Amazon (AMZN) reported a strong beat with its first-quarter earnings. Net sales of $108.5 billion (+44% year-over-year) exceeded estimates of about $104.510 billion. Operating income increased to $8.9 billion, crushing estimates of $6.03 billion, leading to earnings per share of $15.79 (+215% YoY) that smashed the $9.54 expectation.

Amazon did not announce a stock split like some had expected on Thursday night (and it would be very wrong to sell the stock because a split didn't happen). The good times for the company, however, are expected to continue into the second quarter, based on management's outlook. The guidance calls for net sales between $110.0 billion and $116 billion (+24% to +30% YoY), and at a midpoint of $113 billion is nicely above estimates of $108.49 billion.

Management's forecast anticipates a favorable impact of approximately 200 basis points from foreign exchange rates. Operating Income is expected to be between $4.5 billion and $8.0 billion, but at a midpoint of $6.25 billion, this is below consensus estimates of $6.9 billion. We would look past viewing this as a light operating income guidance, because the outlook assumes approximately $1.5 billion of costs related to COVID-19. Plus, management is known for conservative forecasts. It is also worth noting that guidance also assumes Prime Day will occur in the second quarter.

In the press release here, Amazon founder and CEO Jeff Bezos had this to say: "Two of our kids are now 10 and 15 years old-and after years of being nurtured, they're growing up fast and coming into their own." 

"As Prime Video turns 10, over 175 million Prime members have streamed shows and movies in the past year, and streaming hours are up more than 70% year over year. Amazon Studios received a record 12 Academy Award nominations and two wins. Upcoming originals include Tom Clancy's 'Without Remorse,' 'The Tomorrow War,' 'The Underground Railroad,' and much more. In just 15 years, AWS has become a $54 billion annual sales run rate business competing against the world's largest technology companies, and its growth is accelerating -- up 32% year over year. Companies from Airbnb (ABNB) to McDonald's (MCD) to Volkswagen come to AWS because we offer what is by far the broadest set of tools and services available, and we continue to invent relentlessly on their behalf. We love Prime Video and AWS, and we're proud to have them in the family."

Turning to the results, by geography, North American net sales were $64.366 billion (+40% YoY), exceeding expectations of $63.119 billion. Operating income was $3.450 billion (+163% YoY), a result that was far better than expectations of $2.249 billion. Management cited a continuation of demand trends seen since the early months of the pandemic, as one reason for the strong growth. To us, this is a sign that the pandemic has changed consumer habits permanently and has increased the adoption of e-commerce.

International sales in the quarter were $30.649 billion (+60% YoY), a solid beat relative to estimates for $28.136 billion. Furthermore, operating income of $1.252 billion was far better than expectations of $146 million. National lockdowns and other restrictive measures helped boost sales in the quarter.

By segment, net sales at Online Stores, the heart of Amazon's e-commerce business, were $52.901 billion (+41% ex-FX) and topped estimates of $51.538 billion. Worldwide shipping costs rose 57% YoY to $171.162 billion. As mentioned above, the growth Amazon is experiencing in its Online Stores is proof that more people are turning to e-commerce for their everyday shopping needs. Amazon discussed on the call how they are investing "heavily" in the last mile and increasing capacity to support their business.

At Physical Stores (mostly Whole Foods) revenue was $3.920 billion (-16% YoY) in the quarter and below estimates of $4.285 billion. Not much to add here, other than management sees a lot of value in expanding in grocery deliver and pick up in store options as well as the 12 "Fresh" stores they have right now.

At Amazon Web Services, revenue of $13.503 billion (+32% YoY) topped consensus estimates for $13.231 billion, as sales growth accelerated from the 28% growth rate in the fourth quarter. The company said the acceleration was driven across a broad range of customers and they expect this enterprise shift to the cloud is a trend that is expected to continue in the post-pandemic recovery. The backlog ended the quarter at $52.9 billion, up from about $50 billion at the end of the year. AWS Operating Income came in at $4.163 billion (+35% YoY) and beat estimates of $3.871 billion. The operating margin was 30.8%, representing a nice pick up from 28% in the fourth quarter of 2020 and a small expansion from 30.1% in the first quarter of 2020.

In Subscription Services, which include annual and monthly fees associated with Prime, audiobook, e-book, digital video, digital music, and more, revenues of $7.580 billion (+34% ex-FX) exceeded estimates of $7.321 billion. It sounds like beefing the content on Amazon Prime Video is one major objective of management this year. And it makes sense, because they said on the earnings call that members who watch video have a higher free trial conversion rate, renewal rate, and stronger engagement. Amazon recently struck a 10-Year agreement with the National Football League that makes Amazon Prime Video the exclusive broadcaster for 15 Thursday Night Football games, starting in 2023. A Prime membership is a must-have if you are a fan of the NFL. And don't forget, by increasing the value of the Prime membership through new offerings like this, Amazon's subscription product will become even "stickier" with the consumer, and the subscription's pricing power will be even stronger in the future. A price increase for Prime at some point down the road would be a positive event for the stock.

Third-Party Seller services includes commissions and any related fulfillment and shipping fees, and other third-party seller services. Sales were $23.709 billion (+64% YoY ex-FX) and were ahead of estimates for $21.692 billion. What's impressive here is that 3P seller revenues grew even faster than online stores. That's big for Amazon's profits, because this is a higher margin business and is another sign that e-commerce is here to stay despite the reopening.

Other sales, which mostly comes from the high-margin Advertising, came in at $6.903 billion (+72% YoY ex-FX) and topped estimates of $6.158 billion. Revenue growth in this segment greatly accelerated in the quarter and follows a trend that Facebook and Alphabet experienced this quarter, too. Amazon is using deep learning models to show more relevant sponsored products. And remember, Advertising is a higher margin revenue stream, too, meaning that Amazon sees tremendous operating leverage off this larger revenue base.

Overall, there is not much to complain about here, as Amazon's blowout quarter was driven by broad-based strength across the business, and it proved what we have been saying in that Amazon is so much more than a pandemic play.

Shares of Amazon are trading roughly 2.5% higher after hours, toward its all-time highs of around $3,550. The question for Friday is, will AMZN trade like Facebook (FB) and Alphabet (GOOGL) and see its after-hours strength follow through to the next day? Or will it be like Apple, who ended the day lower, despite reporting a blowout quarter the previous night? Short-term movements aside, we continue to believe Amazon is one of the best-positioned companies in both a pandemic and post-pandemic world due to its exposure to secular growth drivers in e-commerce, cloud computing, and digital content. That is what makes Amazon one of the best long-term growth stories in the market.

Action AlertsPLUS, which Cramer co-manages as a charitable trust, is long AMZN, FB, GOOGL.