The share price for Amazon.com, Inc the largest online retailer in the United States, spiked 13.3% to $2,113.35 in after-hours trading Thursday after the company reported better than expected earnings for the fourth quarter. The stock opened on Wall Street at $1,858.00 and reached a high of $1,872.86 during regular trading hours.
Amazon reported earnings per share for Q4 at $6.47 versus expectations of $4.03 per share, according to analysts surveyed by Refinitiv. Revenue for the quarter stood at $87.44 billion compared to expectations of $86.02 billion (Refinitiv).
Amazon's guidance for the current quarter was also upbeat. The company said it now expects to report revenue between $69 billion and $73 billion.
Speaking about Amazon Prime, the company's paid subscription service, CEO Jeff Bezos said "more people joined Prime this quarter than ever before." He said Amazon now counts more than 150 million paid Prime members around the world compared to 100 million members in April 2018. Amazon Prime posted revenues of $14.2 billion in 2018.
Amazon's physical-store sales consisting mostly of stories owned by its subsidiary, Whole Foods Market Inc saw revenue skid 1% year-on-year to $4.36 billion. Amazon's "other" category, which is mostly its advertising business, generated $4.8 billion in revenue during Q4, a 41% increase year-on-year.
As anticipated, Amazon's worldwide shipping costs rose significantly during Q4, climbing 43% year-on-year to $12.9 billion. Amazon is spending heavily to speed-up deliveries (especially same day deliveries). It's been boosting one-day and same-day delivery services over the past several months.
Amazon Web Services (AWS), which provides on-demand cloud computing platforms and APIs to individuals, companies, and governments, said its Q4 2019 revenue hit $9.95 billion. This figure, which was larger than expected, beat expectations of $9.81 billion, or a 32% growth rate, according to FactSet. AWS revenue grew 34.0% on an annualized basis in Q4 but compares unfavorably to the 34.7% revenue growth in Q3.
In contrast, AWS revenue for Q4 2018 reached $7.43 billion. AWS accounted for 58 percent of Amazon's overall operating income in Q4 2018.
While AWS represents only 11% of Amazon's total revenue, it remains the company's cash cow due to its status as market leader.
Of the $3.88 billion in operating income Amazon earned this Q4, $2.60 billion, or 67%, came from AWS. The operating income from AWS compares favorably to the $2.45 billion consensus estimate among analysts polled by FactSet.
Analysts noted AWS continues to grow faster than Amazon's North America and International business segments. AWS' growth, however, is on the decline. Deutsche Bank said competitive pressures and a slower pace of big companies moving applications to AWS, "underscore increased risk of further deceleration at AWS."
