Amazon increase in expenses eats into profit growth

Web firm's commitment to expansion eats into outgoings, but profit still growing - just not as quickly as it was

Web firm Amazon has reported a first-quarter jump in profits of almost one third, while sales have increased by more than 20 per cent.

Net income for the period January to March 2014 was $108m (£64m), representing a 32 per cent increase on the figure of $82m (£49m) during the same period last year. Meanwhile, sales increased 23 per cent to almost $20bn in the first quarter, compared with $16bn in first quarter of 2013.

However, a 23 per cent rise in the company's expenses – fuelled by expansions into such areas as video streaming – and further reductions in price from cloud platform Amazon Web Services, has caused Amazon's growth in profits to decline.

But Jeff Bezos, founder and CEO of Amazon, remained bullish.

"We get our energy from inventing on behalf of customers, and 2014 is off to a kinetic start," he said, speaking on the launch of the firm's first-quarter results. He was keen to emphasise the success of the firm's devices and streaming services.

"Our device team launched Fire TV, offering great content, including our recently announced exclusive deal with HBO, and innovative features like unified voice search, which we're delighted is being adopted by so many new partners, including Netflix, HBO Go, Hulu Plus, Crackle and Showtime Anytime," Bezos said, before talking up Amazon's data centre services.

"Our AWS team significantly lowered prices on EC2, S3 and RDS, saving AWS customers hundreds of millions of dollars over the next several months alone," he added.

Amazon has also set out its expectations for the second quarter, with the company expecting growth to increase between 15 and 26 per cent. Operating losses, however, are expected to rise as the firm continues its attempt to expand.

Shares in Amazon have remained stable since the report, with no major rises or falls. However, the firm's shares have declined by more than 15 per cent so far this year.