April 15, 2024
Amazon stock rises 7% as earnings beat expectations on strong holiday shopping season  The Motley Fool

shares of Amazon (AMZN 2.63%) jumped 7.1% in Thursday’s after-hours trading session after the e-commerce and cloud computing leader released its fourth-quarter 2023 report.

The gain was driven by quarterly revenue and earnings that easily beat Wall Street estimates. Investors shrugged off the fact that revenue guidance for the first quarter of 2024 came in slightly lighter than analysts expected.

Below is an overview of Amazon’s Q4 2023 results and its guidance, focused on five key metrics.

Image Source: Amazon.

1. Revenue increased by 14%

Amazon’s net quarterly sales rose 14% year over year to $170 billion, exceeding Wall Street’s estimate of $166.2 billion. The result also topped the company’s guidance range of $160 billion to $167 billion. Excluding the negative impact from foreign currency exchange, revenues increased 13% compared to the year-ago period.

For context, last quarter (Q3 2023), revenue grew 13% as reported, and 11% on a constant-currency basis.

Amazon section Q4 2023 revenue Change (year-on-year)
North America $105.5 billion 13%
international $40.2 billion 17% (and 13% in constant currency)
Amazon Web Services (AWS) $24.2 billion 13%
Total $170.0 billion 14% (and 11% in constant currency)

Data Source: Amazon. YOY = year over year.

The quarter ended the slowdown (or stagnation in the case of the previous quarter) in AWS’s year-over-year revenue growth on a sequential-quarter basis. Over the last four quarters, the cloud computing unit’s year-over-year revenue grew 12% (Q3 2023), 12% (Q2 2023), 16% (Q1 2023), and 20% (Q4 2022). This slowdown is not limited to AWS but is industry-wide. Many businesses have been cautious about their spending due to the mixed macro environment, including high interest rates.

North America and International performed very well during the quarter with major holidays. In fact, the e-commerce giant’s CEO Andy Jassy said in the earnings release, “This Q4 was a record-breaking holiday shopping season and a strong finish to 2023.”

2. Operating income increased by 389%

Operating income for the quarter increased nearly fivefold year over year to $13.2 billion. The result falls within Amazon’s guidance range for this metric between $7 billion and $11 billion.

Amazon section Q4 2023 operating income Change (year-on-year)
North America $6.5 billion That’s up from a $0.2 billion loss in the year-ago period.
international ($0.4 billion) That’s up from a $2.2 billion loss in the year-ago period.
Amazon Web Services $7.2 billion 38%
Total $13.2 billion 389%

Data Source: Amazon.

AWS’s operating income growth was strong, with its percentage growth significantly exceeding its revenue percentage growth. Additionally, year-over-year quarterly operating income growth accelerated from 30% in the previous quarter.

3. Earnings per share increased by 3,233%

In Q4, net income was $10.6 billion, or $1 per share, up from $0.03 per share in the year-ago quarter. The result beat the $0.80 earnings per share (EPS) that Wall Street was expecting.

The quarter’s net income includes a pre-tax valuation loss of $0.1 billion in non-operating expenses from Amazon’s common stock investment in the electric vehicle maker. Rivian AutomotiveWhich became public in November 2021.

In the year-ago quarter, Amazon reported a pre-tax valuation loss of $2.3 billion from the Rivian investment. Therefore, the recently reported quarter’s EPS percentage gain got a notable boost from Rivian’s pre-tax valuation loss, which is lower than Q4 2022. This is one reason why it is best for investors to use operating income percentage changes to measure a company’s profitability performance. ,

4. Operating cash flow increased by 82% last year

Operating cash flow increases 82% to $84.9 billion in 2023. Free cash flow (FCF) for the period was $36.8 billion, compared to negative $11.6 billion in 2022.

The company ended the quarter (and year) with $73.9 billion of cash and cash equivalents and $58.3 billion of long-term debt.

5. Revenue is expected to grow 8% to 13% in the first quarter of 2024

For the first quarter of 2024, management guided net sales in the range of $138 billion to $143.5 billion, which would increase 8% to 13% year over year.

Wall Street was expecting revenue of $142.1 billion in the first quarter of 2024, according to the Q4 2023 report. So, Amazon’s top-line guidance at the midpoint (which is $140.8 billion) was a bit lighter than analysts expected.

Amazon, which does not provide earnings guidance, also said it expects Q1 operating income to be between $8 billion and $12 billion, compared with $4.8 billion in the year-ago period.

In short, Amazon turned in a strong quarter, which was especially impressive given the somewhat challenging macro environment.

John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Beth McKenna has no position in any stocks mentioned. The Motley Fool has posts on Amazon and recommends it. The Motley Fool has a disclosure policy.

Source: www.fool.com

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