The retail site is becoming more profitable. Amazon has squeezed more revenue and cut costs from its retail business. For years, it has been shifting its online store to offer items sold by third-party merchants rather than inventory it buys from suppliers. A decade ago, 30 percent of the goods sold on Amazon were from these outside sellers, but by last year, that had risen to 58 percent.
That growing marketplace side of its business is more profitable, because Amazon takes a cut of each sale without taking on the risk of holding inventory.
Third-party services produced more than $11 billion in sales in the latest quarter.
At the same time, Amazon’s costs for fulfilling orders were down 4 percent. Mr. Olsavsky said that was largely because the company had been building fewer warehouses than in the past, which meant it had to hire fewer new workers.
“Right now, we are on a nice path where we are getting the most of out of the capacity we have,” he said.
Big money in the cloud and ads. While Amazon’s retail business has never had particularly high margins, other parts of the company do, and their growth is accelerating. In the last quarter, Amazon’s cloud computing business made up 13 percent of sales but roughly half of the company’s $4.4 billion in operating income.
Amazon essentially created the industry of cloud computing and has maintained its lead, signing major deals with large companies. The business recorded $7.7 billion in sales, up 42 percent from a year earlier.
Investors are also keenly interested in Amazon’s advertising business. Amazon barely talks about it, but it’s another dynamo. In the first quarter, Amazon’s “Other” business segment, which it says is largely ads, grew 36 percent to $2.7 billion.
Those profitable businesses give Amazon flexibility to invest across its empire.
“They are the ultimate in optionality,” said Mr. Blackledge at Cowen. “They can cut Whole Foods prices because their ad business is ramping up.”