Amazon shares bounce as figures leapfrogs expectations in Prime boost
Amazon reported better-than-expected results for its fourth quarter tonight, sending shares up more than 13 per cent in after-hours trading and pushing it back above $1 trillion in market value.
For the three months to the end of December 2019, the e-commerce giant posted a profit of $6.47 per share, or $4.2bn, jumping well ahead of analyst expectations of $4.03 according to data from Refinitiv.
Chief executive Jeff Bezos said efforts to push holiday shoppers towards its on-demand Prime delivery service paid off, with more people joining Prime in the quarter “than ever before” to reach 150m users — a 50 per cent increase from figures in 2018.
Revenue was reported at $87.44bn versus estimates of $86.02bn, while sales from subscription fees to Prime and other services such as Music Unlimited and Prime Video rose 32 per cent to $5.2bn.
Amazon Web Services (AWS) — the firm’s highly successful cloud computing arm — rose 34 per cent year on year to hit $9.95bn, compared to estimates of $9.81bn. The firm lost out to Microsoft on a $10bn contract to sell services to the US Department of Defense last year, which was expected to provide a major boost to AWS. Amazon is contesting the decision.
For the current quarter, Amazon surprised investors by providing guidance of revenue between $69bn and $73bn. Analysts had forecast revenue of $71.65bn.
Net sales in North America, Amazon’s biggest market, rose 21.6 per cent to $53.67bn, compared to expectations of $52.23bn.
However its total operating expenses surged 21.8 per cent during the quarter to $83.56bn.
Global shipping costs — an expected thorn in Amazon’s side from the increased focus on Prime — jumped significantly during the quarter, climbing 43 per cent to $12.88bn. As it transitions closer to relying on its in-house delivery service Amazon Logistics rather than third-party shipping, Amazon carried the biggest share of all of its US packages and delivered more than 3.5bn boxes worldwide in 2019.
“Amazon has repeatedly shown it’s prepared to sacrifice short-term profits for long-term gains, and these results are no different,” said Hargreaves Lansdown equity analyst Nicholas Hyett.
“However, given the scale of investments taking place analysts had expected profits to reverse, and the fact they’ve improved despite the extra spending is testament to the quality of the business Jeff Bezos has created. In fact every time we see a set of Amazon results there’s something new to get excited about.”
“Amazon is truly an embarrassment of riches,” he added.