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Amazon Is Betting Big on India

By Motley Fool Staff – May 6, 2017 at 1:31PM

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Here's what investors need to know from Amazon's first-quarter earnings call.

E-commerce giant Amazon (AMZN -2.72%) continues to invest heavily in the Indian market, including in areas like fulfillment infrastructure and original localized content. That will hold back Amazon's international results, but could pay off big time in the long run, with CEO Jeff Bezos noting that it's "still Day 1 for e-commerce in India."

In this segment of Industry Focus: Tech, Motley Fool analyst Dylan Lewis and contributor Evan Niu, CFA, talk about Amazon's growth plans.

A full transcript follows the video.

This video was recorded on April 28, 2017.

Evan Niu: Speaking of India, I think that was a big contributor. International operating margins declined from -1% to -4%. So, you see losses widening on the international side. In the earnings release, they talked a lot about India. They mentioned India many times. They mentioned they're making localized content and TV shows for the Indian market. I think they invested, at this point, somewhere in the neighborhood of $5 billion in infrastructure in India. Jeff Bezos even said, it's still "day one" for e-commerce in India. So, clearly, Amazon sees a lot of potential in the Indian market, and that's where they're directing a lot of their investments. But, they did talk about it an awful lot in the press release, so you can certainly see that it's at the top of their mind.

Dylan Lewis: Yeah. We talked about that "day one." That was something that also came up in Jeff Bezos' annual letter to shareholders -- if any Fools haven't read it, I highly recommend it, it's great insight into the leadership of Amazon and how the company is thinking about things. You see a lot of that reflected in how they're handling that international segment. Pulling back and looking broadly at the company, and looking for investor takeaways here, I think you have to chalk this up to a killer quarter from a great company. A lot of stuff that we expected. AWS, it's great to see it continuing to grow and become a more important part of the business. We love that. But what we're seeing on the international side, yes, would it be nice if it wasn't operating at a loss? Yeah. But the long-term investments are probably going to bear fruit for the company in the future. Anything else on Amazon for you, Evan?

Niu: I remember a few years back, I was having a conversation with Eric Bleeker, he used to be a general manager at and has moved to a different part of the company. Bleeker was telling me, we were having this conversation a couple years ago and he was saying it might be worth it to invest in Amazon purely just for AWS. This was at a time when AWS was much smaller, and Amazon wasn't even disclosing their results yet, so it was hard to know how important it was. But I wish I had taken him up on that. The stock has more than doubled since that time, largely driven by AWS. So, it is pretty breathtaking how AWS has become so fundamental to the investing case. It would have been hard to predict five years ago, but it's so important now.

Lewis: Yeah. I mentioned Jeff Bezos' annual letter before. Actually, we had a writer, Seth McNew, look at Jeff Bezos' annual letter from 10 years ago, and he talks about AWS. So, I mention the importance of reading these letters as getting a lens into how management thinking, and what eventually might become very important parts of the business, and why they're funneling money into these different projects. I think that's an example where Bezos had the vision a long time ago that this was going to be super important for Amazon. Bleeker caught on at some point, too. But, it wound up being huge for investors, huge for the company, and it's really fueled a lot of the growth that they're looking for in other segments.

Niu: Yeah. I wish I could have invested in just the AWS business.

Lewis: [laughs] Gotta love those margins.

Dylan Lewis has no position in any stocks mentioned. Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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