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Recap: Amazon crushes fourth-quarter profit estimates, provides strong guidance

amazon warehouse worker boxes
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  • Amazon's fourth-quarter earnings and outlook surprised to the upside on Thursday.

  • Shares rose more than 11% in after-hours trading.

  • AI was a key theme, with Amazon saying it'll continue to invest in generative AI.

Amazon reported earnings on Thursday that beat estimates, sending shares up in postmarket trading.

Fourth-quarter earnings per share came in well above consensus forecasts, and first-quarter estimates for net sales and operating income also came in at the high end of the expected range.

Amazon's key AWS unit's sales increased 13% from a year earlier, and the company said it's seeing significant interest from those customers wanting to run AI products. It also launched a new AI shopping assistant, Rufus.

Amazon stock climbed as much as 11% in after-hours trading.

Advertisers are 'excited' about Amazon's Prime Video ad rollout.

While CFO Brian Olsavsky didn't break out data about Amazon Prime Video, which started showing ads earlier this week, he said advertisers are "excited" to access Prime's customer base.

"We're looking for ways to increase our advertising," he said — and not just across streaming services like Prime Video, but also on platforms like Freevee and Twitch.

But he cautioned that "we will not have heavy ad loads" relative to, for example, network TV.

CFO Olsavsky says Amazon continues to be mindful of geopolitical issues.

Amazon CFO Brian Olsavsky
Amazon CFO Brian OlsavskyLinkedIn/Brian Olsavsky

Amazon is "working very hard" to ensure supply chain disruption from political instability doesn't "back up on customers," its CFO said.

"It's not a material impact estimated in our guidance" for the first quarter, he said.

CEO Andy Jassy says Amazon will continue to invest in generative AI.

Amazon's generative AI products will continue to enhance customer experience and improve processes, CEO Jassy said on the company conference call. He said that investment in AI will generate tens of billions in revenue.

CFO Olsavsky said revenues from generative AI are accelerating rapidly at the company, and that they're seeing "significant interest" from customers wanting to run AI applications. The company doesn't split out the amount of revenue it gets from AI products in its AWS division.

Meet Rufus: Amazon's new AI shopping assistant.

amazon's AI chatbot Rufus
Amazon announced an AI chatbot it calls Rufus.Amazon

Rufus is an AI chatbot trained on the retail giant's product catalog and information across the web. It's designed to help customers answer questions, make recommendations, and discover new products, according to the company.

Rufus is the latest addition to Amazon's generative AI tools. Last November, Amazon launched Q, its AI chatbot for workers. A few months prior, Amazon unveiled Bedrock, a suite of large language models that AWS customers can access.

Amazon’s focus on cost-cutting was reflected in its profit numbers.

Andy Jassy
Amazon boss Andy Jassy.Thos Robinson/Getty Images

CEO Andy Jassy has been slashing costs at the company, including headcount reductions. Last year, it had the largest job cuts in its history – 18,000 in January alone – and it's still cutting roles. In early January this year, Amazon said it would lay off several hundred employees in Prime Video and Amazon MGM Studios, plus some of its workforce at its Buy with Prime unit.

That seems to be reflected by Amazon's operating income; both Q4 earnings and its forecast beat estimates.

Amazon is far from the only big tech company slashing jobs. And in earnings also published today, Meta said it spent billions closing offices and laying people off — yet also saw profitability soar.

Amazon stock soars on Q4 earnings beat.

amazon after-hours stock move 2-1-24
Markets Insider

Amazon shares jumped 8% to after the bell following its fourth-quarter earnings release.

Amazon beats 4th-quarter EPS estimates, forecasts 1st-quarter net sales and operating income at the high end of expected range.

Amazon driver
Sandy Huffaker/Reuters

1st-quarter forecast

  • Forecasts net sales $138.0 billion to $143.5 billion, estimate $142.01 billion

  • Forecasts operating income $8.0 billion to $12.0 billion, estimate $9.12 billion

4th quarter results

  • EPS: $1.00 vs. $0.94 q/q, estimate $0.78

  • Net sales: $169.96 billion, +14% y/y, estimate $166.21 billion

    • Online stores net sales: $70.54 billion, +9.3% y/y, estimate $68.91 billion

    • Physical Stores net sales: $5.15 billion, +3.9% y/y, estimate $5.23 billion

    • Third-Party Seller Services net sales: $43.56 billion, +20% y/y, estimate $41.96 billion

    • AWS net sales: $24.20 billion, +13% y/y, estimate $24.22 billion

    • North America net sales: $105.51 billion, +13% y/y, estimate $102.88 billion

    • International net sales: $40.24 billion, +17% y/y, estimate $38.96 billion

  • Third-party seller services net sales excluding F/X: +19% vs. +24% y/y, estimate +15.9%

