Amazon.com Inc. today reported a 24% increase in North American revenue for the first quarter of 2014, though some international sales were down.

The retailer also reported higher spending in fulfillment and technology and content, two expense categories that support the growth of Amazon’s Prime two-day-shipping-and-loyalty program, which offers free streamed film, TV and music content for consumers who pay $99 per year or take out free trial memberships. Today Amazon says only that Prime has “tens of millions” of members though an estimate earlier this year from investment firm Macquarie says half of U.S. households could be members of Amazon Prime by 2020. Macquarie estimates 20-25% of U.S. households, or 40 million, include a Prime member.

The web-only merchant is No. 1 in the new Internet Retailer 2015 Top 500 Guide.

For the first quarter ended March 31, 2015, Amazon reported:

• Net sales of $22.717 billion, a 15.1% increase from $19.741 billion in the same quarter in 2014. Of that revenue, about $17.084 billion stemmed from merchandise Amazon itself sold to consumers, what the e-retailer terms “net product sales”—up 8.8% year over year. The rest, $5.633 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 39.6% from last year’s Q1. Outside merchants accounted for 44% of sales in this quarter, versus 40% a year earlier.

• North American net sales of $13.406 billion, up 24.0% from $10.808 billion for the first quarter of 2014. North America accounted for about 59.0% of sales in the first quarter of 2015, compared with 54.7% in the first quarter of 2014 and 63.9% in the fourth quarter of 2014.

• International net sales totaling $7.745 billion, down 1.7% from $7.883 billion in the first quarter of 2014. International accounted for about 34.1% of sales in the first quarter of 2015, compared with 39.9% in the first quarter of 2014 and 36.1% in the fourth quarter of 2014.

• North American sales of books, music and videos increased 5.1% to $2.969 billion from $2.825 billion, while sales of electronics and other general merchandise increased 30.9% to $10.250 billion from $7.829 billion in the same period in 2014.

• International sales of books, music and videos decreased 12.2% to $2.320 billion from $2.642 billion, while sales of electronics and other general merchandise increased 3.7% to $5.378 billion from $5.188 billion in the same period in 2014.

• A net loss of $57 million compared with net income of $108 million in the same period in 2014.

• Spending on marketing increased 24.5% to about $1.083 billion from $870 million in the first quarter of 2014.

• Spending on technology and content, including fees for licensing content for its Amazon Prime Instant Video service, increased 38.3% to $2.754 billion from $1.991 billion. “We mentioned last call that we spent approximately $1.3 billion on content globally for Prime customers and what we’ve seen and to date is was certainly still an investment for us, it’s certainly impacting our operating results, but we like what we see,” said Tom Szkutak, chief finanial officer and senior vice president, during the conference call with investors today. “We see customers who come in through our free trial pipeline if you will for video content. They convert it at a higher rate. Wee have a great retention of Prime members, but those who stream, we retain those at a higher rate and we bring in new customers through our video pipeline.”

• Spending on fulfillment increased 19.1% to $2.759 billion from $2.317 billion in 2013. “We ended the year with 109 fulfillment centers around the world,” said Brian Olsavsky, Amazon’s vice president, chief financial officer of global consumer business, during the conference call with investors today, according to a Seeking Alpha transcript.

• General and administrative spending increased about 30.6% year over year to $427 million from $327 million.

• A 49.1% increase in net sales for Amazon Web Services, a unit of Amazon.com Inc. that provides Internet-based data storage and computing power and is used by some business-to-business e-commerce operators, as well as online retailers and other organizations. Net sales reached $1.566 billion in the first quarter of 2015 compared with $1.050 billion for the same period last year. It was the first time Amazon had broken out Amazon Web Services’ sales.

“Amazon Web Services is a $5 billion business and still growing fast. In fact it’s accelerating,” says Jeff Bezos, founder and CEO of Amazon.com. “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”

The financial report debut of Amazon Web Services pleased investors. “Amazon Web Services stole the show,” reads a research note from Robert W. Baird & Co. “We believe investors will view Amazon’s cloud platform with renewed enthusiasm, despite the implied lower margins for the core Retail/Media segments.”

Amazon is nominated for two Internet Retailer Excellence awards this year. Please click here to learn more.

 

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