Amazon's revenue increases even as spending rises

International unit continues to be a drag as sales growth slows to 18%

Amazon.com Inc’s revenue grew more than expected for the first quarter, largely offset by a sharp increase in spending on technology, content and new warehouses as the e-commerce company branches into new businesses.

Amazon's international unit, which accounts for 40 per cent of sales, continued to be a drag as sales growth slowed to 18 per cent during the quarter. Global unit sales, a closely watched measure of how many items Amazon has sold, also decelerated, rising only 23 per cent.

Shares of Amazon, which is also aggressively expanding its lineup of devices and computing services to sustain its growth pace, were little changed in after-hours trading.

The Seattle-based company's first-quarter revenue rose 23 per cent to $19.74 billion, boosted by North American sales. This bested the average Wall Street estimate of $19.4 billion, according to Thomson Reuters I/B/E/S. Amazon reported earnings per share of 23 cents, in line with expectations.

Operating margins were predictably razor-thin at around 1 percent. Amazon is spending big on a range of projects, including developing its own original shows and video games, as its core retail business comes under pressure.

"They continue to struggle with the level of profitability they should be seeing, but how can you do better when you're 'investing' for the future?" Forrester Research analyst Sucharita Mulpuru said in an email.

The company is also moving more forcefully into hardware with the debut of its Fire TV video streaming box, as well as a long-rumored smartphone.

First-quarter operating expenses shot up by 23 percent. Amazon's fulfillment costs rose 29 pct, while its technology and content spending was up 44 percent.

But Amazon faces a few near-term hurdles, including new laws in several states forcing the company to collect sales taxes. A recent study showed Amazon sales fell 10 percent in such states, and analysts said this was one factor that pinched Amazon's unit sales growth over the last two years.

The e-commerce company also faces heightened competition abroad from rivals such as Alibaba, which is laying the groundwork for what could be the largest initial public offering for a technology company.

The first-quarter report comes as Amazon tries to build the case for its Prime service after hiking its annual fee to $99 from $79 last month. Prime users get unlimited two-day shipping, access to streaming video and other perks.

This week alone, Amazon unveiled two initiatives to stem defections, including a deal to stream older shows from HBO, the premium cable channel owned by Time Warner Inc.