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