Amazon Q4 sales, earnings beat expectations; outlook disappoints

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Amazon Q4 sales, earnings beat expectations; outlook disappoints

By Marianne Wilson - 01/31/2019
Amazon had a better-than-expected holiday quarter, but its growth is starting to slow down.

The online giant’s net sales increased 19.7% to $72.4 billion in the quarter ended Dec. 31, compared with $60.5 billion in the year-ago quarter. While sales topped analysts’ expectations of $71.88 billion, it was the company’s slowest growth since the first quarter of 2015.

Net income surged 63% to a record $3.0 billion, or $6.04 per diluted share, compared with net income of $1.9 billion, or $3.75 per diluted share, last year easily topping Street estimates of $5.65 a share. Amazon’s non-retail businesses, such as cloud computing and advertising and the services it offers to its sellers, helped fuel its bottom line and offset the traditionally lower margins of its retail unit.

“Retail is our largest business and it’s still less than 1% of global retail," said an Amazon spokesman. "Amazon faces intense competition every day in every business we operate, from retail to entertainment to consumer electronics to technology.”

Amazon’s cloud computing division, Amazon Web Services, continues to play a crucial role in the company’s performance. Sales at the division rose to $7.43 billion from $5.11 billion a year ago, topping analysts’ estimates. AWS revenue represented 10% of total quarterly sales at Amazon, but 58% of the company’s overall operating income.

For the full year, net sales increased 31% to $232.9 billion.

Looking ahead, Amazon’s net sales are expected to range from $56 billion to $60 billion in the first quarter, or increase between 10% and 18% compared with the year-ago period. (At the midpoint of that range, Amazon’s first-quarter revenue increase of less than 14% would be the lowest since 2001, Bloomberg reported.) The forecast was on the low end of analyst expectations’ of about $61 billion.

Amazon founder and CEO Jeff Bezos touted the success of the company’s Alexa voice-assistant in the earnings release.

“Alexa was very busy during the holiday season,” Bezos stated. “Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year. The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear. In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017.”

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