Amazon stock moves lower on mixed earnings result (update)

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Amazon.com Inc. (NASDAQ:AMZN) stock wavered in Thursday’s extended trading as the market digested a mixed Q4 earnings report.

Headlining the quarterly results was a big revenue beat, with $149.2B in revenue exceeding analyst estimates by $3.43B. However, AWS sales came in slightly slower than already tempered estimates, hitting $21.38B against a $21.76B expectation. That slight disappointment was offset by continued rapid growth in advertising revenue and strong North American net sales.

Diluted earnings per share at $0.03 also missed expectations by a wide margin. That said, net income for the quarter includes a pre-tax valuation loss of $2.3B related to the company’s investment in Rivian Automotive (RIVN).

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” CEO Andy Jassy said. “The vast majority of total market segment share in both Global Retail and IT still reside in physical stores and on-premises datacenters; and as this equation steadily flips, we believe our leading customer experiences in these areas along with the results of our continued hard work and invention to improve every day, will lead to significant growth in the coming years.”

The company anticipates net sales between $121B and $126B for the first quarter of 2023 against a $125.13B Street consensus. Operating income is expected to be between $0 and $4B as compared to $3.7B in the first quarter of 2022. Management added that no restructuring is factored into the guidance.

Shares of the Seattle-based tech giant initially pushed over 3% higher after the results were revealed before diving over 6% as after hours trading progressed.

Shares again made a sharp move as CEO Andy Jassy joined the company's earnings call for the first time. He highlighted plans to streamline the business as his number one priority, but was careful to note that major investments at key junctures have helped Amazon become the company it is today.

Jassy also outlined his bullishness on strides the company is making in both grocery and international e-commerce. In particular, geographies like India and Turkey are beginning to show strong growth, in his view.

Further, he addressed questions regarding AWS and its apparent slowing.

"Most enterprises right now are acting cautiously...we're being very thoughtful about streamlining our costs as well," Jassy told analysts. "We're going to find a way to help our customers spend less money...If it's good for our customers to find a way to be more cost effective in an uncertain economy our team is going to spend a lot of cycles doing that."

He indicated that this strategy serves the long-term interest of the company even if it stands to hamper quarterly results from time to time. Instead, the business is focusing on building longer-term relationships and highlighting the elasticity of AWS versus on-premise services.

Finally, Jassy addressed the company's shift toward cost-cutting in specific business areas, such as stores and devices.

"When we looked at some of our physical store investments, there were just some areas where didn't have conviction that they were going to be big needle movers for Amazon," he explained.

He added that a decision to pull back on certain investments and streamline the business ended up with the decision to eliminate 18K roles, a decision he describes as the most difficult he has had to make.

He added that his team is not looking to optimize quarterly results, but instead build the business and maintain customers for the longer term. Still, he remained optimistic about space investments, healthcare, and entertainment and streaming among other areas.

"It only takes one or two of them to become the fourth pillar for Amazon for us to become a very different company over time," Jassy concluded.

Shares declined 3.55% at the conclusion of the earnings call at 6:17 ET.

Dig into the details of the print.

(This article has been updated to add commentary from the earnings presentation)

Comments

[ronald61239]

With Ford almost complete with the sale of Rivian shares. Some sales pressure should be eliminated on Rivian shares.

[Mission Hills 01]

I go out of my way not to give Amazon a single penny of my money.

Evil company.

[WisPokerGuy]

@Mission Hills 01

Well then, it's a good thing for $AMZN that several BILLION other customers don't feel the same way as you do, right?

[TJ Burke]

@Mission Hills 01 atta boy. Tell us all the other ways you’re making a non-impact.

[Mission Hills 01]

@WisPokerGuy we all gotta make our own decisions, bro

[Mister Doom]

The Big 3 were all expected to disappoint and they did.
Meta got lucky.

[Hercules7]

Amazon book value is $146B . Market cap is $1.1 Trillion

[Clq6073]

@jackc77 Doesn’t mean anything.

[ex institutional listed derivatives analyst]

Investors and Analysts are blind not to like the Q4 AMZN earnings report. Global revenues were up >10% during an inflationary 2022 when you would think that it would hit non-discretionary spending. The evidence of how great Prime is is in the 23% YOY growth in advertising revenues to 11.6 BN. In comparison, GOOG advertising revenues are down 5% YOY. Ad revenues are now more than 50% of AWS revenues. AWS also did very well. Hello, anybody there? AMZN has just completed a period of the biggest investment they have ever made in the history of their existence in 2022. They are sandbagging real profits. You are going to see massive profits going forward.

[RockyCT]

@ex institutional listed derivatives analyst Lets talk when AWS growth goes negative.

[ex institutional listed derivatives analyst]

@RockyCT You mean like google with ad revenues at -5% YOY. Yeah AWS sucks don't it? Amazon ads up 23% YOY vs -5% Google. CASE CLOSED.

