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Amazon's net income down to $2.5 billion in Q1

Sales surged during the first quarter of 2020

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MUMBAI: Amazon.com, Inc. today announced financial results for its first quarter ending March 31, 2020. The result is a measure of how the Covid2019 pandemic is affecting the overall online shopping experience.

Net income decreased to $2.5 billion in the first quarter, or $5.01 per diluted share, compared with net income of $3.6 billion, or $7.09 per diluted share, in first quarter 2019.

Operating cash flow increased 16 per cent to $39.7 billion for the trailing twelve months, compared with $34.4 billion for the trailing twelve months ended March 31, 2019.

Free cash flow increased to $24.3 billion for the trailing twelve months, compared with $23.0 billion for the trailing twelve months ended March 31, 2019.

Net sales increased 26 per cent to $75.5 billion in the first quarter, compared with $59.7 billion in first quarter 2019. Excluding the $387 million unfavourable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 27 per cent compared with first quarter 2019.

Operating income decreased to $4.0 billion in the first quarter, compared with operating income of $4.4 billion in first quarter 2019.

“From online shopping to AWS to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced,” said Jeff Bezos, Amazon founder-CEO.

He further added: “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. This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities.”

“There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less,” he added.

Covid2019 and employees

Amazon made over 150 significant process changes in its operations network and Whole Foods Market stores to help teams stay healthy — and it conducts daily audits of the measures we’ve put into place.

“A team of Amazonians — from research scientists and program managers to procurement specialists and software engineers — has moved from their normal day jobs to a dedicated team working to build incremental testing capacity. The team is building its first lab and has begun a pilot to test front-line employees. We’re not sure how far we will get in the relevant timeframe, but we think it’s worth trying, and we stand ready to share anything we learn. In March and April, we announced plans to and have now hired 175,000 people in our fulfillment and delivery network in response to increased customer demand and to assist existing employees. We are happy to welcome these new hires to our team and are continuing to hire,” said the company.

Alexa is helping customers stay informed and connected, and can now answer tens of thousands of questions related to Covid2019.

“We’re working to provide accurate and timely information from official government and news sources, globally. Alexa also provides an experience that helps customers in Brazil, Canada, India, Japan, Mexico, and the U.S. check their risk level for COVID-19. Customers can ask, “Alexa, what do I do if I think I have COVID-19?” or “Alexa, what do I do if I think I have coronavirus?” Alexa then asks a series of questions about the person’s symptoms and possible exposure and provides guidance sourced from local health authorities.”

Amazon is supporting small businesses by partnering with American Express and its Stand for Small initiative, providing free use of business tools that help with virtual communication and collaboration, such as Amazon Chime, Amazon WorkDocs, and Amazon WorkSpaces, as well as enabling small businesses to use the cloud at no charge for 12 months with AWS Free Tier.

Shopping and entertainment

Amazon ranked #1 in the 2019 American Customer Satisfaction Index Internet Retail Category and has been ranked in the top 10 for the past 11 years. In the UK, the Institute of Customer Service named Amazon as the company with the best customer service score for the past decade.

Prime Video launched Prime Video Cinema in the US, the UK, and Germany. Prime Video Cinema is a premium movie rental offering that allows customers to stream in-theatre movies at home, including titles such as Birds of Prey, Emma, The Invisible Man, Onward,andTrolls World Tour.

Customers in the US, the UK, and Germany can now rent or buy hundreds of thousands of video titles directly from the Prime Video app on Apple iOS 12 devices and the Apple TV Gen 4+, including new release movies, award-winning TV shows, and Oscar-nominated movies.

Prime Video premiered several new Amazon Original series including the reality competition Making the Cut, hosted and executive produced by Heidi Klum and Tim Gunn; The Forgotten Army in India; Love Island in France; Celebrity Hunted in Italy; and the docuseries The Test: A New Era for Australia’s Team in Australia.

Prime Video and the National Football League (NFL) announced a multi-year agreement to renew their partnership to deliver a live digital stream of 11 Thursday Night Football games as well as exclusive global streaming rights to one additional regular season game. All NFL games on Prime Video are available at no extra cost to Prime members.

Amazon launched Amazon.nl and a new Prime program for the Netherlands marketplace. Amazon Prime includes unlimited free shipping, Prime Video, Twitch Prime, and Amazon Photos.

Devices and Alexa

Alexa is available on even more devices including TV, mobile, and auto and is now available on select LG and Samsung Smart TV 2020 models and the new OnePlus 8 mobile phone. Additionally, BMW customers in the U.S., and MINI customers in the U.S., France, Italy, Spain, and Austria can now access Alexa on select models.

Amazon introduced a new speaking style for Alexa skills, enabling U.S. developers to build more natural long-form content experiences by adding conversational pauses to Alexa’s speech when reading articles or blogs.

Fire TV’s content catalog continues to grow internationally with new apps, including Disney+, available on Fire TV and Fire Tablet devices in the UK, France, Germany, Italy, and Spain.

Amazon Web Services

AWS announced the opening of the AWS Europe (Milan) and AWS Africa (Cape Town) Regions. AWS now spans 76 Availability Zones within 24 geographic regions, with announced plans for nine more Availability Zones and three more AWS Regions in Indonesia, Japan, and Spain.

AWS announced the general availability of Amazon Detective, a security service that makes it easy for customers to conduct faster and more efficient investigations into security issues across their AWS workloads. Amazon Detective automatically collects log data from a customer’s resources and uses machine learning, statistical analysis, and graph theory to build interactive visualizations that help customers analyze, investigate, and quickly identify the root cause of potential security issues or suspicious activities.

AWS announced the general availability of Amazon Keyspaces (for Apache Cassandra), a scalable, highly available, and fully managed database service for Cassandra workloads. Amazon Keyspaces supports the same application code, Apache 2.0 licensed drivers, and developer tools that customers running Cassandra workloads use today. With Amazon Keyspaces, customers can easily migrate on-premises Cassandra workloads to the cloud, without having to provision, configure, and operate servers or large Cassandra clusters, or needing to manually add or remove nodes or rebalance partitions as traffic scales up or down.

AWS announced the general availability of Amazon Augmented Artificial Intelligence (Amazon A2I), a fully managed service that makes it easy to add human review to machine learning predictions to enhance model and application accuracy by continuously identifying and improving low confidence predictions. Human review for model predictions can be added to new or existing applications using reviewers from Mechanical Turk, third party vendors, or a customer’s own employees.

AWS is helping schools around the world quickly deploy and transition to online learning through its EdTech customers and partners. In Egypt, the Ministry of Education and CDSM Thinqi are standing up instant access to online learning content, where 22 million K-12 students are able to continue their education in the midst of COVID-19; and in India, EdTech startup Impartus is launching virtual classrooms for more than 530,000 students — the online equivalent of 13,000 physical classrooms. AWS is also working with Blackboard, the largest education technology and services company in the world, enabling them to scale to 50x their usual capacity within a 24-hour timeframe to meet the global surge in demand of daily users for their virtual teaching and learning platform.

Second quarter 2020 guidance

Net sales are expected to be between $75.0 billion and $81.0 billion, or to grow between 18 per cent and 28 per cent compared with second quarter 2019. This guidance anticipates an unfavorable impact of approximately 70 basis points from foreign exchange rates.

Operating income (loss) is expected to be between $(1.5) billion and $1.5 billion, compared with $3.1 billion in second quarter 2019. This guidance assumes approximately $4.0 billion of costs related to COVID-19.

This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

Follow Tellychakkar for the consumer facing news & entertainment

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