  • Amazon Web Services net sales excluding F/X: +13% vs. +20% y/y, estimate +11.8%

  • Operating income: $13.21 billion vs. $2.74 billion y/y, estimate $10.49 billion

    • Operating margin: 7.8% vs. 1.8% y/y, estimate 6.17%

    • North America operating margin: +6.1% vs. -0.3% y/y, estimate +4.12%

    • International operating margin: -1% vs. -6.5% y/y, estimate -1.27%

  • Fulfillment expense: $26.10 billion, +13% y/y, estimate $25.2 billion

  • Seller unit mix: 61% vs. 59% y/y, estimate 59.5%

Bloomberg Intelligence says 'advertising revenue may continue to grow at a 20%+ clip.'

Analysts at Bloomberg Intelligence said building sales momentum should help the e-commerce giant to Wall Street estimates when it reports earnings results.

"Amazon's 4Q results may spark upside to consensus for a low-double-digit sales gain, aided by a better-than-expected holiday season, strong advertising gains and stabilization in AWS growth rates," Bloomberg Intelligence said in a note earlier this month.

Amazon's foray into advertising should lead to continued growth, according to the note. Amazon launched ads for its Prime Video service this past week, which should impact the company's advertising business significantly in 2024.

Bank of America says 'expect retail to be a bright spot.'

Amazon packages.
Amazon/Jordan Stead

Bank of America said AWS growth will be "the most important metric" for investors to consider in Amazon's upcoming earnings report, and that its fourth-quarter retail results should "be a bright spot," according to a note last week.

"Bank of America aggregated credit and debit card data indicates eCommerce sales growth in 4Q was stable vs 3Q and Cyber Five data suggests Amazon gained share," Bank of America said.

The bank expects Amazon to report $167 billion in revenue for the quarter, and that AWS will grow revenue 13% year-over-year to $24.2 billion.

JPMorgan says Amazon's stock can continue to climb higher.

Despite Amazon's solid rally over the past three months, JPMorgan thinks there is still upside left in the stock.

"Amazon is most liked and most owned across our group, but that does not deter our view that the stock can continue to climb higher," JPMorgan said in a note on Monday.

But further growth in Amazon's stock price will not be without volatility, as JPMorgan's channel checks suggest that its all-important AWS unit saw a softening in growth towards the end of the fourth-quarter and into the first few weeks of 2024.

For the year, JPMorgan said it expects Amazon's AWS cloud unit to grow 16.6% thanks to the integration of generative AI technology and new workloads.

Goldman Sachs says 'AWS revenue growth will remain a key area of debate.'

An Amazon worker moves boxes on Amazon Prime Day on July 11, 2023 in the East Village of New York City. Amazon holds the annual two-day event, where it offers shopping deals to Prime customers, in the middle of the summer. Amazon Prime Day has brought an estimated 10 billion dollars to the company in each of the last 3 years, as customers look to take advantage of discounts and quick shipping. (Photo by )
An Amazon worker moves boxes on Amazon Prime DaySpencer Platt/Getty Images

Goldman Sachs said in a note earlier this month that Amazon is well positioned to scale its profit margins in retail and grow even more efficient from a cost perspective. That should ultimately help the company beat analyst estimates when it reports its fourth-quarter results.

The bank expects Amazon to report revenue slightly ahead of estimates at $166.5 billion, and AWS revenue growth of 14%, which would represent an acceleration of growth from its reported 12% jump in the third-quarter.

"We view Amazon as well positioned as a leader in all aspects of secular growth within our Internet coverage and reiterate our Buy rating into 2024 with a PT of $200 (from $190)," Goldman said.

Amazon's consensus fourth-quarter net sales estimate is $166.21 billion

4th quarter

  • Net sales estimate: $166.21 billion

  • Online stores net sales estimate: $68.91 billion

  • Physical Stores net sales estimate: $5.23 billion

  • Third-Party Seller Services net sales estimate: $41.96 billion

  • Subscription Services net sales estimate: $10.31 billion

  • AWS net sales estimate: $24.22 billion

  • North America net sales estimate: $102.88 billion

  • International net sales estimate: $38.96 billion

  • Third-party seller services net sales excluding F/X estimate: +15.9%

  • Subscription services net sales excluding F/X estimate: +12.5%

  • Amazon Web Services net sales excluding F/X estimate: +11.8%

  • EPS estimate: $0.78

  • Operating income estimate: $10.49 billion

  • Operating margin estimate: 6.17%

  • North America operating margin estimate: +4.12%

  • International operating margin estimate: -1.27%

  • Fulfillment expense estimate: $25.2 billion

  • Seller unit mix estimate: 59.5%

1st quarter

  • Net sales estimate: $142.01 billion

  • Operating income estimate: $9.12 billion

Source: Bloomberg

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