Amazon Stock (NASDAQ:AMZN)
Amazon.com (NASDAQ:AMZN) reported fourth-quarter 2022 earnings of 0.03 cents per share, a 97.8% year-over-year decrease.
Amazon’s net income of $0.3 billion includes a $2.3 billion pre-tax valuation loss in non-operating income related to its investment in Rivian Automotive.
The adjusted bottom line result is 21 cents per share, which is 40% more than the Consensus Estimate.
Net sales of $149.2 billion increased by 9% year on year. The amount surpassed management’s forecast of $140-$148 billion. Furthermore, the figure exceeded the Consensus Estimate of $145.4 billion.
Unfavorable changes in foreign exchange rates cost Amazon $5 billion, reducing year-over-year net sales growth to 12%.
Nonetheless, Amazon’s strong performance throughout the holiday season spurred top-line growth. Notably, it saw record-breaking sales from Thanksgiving through Cyber Monday, when small businesses in the United States made more than $1 billion in sales.
In the reported fourth-quarter scenario, Amazon had a 6% year-over-year increase in physical store sales, which stood at $4.96 billion.
Prime’s strength was a plus. Amazon’s subscription services sales increased by 13% to $9.2 billion in the reporting quarter.
Relationship building with third-party merchants remained a benefit. Third-party seller services sales increased 20% year on year to $36.34 billion in the reported quarter.
Strong advertising service sales climbed 19% to $11.56 billion.
However, the corporation saw sluggishness throughout its online outlets, which produced $64.53 billion in sales, a 2% decrease year over year.
Also troubling was AWS’s slowing growth.
In terms of segmentation, North America revenues (63% of total sales) increased 13% year on year to $93.4 billion. International sales (23% of total sales) fell 8% year on year to $34.5 billion. AWS revenues (14% of total sales) increased 20% year on year to $21.4 billion.
Inflationary pressures, global supply-chain bottlenecks, geopolitical tensions, negative foreign-currency swings, labor-market uncertainty, and recessionary fears will continue to worry Amazon in the coming months.
Amazon stock slumped 4% in pre-market trading due to disappointing sales guidance for the first quarter of 2023 and slower AWS growth.
Nonetheless, Amazon’s strong global presence, growing Prime momentum, strengthening AWS portfolio, improving Alexa skills, expanding smart devices portfolio, and increasing efforts to establish significant traction among small and medium companies are likely to fuel its near-term financial performance.
Efforts in Prime and Retail
Amazon has continued to make significant efforts to strengthen its Prime programme and retail operations.
The increasing popularity of Amazon’s Same-Day Delivery service across the United States remained a significant positive. During the reporting quarter, the company increased its speed of delivery in key metropolitan regions such as Los Angeles, San Francisco, Phoenix, Sacramento, and Portland.
With its increased emphasis on technological improvement, the company’s fulfillment strength has continued to contribute successfully. In the fourth quarter, it debuted Sparrow, a robotic system, at its first fulfillment center.
Another highlight was Amazon’s increased use of Rivian electric delivery cars for deliveries.
Prime Video’s increased original content and overall content offering accelerated Prime engagement. Another significant advantage was the growing number of local originals around the world.
Following the success of The Lord of the Rings: The Rings of Power, Prime Video drew over 100 million viewers worldwide, making it the most-watched Amazon Original series in every area. The series was watched for more than 24 billion minutes.
It aired a number of original series and films, including The English, Dr. Seuss Baking Challenge, My Policeman, and Good Night Oppy.
The third season of Tom Clancy’s Jack Ryan was streamed. Prime Video had a successful Thursday Night Football season, with high viewership.
In the current quarter, the business restored HBO to Prime Video Channels, which is a plus.
AWS Expansion
AWS gained client momentum in the fourth quarter, owing to its highly stable service offering and a growing number of data centers, availability zones, and regions.
Amazon released AWS Clean Rooms, AWS Supply Chain, AWS SimSpace Weaver, Amazon Security Lake, and Amazon DataZone in the third quarter.
During the quarter under review, the business introduced AWS Europe, an infrastructure area in Switzerland (Zurich). It also opened an infrastructure area in Spain, AWS Europe (Spain), making it AWS’s eighth region in Europe. The business has opened its second AWS area in India, in Hyderabad.
Notably, AWS was chosen as the primary cloud provider for Brookfield Asset Management, American Family Insurance, and Stability AI. AWS was chosen as Yahoo’s preferred public cloud provider and Atos’ preferred enterprise cloud supplier, respectively.
In the fourth quarter, Descartes Labs and Wallbox went all-in on AWS. Slalom and AWS have renewed their global Strategic Collaboration Agreement. In addition, Duke Energy has entered into a multi-year strategic partnership with AWS to develop new smart grid software and services.
Product sales (47.3% of total sales) fell 1.2% year on year to $70.5 billion. Service sales (52.7% of total sales) increased 19.2% year on year to $78.7 billion.
Operating expenses were $146.5 billion, a 9.3% increase over the previous quarter. The figure as a proportion of revenues increased by 70 basis points (bps) year on year to 98.2%.
On a year-over-year basis, the costs of sales, fulfillment, technology and content, marketing, and general and administrative expenses climbed by 3.4%, 2.9%, 35.9%, 18.6%, and 32% to $85.6 billion, $23.1 billion, $20.8 billion, $12.8 billion, and $3.3 billion, respectively.
Other operating expenses were $759 million in the reporting quarter, up from $24 million the previous year.
Overall operating income fell 20.9% from the previous quarter to $2.74 billion. The operating margin shrank by 70 basis points from the previous quarter to 1.8%.
AWS’s operating income was $5.2 billion, a 1.7% decrease year on year.
The North America segment recorded an operating loss of $240 million, which was higher than the prior-year quarter’s loss of $206 million. In addition, the International sector posted an operating loss of $2.23 billion, up from $1.63 billion in the previous quarter.
The Balance Sheet and Cash Flow
Cash and cash equivalents totaled $53.9 billion as of December 31, 2022, up from $34.9 billion as of September 30, 2022. At the conclusion of the fourth quarter, marketable securities reached $16.1 billion, down from $23.7 billion at the end of the third quarter.
Long-term debt increased to $67.1 billion in the reported quarter from $58.9 billion in the previous quarter.
Amazon generated $29.2 billion in cash from operations in the fourth quarter, up from $11.4 billion in the previous quarter.
On a trailing 12-month basis, free cash flow was an $11.6 billion outflow, compared to $19.7 billion in the previous quarter.
Guidance
Amazon anticipates net sales of between $121 billion and $126 billion in the first quarter of 2023. Net sales are predicted to increase 4-8% above the previous quarter’s reported amount. Net sales are expected to be $124.46 billion, according to the Consensus Estimate.
Management anticipates a 210-bps negative foreign exchange impact.
Operating income is expected to range between $0 and $4 billion.
Amazon stock has lost 18.7% in the last year, while the industry has lost 18.1%.
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