Amazon.com Inc. reported quarterly profit that topped estimates as cost cuts and surprisingly strong sales in the cloud-computing division helped the e-commerce giant weather an uncertain economy. The shares were little changed in extended trading, giving back earlier gains of as much as 12 per cent.

First-quarter revenue increased 9.4 per cent to US$127.4 billion, the company said Thursday in a statement, above expectations for US$124.7 billion. Operating income was US$4.8 billion. Analysts, on average, projected US$3 billion.

The world’s largest online retailer and cloud-computing provider has been working for more than a year to streamline its businesses to adjust to slowing sales growth in online shopping and its Amazon Web Services division. The company is cutting 27,000 jobs, the largest such cull in its history, with the latest round of layoffs announced Wednesday landing mostly on employees of AWS, its cloud unit.

“Amazon did what it needed to do in Q1 by reversing — or at least stalling — its most troublesome declining growth trends,” said Andrew Lipsman, an analyst at Insider Intelligence. “Amazon’s stronger-than-expected performance for its key profit centers of AWS and advertising indicate that the enterprise and the digital ad sectors may be turning the corner.”

The earnings reflect an ongoing shift in Amazon’s business model away from buying goods directly from manufacturers and selling them itself. An increasing share of revenue is coming from the more profitable business of providing services and advertising to independent merchants who rent space on Amazon’s website and in its warehouses. Advertising sales rose more than 21 per cent to US$9.51 billion and seller services jumped 18 per cent to US$29.8 billion in the quarter.

Sales in Amazon’s online stores category — the company’s original business — were flat compared with a year ago, and down about 4 per cent from the same period in 2021.

AWS revenue rose 16 per cent to US$21.4 billion, more than Wall Street projected, although sales growth declined for the fifth straight quarter. Some analysts have speculated that a slowdown in corporate technology spending could push the cloud unit’s growth rates to single digits later this year. AWS is less profitable than it was a year ago, which is partly the result of discounts the company offered to customers in exchange for longer-term contracts, Chief Financial Officer Brian Olsavsky said on a call with reporters.

Amazon’s results also suggest the company’s efforts to reduce costs are starting to pay off. Operating expenses increased 8.7 per cent in the quarter, the slowest pace in at least a decade. The company’s North America segment was profitable on an operating basis for the first time since late 2021.

The Seattle-based company employed almost 1.47 million people as of March 31, a decrease of 10 per cent from the period a year earlier and down from more than 1.54 million workers three months earlier. 

Amazon’s positive results follow similar good news this week from fellow big tech companies Alphabet Inc., Microsoft Corp. and Meta Platforms Inc. Microsoft, like Amazon, reported sustained sales for its public cloud business while Alphabet’s Google Cloud produced a profit for the first time. Meta’s digital advertising business rebounded, returning the company to sales growth after three straight quarters of declines. 

The shares rose to a high of US$123 in extended trading after closing at US$109.82 in New York. The stock has gained 31 per cent so far in 2023, part of a broad rebound among battered technology firms.

Some analysts said Amazon has more work to do. “We keep waiting for profit and cash flow to turn here,” said Stefan Slowinski, an analyst at BNP Paribas Exane. “With all of the headlines on restructuring and closure of businesses, we’re really not getting that coming through in the numbers.”

Amazon projected sales of US$127 billion to US$133 billion in the current period ending in June and operating profit of US$2 billion to US$5.5 billion. Both were in line with estimates.