Amazon Earnings: Strong Now, but Not So Much for Next Quarter

Amazon.com's (AMZN) reported first-quarter earnings that beat Wall Street's estimates. But in looking ahead at the next quarter, the online retailing giant warned it won't look as rosy as analysts had projected. So, shares of Amazon are down in after-hours trading, falling about 5% to $142.

The online retailing giant, which is battling to keep its ebook reader Kindle front and center despite the entry of Apple's (AAPL) highly touted iPad, reported a net profit of $299 million, or 66 cents per share, in the quarter that just ended, an improvement over year-ago figures of $177 million, or 41 cents a share. Analysts were expecting earnings of 61 cents a share, according to Thomson Reuters. Amazon's revenues jumped to $7.13 billion in the quarter, up 46% from the previous year.

"We remain heads-down focused on customers," said Jeff Bezos, CEO of Amazon.com, said in a statement. "Amazon Prime has just celebrated its fifth anniversary, adoption of Amazon Web Services continues to accelerate, Kindle remains our #1 bestselling product, and earlier this week, Kindle selection reached 500,000 titles."

'Top Line Remains Phenenomal'

Analysts also applauded the online retailer's first-quarter performance. "Their top line remains phenomenal," said Benjamin Schachter, a Broadpoint Amtech analyst, referring to Amazon's revenues. "Their execution is phenomenal. There was nothing bad in this quarter, expect maybe wanting to see a little better performance internationally."

The company's international sales rose 45% to $3.35 billion in the first quarter, compared to the same time last year. In North America, however, sales grew 47% to $3.78 billion over last year.

Electronics and other general merchandise were once again the growth drivers for the company, pushing worldwide sales up 72% to $3.51 billion in the quarter. These items range from electronic devices like the Kindle to household goods. But it's Amazon's worldwide media sales that seem to grab attention, even though its a declining slice of its overall revenue pie with its books, DVD and music sales. Media sales rang up 26% growth to $3.43 billion in the quarter.

Smaller Operating Income Forecast

Despite its strong quarter, Amazon noted that it now expects to post smaller operating income in its second quarter than what Wall Street had expected. Amazon forecasts operating income in the range of $220 million to $320 million, but according to a Citigroup Global Markets report, Wall Street was expecting $437 million.

After the earnings report, several analysts downplayed the significance of the gap between Amazon's second-quarter operating income guidance and the level Wall Street was expecting. They noted the e-retailer is historically conservative on its forecasts for the coming quarter and shares little details on some of its operations, leaving analysts with a larger guess factor than other companies.

Amazon, for example, does not break out its Kindle sales when reporting earnings. But analyst Jim Friedland of Cowen and Co. noted in a pre-earnings report that he expects Kindle sales to reach $1.1 billion this year. It's a lofty figure, but still a drop in the bucket when taking into account Amazon's anticipated $32 billion in sales for the year, Friedland noted.

Future Revenues Seen in Range

And because Amazon keeps some figures close to its chest, the exact effect of Apple's iPad will be hard to determine, as will the impact from a growing number of states trying to levy a sales tax on Amazon's Internet transactions.

The online retailer, however, did provide guidance on its larger numbers. Amazon expects to generate revenues between $6.1 billion to $6.7 billion in the second quarter, which is largely within Wall Street's range of $6.4 billion.