Amazon's surge in Q1 revenue is spoiled by steep coronavirus costs - Business Insider

Amazon reported its first-quarter earnings on Thursday after the bell.Amazon's sales grew faster than expected as more people shopped online amid COVID-19.But it missed on earnings as COVID-19-related costs across the supply chain increased.Amazon shares dropped about 5% in after-hours trading.Visit Business Insider's homepage for more stories.

Amazon reported huge growth in first-quarter revenue but a miss on earnings on Thursday.The mixed results show how the coronavirus outbreak is leading to more shoppers on Amazon, albeit at an increased cost as the company is dealing with a number of costly changes, including supply chain lockdowns and warehouse safety upgrades.Amazon stock is down about 5% in after-hours trading.Here are the most important numbers:

Q1 EPS (GAAP): $5.01 versus expectations of $6.27 per shareQ1 Revenue: $75.5 billion versus expectations of 73.74 billionAmazon Web Services: $10.22 billions versus expectations of $10.29 billionAmazon CEO Jeff Bezos said in an unusually long statement that the epidemic is causing a lot of uncertainties, adding that the company expects to spend $4 billion in COVID-19-related expenses in the second-quarter.

“If you're a shareowner in Amazon, you may want to take a seat, because we're not thinking small,” Bezos said in a statement. “Under normal circumstances, in this coming Q2, we'd expect to make some $4 billion or more in operating profit. But these aren't normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”Amazon clearly saw a massive demand surge as more people bought things online to avoid physical stores during the pandemic. The 26% revenue growth exceeds street estimates of 22%. Paid unit growth jumped 32%, up from last year's 10% growth rate. Even its “Physical Stores” sales, which includes Whole Foods revenue, grew 8% from last year, an unusual spike for a segment that hovered around 1% growth in the past year.Meanwhile, costs increased as Amazon had to put additional safety measures and pay raises across its warehouses. Shipping costs also jumped 49% to $10.9 billion. Operating income dropped $400 million from last year to $4 billion for the quarter.Amazon's cloud service continues to be a the company's main profit-driver. It reported $3 billion in operating profit, accounting for 77% of Amazon's total operating profit. Meanwhile, AWS crossed the $10 billion quarterly revenue mark for the first time, growing 33% from last year.

Despite concerns of the pandemic causing less spending on Amazon's advertising service, the segment saw a 44% sales increase to $3.9 billion in the quarter, showing little impact on one of its fastest growing business segments.Amazon's stock hit record highs earlier this month, and was up almost 30% year-to-date, far outpacing the broader market.