Despite beating earnings expectations for Q4, Amazon’s stock experienced significant volatility in after-hours trading following their latest financial results announcement. The e-commerce giant reported earnings per share of $1.86, surpassing the estimated $1.50, while delivering net sales of $187.79 billion, representing a 10% year-over-year increase and slightly exceeding analyst predictions of $187.32 billion.
The company’s core online retail business showed strength, with online stores net sales reaching $75.56 billion, up 7.1% from the previous year. Physical store performance also impressed, with sales of $5.58 billion marking an 8.3% increase. However, subscription services fell short of expectations, generating $11.51 billion in revenue against projected figures of $11.58 billion.
A key focus for investors was Amazon Web Services (AWS), which posted sales of $28.79 billion, reflecting a 19% year-over-year growth but narrowly missing analyst estimates of $28.82 billion. While the cloud division’s revenue growth may have disappointed some observers, its operating margin of 36.9% outperformed expectations of 34.7%, though showing a decline from the previous quarter’s 38.1%.
The company’s overall operating performance demonstrated considerable strength, with total operating income reaching $21.20 billion, a 61% increase year-over-year. The operating margin expanded to 11.3%, up from 7.8% in the previous year and exceeding the anticipated 10.1%. North American operations were particularly robust, achieving an 8% operating margin compared to 6.1% the previous year.
In terms of operational metrics, fulfillment expenses came in at $27.96 billion, slightly below estimates, while the seller unit mix increased to 62% from 61% year-over-year. The North American segment’s profit margin reached its highest level since at least 2015, though questions remain about the sustainability of further margin expansion.
However, the market’s initial negative reaction stemmed primarily from Amazon’s forward guidance. The company projected first-quarter revenue between $151.0 billion and $155.5 billion, falling short of Wall Street’s expected $158.64 billion. Operating income guidance of $14.0 billion to $18.0 billion also came in below the consensus estimate of $18.24 billion. If realized, this guidance suggests the company’s slowest revenue growth rate since the 2008 financial crisis.
The market’s response to these mixed results was notably volatile. Initially, Amazon’s stock dropped approximately 7% in after-hours trading, primarily due to the cloud revenue miss and disappointing guidance. However, in a remarkable turn of events, strong buying pressure emerged, eventually erasing these losses and bringing the stock back to roughly flat levels in after-hours trading.
These results and subsequent market reaction reflect the complex dynamics facing Amazon as it navigates multiple business segments with varying growth rates and profit margins. While the core retail business and operating efficiencies showed improvement, concerns about cloud growth and future revenue expansion continue to influence investor sentiment. The company’s ability to maintain its market leadership while managing growth expectations across its diverse business portfolio remains a key focus for investors and analysts alike.