Amazon.com Inc. closed out last year with a big quarter of profit growth — and it signaled that a recent acceleration in its all-important cloud-computing business was expected to continue into 2024.
The company on Thursday reported $13.2 billion in operating income for the fourth quarter, up from $2.7 billion a year before. Analysts had been modeling $10.4 billion.
Looking to the first quarter, Amazon
AMZN,
anticipates $8.0 billion to $12.0 billion in operating income, whereas the FactSet consensus was for $9.0 billion.
The stock surged 7% in Thursday’s extended session.
“We’ve challenged every closely held belief in our fulfillment network and re-evaluated every part of it and found several areas where we believe we can lower cost while also delivering faster for customers,” Chief Executive Andy Jassy said on the earnings call, noting that executives “have optimism there’s more upside for us.”
Amazon’s fourth-quarter revenue rose to $170.0 billion from $149.2 billion, while the FactSet consensus had been for $166.0 billion. The company generated $105.5 in North America-segment revenue, up 13% from a year earlier.
The Amazon Web Services cloud-computing business logged 13% growth, with revenue coming it at $24.2 billion. That matched the FactSet consensus view.
Growth at AWS improved relative to the 12% rate seen in the third quarter.
“Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations, and as these optimizations slow down, we’re seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations,” Chief Financial Officer Brian Olsavsky shared on the earnings call.
Management expects “accelerating trends to continue into 2024,” according to the call.
“Our approach of democratizing AI is resonating with customers,” Olsavsky said in a separate conference call with reporters late Thursday. However, he did not break out AI-related sales.
He said the company’s new artificial-intelligence assistant for shopping, called Rufus, will improve the customer experience. “If we do it right, and we intend to, it will lead to a better shopping experience,” he said.
Olsavsky noted a “really strong” holiday season aided by aggressive promotions tied to Prime and a wave of last-minute shopping. Sales in home essentials stood out among purchases, he added.
“We will continue to be careful in what we invest in,” Olsavsky said in assessing the company’s cost-savings plans.
Advertising services revenue increased 27% to $14.7 billion and came in ahead of the FactSet consensus, which was for $14.2 billion.
Amazon’s net income rose to $10.6 billion, or $1.00 a share, from about $300 million, or 3 cents a share, a year before. The FactSet consensus was for 80 cents in earnings per share.
For the first quarter, Amazon expects $138 billion to $143.5 billion in sales, while analysts were modeling $142.0 billion.
Evercore ISI analyst Mark Mahaney deemed the performance a “beat-and-constructive-bracket quarter,” highlighting total revenue that came in at 2% above the Street’s expectations.
“This not only reflects the strength of the domestic consumer market but also Amazon’s leading position in the domestic e-commerce sector,” Global X ETFs research analyst Mayuranki De said in an email message.
This story originally appeared on Marketwatch
