It is awesome to be Jeff Bezos.
The Amazon.com Inc. CEO is the world's richest person. He has a meme-worthy physique. And investors love him when he shows them the tiniest bit of profit love.
Amazon on Thursday reported a dinky 3.8 percent operating profit margin on more than $51 billion in sales. It was the highest operating profit margin since the middle of 2016, but it's still laughably small compared with a company like Facebook and its 45 percent margins. Amazon also projected second-quarter operating profit that was higher than most Wall Street forecasts.
Amazon shares had already climbed more than 67 percent in the last year, and they shot up about 6 percent in after-hours trading on Thursday. Yup, Being Bezos is pretty grand.
Amazon has a reputation for spending as much money as it can get its hands on, and that reputation is deserved. The company has poured money into building up its e-commerce business in India and other international markets, its cloud-computing business, its Echo line of voice-activated gadgets, programming for its web video service and its packing, sorting and shipping logistics.
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That is quite a list of spending priorities, and it shows in Amazon's results. The company's core operating expenses — excluding its cost of sales covering items like payments for products that Amazon sells online — is consistently growing faster than Amazon's rapidly growing revenue. Revenue in Amazon's first quarter rose 43 percent from a year ago, which didn't include sales from the Whole Foods supermarket chain. Amazon's core operating costs climbed even faster at nearly 50 percent. This cost line has been inching up gradually, and the increase in the first quarter was the fastest rate since at least 2012.
What has changed, however, is that Amazon is becoming a fundamentally more profitable company. I know that's a weird sentence to read about a company with less than 4 percent operating profit margins. But what I mean is that Amazon's gross profit margin — its revenue minus basic costs to purchase products, buy packing supplies and grab digital video programming — is growing. Gross margin was nearly 40 percent in the first quarter compared with consistent margins in the 30 percent range for several years.