Amazon Reports Results That Surpassed Analysts’ Estimate, Issues Guidance That Falls Short of Expectations For The Upcoming Quarter

Amazon results for the quarter beat the expectations of Analysts. The Big Tech company reported revenue growth of 9 percent and a profit of almost $12 billion from its investment in EV company Rivian. The company’s shares were up 14 percent in extended trading on Thursday.

Amazon reported earnings per share of $5.80 surpassing $3.57 that analysts estimated, according to Refinitiv. It also reported revenue of $137.4 billion compared to $17.37 billion that analysts had projected for the quarter, according to Refinitiv. AWS revenue stood at $17.8 billion. A StreetAccount consensus of analysts forecasted $17.37 billion for AWS revenue.

The company has issued guidance for the first quarter of the year, saying that it expects revenue of between $112 billion and $117 billion. Its expectation falls short of an average of $120 billion by analysts, according to Refinitiv. It also added that it expects operating profit to be between $3 billion and $6 billion.

In the fourth quarter, Amazon had its first period of single-digit growth since 2017. Sales in the fourth quarter grew 9.4 percent to $137.4 billion. Although the company’s figure for sales was weaker than what was envisioned coupled with its weak guidance, investors still have confidence that the company’s numbers will recover. The same could, however, not be said for Meta (formerly Facebook) which experienced its worst-ever drop after reporting its earnings and issuing weak guidance.

For the first time, Amazon revealed revenue from its fast-growing advertising business. The company mentioned that advertising services grew 32 percent YoY to $9.7 billion in the fourth quarter. This category used to be housed under its Other Business category. According to CFO Brian Olsavsky, “It had been the majority of other revenue. We’re happy with ad growth. It continues to drive value”.

Currently, Amazon stands below Google and Facebook in the US in terms of the advertising business. Amazon had always viewed its ad business as “inconsequential” or smaller than its actual capacity but this is changing…

Revenue at Amazon Web Services climbed almost 40% to $17.78 billion, topping analysts’ estimates.

Rivian, which Amazon has a stake in had its IPO in November last year. The company has made gains from its investment in the EV company. Earnings per share, including the Rivian gain, was $27.75 for the quarter. The Rivian IPO priced at $78 a share, valuing the company at $66.5 billion. The stock climbed past $172 at its peak but has since fallen back to about $60. Shares of Rivian gained 3% in extended trading on Thursday. Amazon, which invested more than $1.3 billion into Rivian, owned 22.4% of the company’s Class A shares prior to the IPO.

Like other companies, Amazon also faced challenges in the quarter. According to CEO Andy Jassy, the pandemic posed challenges and continues to do so. He added that the company had to hike wages to an average of $18 an hour to attract workers, as well as increase its incentives such as offering signing bonuses that were as high as $3,000 in some markets.

In the earnings statement, the CEO said “As expected over the holidays, we saw higher costs driven by labour supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic”.

Notably, Amazon has also hiked the price of its Prime membership for the first time in about four years. The price of its annual Prime membership will be raised to $139 from $119. The monthly Prime membership will be $14.99 from $12.99, and the new pricing will go into effect starting March 25^th for current members and February 18^th for new members.