amazon.com's revenue grew more than expected for the first quarter, largely offset by a sharp increase in spending on technology, content and new warehouses as the e-commerce company branches into new businesses. 

Amazon's international unit, which accounts for 40% of sales, continued to be a drag as sales growth slowed to 18% during the quarter. 

Global unit sales, a closely watched measure of how many items Amazon has sold, also decelerated, rising only 23%.
              
The company is investing heavily in new markets abroad, particularly China, where it faces tough competition with Chinese e-commerce company Alibaba.

Shares of Amazon, which is also aggressively expanding its line-up of devices and computing services to sustain its growth pace, were little changed in after-hours trading.
              
The Seattle-based company's first-quarter revenue rose 23% to $19.74 billion, boosted by North American sales. 

This was better than average Wall Street estimate of $19.4 billion, according to Thomson Reuters I/B/E/S. Amazon reported earnings per share of 23 cents, in line with expectations.
              
Operating margins were predictably razor-thin at around 1%. Amazon is spending big on a range of projects, including developing its own original shows and video games, as its core retail business comes under pressure.

The company is also moving more forcefully into hardware with the debut of its Fire TV video streaming box, as well as along-rumoured smartphone.
              
First-quarter operating expenses shot up by 23%. Amazon's fulfillment costs rose 29%, while its technology and content spending was up 44%. 

The e-commerce company faces heightened competition abroad from rivals such as Alibaba, which is laying the groundwork for what could be the largest initial public offering for a technology company.