[RockyCT]

@ex institutional listed derivatives analyst I'm talking about cloud computing not ads. I think yesterdays stock price says it all. Not much I can add.

[Winnertakesall]

Look at the bright side at least you didn't buy into that Adani group... sounds like the whole India market may go up in smoke.

[Larry Hall]

Definitely mixed results. Comments about 'atrocious' results etc. miss the mark, imo. AWS, retail, advertising over a period of time that would be consistent with investing should be very strong. SA trading cohort might be right to project short-term downturn if whetting the trading appetite, though I think they may be disappointed even in that. The bull market is back, Amazon is a very strong company and 'big money' will take notice. I added a few shares yesterday before the report and will gradually increment those.

[Yihai Ding]

Low EPS due to investment in RIVN, not their core business.

[Orangejulius]

Looks like the run up from the $90s wasn't really that justified. If they can stabilize cash flow, I could see them back at $120, but they've so far failed to prove they can operate successfully in a difficult environment.

Along with GOOG, these tech titans failed to stop overspending when it became clear the Fed wasn't going to stop tightening the screws. They both should have started their their layoffs at least a half year before they finally announced them. Now, they're both going to post extremely weak profitability well into 2023. I'm expecting at least another couple bad quarters from these two before their businesses reset and they return to some kind of growth. For now, expect EPS and cash flow to look awful.

[JoeyT]

"If it's better for our customers to spend less money in an uncertain economy we are going to help them do that."

Umm...

[Sermer]

Wow $0.03 EPS on $150B of revenue! I can see why it’s worth >$100 per share. That’s not at all precarious!

[GR Value]

@Sermer I think they wrote off 25-27 cents a share so it was more like 30 cents from operations. Other than that, Amazon is something that has so many lines/costs that the ordinary earnings per qtr might really be $1 even $2 boiled down if they tweak certain things like Facebook did like R&d perhaps. I don't know. So much rev runs through this thing that it's hard to know what effects little tweaks have in costs. The market may sense that to some extent so it may have a higher p/e or something.

I'm not saying it's cheap but I'm saying compared to peers given it's monopoly power, it's not going under 95 meaningfully yet. If they keep posting 25-50 cents a quarter for 2 years it might trend lower than 85 but not yet. If we had a recession and a lot more fed guile it might have but for now it's going to meander 98-120. When it hits 120 that will probably coincide with a retest of the August "4290" level.

The range to me appears to be 4000-4300 now on the S&P.

[Winnertakesall]

AWS results were terrible.

[ReMigration]

@Winnertakesall: Yes, that's really bad, a 20% growth in this segment! ;)

[RockyCT]

@ReMigration Yes, it is. And they are predicting slower sales in the future. GooG, MSFT, and ORCL are starting to take market share. Without AWS Amazon stock is not worth that much. Pretty much worthless.

[Randol33]

RIVN just continues to drag AMZN down

[Hercules7]

Earnings per share close to zero. Probably rally tomorrow

[Guraaf]

@jackc77 No. You need to lose money for shares to rally. Three cents is at least 4 cents too much.

[GR Value]

@jackc77 It's probably going to sit in a 100-115 range and have spike to 124 for the year. Meaning a gain of 7 and a loss of 5 are both tremendous moves probably.

A fall below 3950 isn't happening. The fed has essentially stated that a recession is not being strived for. I don't think this changes anything. Those wishing for ATH's again will be disappointed, those wishing for lows again will also be disappointed.

[Shamanski]

I can't see how anybody would be excited to buy any of the FAAMG stocks at these levels with the continued weak earnings coming.

I would consider it incredibly shocking if they all didn't retest lows at some point, or even make new lows.

[huraibin]

@Shamanski agree with you, but market isn't always logical.

[Diesel]

And it's flat again. It didn't even give up any of the gains today and stock was up 7% during regular hours.

[Mean Reversion Investor]

@Diesel it’s called a bull market. That’s how stocks behave.

[1winner]

mixed? they were awful. this thing should be $70 fair value...

[ckarabin]

@1winner Agreed, seems like an awfully high priced to pay for a company losing sales growth and coming in so short on earnings. Serious issues here.

[BoxerDog]

@ckarabin liking $WMT more and more.

[ckarabin]

@BoxerDog Frankly I think both should be avoided with the big retail retrenchment going on right now, but the higher the valuation the more I'd avoid it.

[PonziPat]

Oooooh nasty lagging effects of interest rises......that will be last May's 1/2point rise to 1% kicking in

[monster94]

Only thing horrible about these results were the eps and continued unprofitably in the retail sector across the globe.
AWS, subscriptions and Ad revenue all saw growth - these are cash cow business!
Eps not really down, because of the Rivian unrealised loss.

[Fobe]

Even successful companies have ups and downs. As long as the long term trajectory is up, you're winning. Split-adjusted cost basis $10 to $15 here.