On Thursday, Amazon, the world’s largest e-commerce company, released its fourth quarter results. The company reported mixed results amid a softening economy: sales growth was stronger than expected but profits fell short of projections.
Better-Than-Expected Sales Growth
Amazon posted sales of $149.2 billion for the quarter, surpassing both its own guidance and Wall Street’s expectations by a wide margin. The company said that if it weren’t for unfavorable foreign exchange rates, sales growth would have been even stronger, at 12%.
Despite the weaker-than-expected profits, Amazon’s net income was $300 million, or 3 cents per share. The loss on Amazon’s stake in electric-truck maker Rivian Automotive was $2.3 billion pretax, but that loss was offset by gains from Amazon’s other investments.
AWS Revenue Falls Short of Expectations
Amazon Web Services, the company’s cloud computing division, fell short of Wall Street expectations for fourth-quarter revenues. AWS had revenue of $21.4 billion, up 20% from the previous year but shy of the Wall Street consensus view of $21.8 billion. This softness in AWS’s revenue is consistent with recent weakening growth at Microsoft’s Azure cloud business, as companies tighten their belts in the face of a more difficult economic climate.
Amazon CEO Andy Jassy made a surprise appearance on the earnings call and discussed the current business conditions at AWS, which he helped build from scratch before succeeding founder Jeff Bezos in the top job. Jassy said that most enterprises right now are acting cautiously and looking for ways to cost-optimize. He also said that AWS will continue to help customers find ways to spend less money on cloud services and that Amazon believes that 90% to 95% of all IT spending will shift to the cloud over the next 10 to 15 years, leaving substantial growth opportunities for AWS.
First Quarter Revenue Outlook Below Consensus Estimates
For the first quarter, Amazon sees revenue ranging from $121 billion to $126 billion, up between 4% and 8% from the previous year, which is below the Wall Street consensus of $139.2 billion. Amazon sees operating income for the quarter of between zero and $4 billion, while Wall Street has been projecting $4.2 billion.
In conclusion, Amazon’s fourth quarter results show a mixed picture of the company’s performance amid a softening economy. While sales grew faster than expected, profits fell short due to a loss on its stake in Rivian Automotive. Additionally, AWS’s revenue fell short of expectations and the company’s first quarter outlook is below consensus estimates. However, CEO Andy Jassy remains optimistic about long-term opportunities for Amazon and believes that the company will continue to grow in coming years.