Please ensure Javascript is enabled for purposes of website accessibility

Don't Overlook These Metrics From Amazon's First-Quarter Earnings

By Daniel Sparks – May 15, 2019 at 7:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Soaring free cash flow, fast-rising subscription services revenue, and more.

Amazon.com (AMZN -0.97%) posted a solid earnings report late last month. First-quarter revenue increased 17% year over year to $59.7 billion and earnings per share skyrocketed 117% to $7.09. This figure crushed analysts' average forecast for earnings per share of $4.71. 

But since Amazon has morphed into such a wide-ranging behemoth, these metrics fail to fully capture the company's performance. Here's a look at some of the metrics from Amazon's first-quarter update investors may have overlooked, including the e-commerce giant's soaring free cash flow, and its fast-growing Amazon Web Services and subscription services revenue.

A smartphone with a shopping cart icon on it

Image source: Getty Images.

1. Free cash flow

Perhaps the most impressive metric from Amazon's first-quarter update was its free cash flow, or the cold, hard cash left over after both regular operations and capital expenditures are taken care of. Amazon's trailing-12-month free cash flow ending March 31, 2018 was $23 billion, up from $7.3 billion in the year-ago period.

2. Online stores revenue

Amazon's first-quarter online stores revenue, or revenue primarily from sales of e-commerce products and digital media sold on a transactional basis (as opposed to a subscription), increased 10% year over year in constant currency. This is a deceleration from constant-currency year-over-year growth of 13% in online stores revenue in Q4.

With online stores sales accounting for half of Amazon's revenue, this deceleration is worth noting. Continued deceleration in the coming quarters could be a concern.

3. Third-party seller services revenue

Fortunately, Amazon has some other fast-growing segments helping make up for slowing online stores revenue growth. Third-party seller services revenue, for instance, increased 20% year over year in constant currency and accounted for nearly a fifth of total revenue.

4. AWS revenue growth

In addition, Amazon Web Services (AWS) revenue continues to soar. The cloud-computing segment's revenue rose 41% year over year in constant currency, representing 13% of total revenue. This segment's rapid growth is important because AWS boasts a lucrative trailing-12-month operating margin of 29.1% -- much higher than Amazon's consolidated trailing-12-month operating margin of 6.2%.

5. Subscription services revenue growth

Lastly, consider Amazon's soaring subscription services revenue, or revenue from Prime memberships and audiobook, digital video, e-book, digital music, and third-party and non-AWS subscription services. Subscription services revenue during the quarter increased 40% year over year in constant currency -- an acceleration from 25% constant-currency growth in Q4.

As these metrics point out, Amazon's business growth is coming from various sources. This is important because it means investors aren't totally dependent on one business, such as e-commerce. Subscription services, AWS, third-party seller services, and online stores revenue are all key drivers for Amazon's growth. And this broad-based approach is generating significant value for shareholders, sending free cash flow through the roof.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$114.03 (-0.97%) $-1.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.