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Amazon.com, Inc.

Amazon stock falls during 4Q earnings call after warning of increased investments

Eugene Kim
CNBC

Amazon’s fourth-quarter report was a beat across the board, but weak guidance and general concerns about slowing growth and heavier investments dragged the stock down in after hours trading.

Here are the most important numbers:

• EPS: $6.04 vs. $5.68 estimated, according to Refinitiv

• Revenue: $72.4 billion vs. $71.9 billion estimated, according to Refinitiv

• AWS: $7.43 billion vs. $7.3 billion estimated, according to Refinitiv

Amazon shares dropped more than 5 percent in extended trading after the company warned of increased spending in 2019, following a relatively slow investment period last year. Amazon CFO Brian Olsavsky noted during the call with analysts that the company had significantly scaled back investments last year, across hiring and capital expenditures — and that it could get back to spending mode this year.

“I would expect investments to increase relative to 2018,” Olsavsky said.

The better-than-expected revenue, backed by strong holiday sales, comes amid concerns of slowing growth at Amazon, as the company failed to beat revenue expectations in the past two quarters. The fourth-quarter saw a 19.7 percent jump in revenue, which was faster than the 18.8 percent expected, but still the slowest since the first quarter of 2015.

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This was the first time to get a fully comparable year-over-year number on Whole Foods, a slower-growing business. That likely contributed to the slowing North American sales, which saw its growth rate drop to 18 percent from the year-ago period’s 42 percent. International sales also slowed down to 15 percent compared to the previous year’s 29 percent growth rate.

AWS, however, continued to see strong results, maintaining its 45 percent growth rate from last year. Its “Other” segment, mostly comprised of its advertising business, jumped 95 percent to $3.4 billion in revenue.

First-quarter revenue guidance fell short of expectations, coming in between $56 billion and $60 billion, slightly below the $60.8 billion consensus estimated by FactSet. The disappointing guidance could partly be related to changes in e-commerce regulations in India which is expected to force Amazon to change the way its marketplace is run in the country.

Meanwhile, the company continued to set record profits for the third consecutive quarter, with $3 billion in net income, up 66 percent from last year. Amazon has seen a huge boost in profitability in recent years, after seeing growth in businesses like cloud, advertising and the third-party marketplace, where margins are bigger but sales are smaller. Amazon is historically known for running on thin margins because it reinvests most of its profits back into the company.

Amazon finished the year with $232.9 billion in annual revenue, passing the $200 billion milestone for the first time. Cash and equivalents jumped 51 percent to $21 billion.

Amazon CEO Jeff Bezos highlighted the success of the Alexa voice-assistant in the earnings release.

“Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year,” Bezos said in a statement.

Amazon stock is up 18 percent over the past year. Its market cap, more than $840 billion as of Thursday afternoon, is the largest of any publicly traded company in the world.

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