Amazon Posts Upbeat Q4 Results, Shares Drop On Investment Boost

Amazon (AMZN), the world’s largest e-commerce marketplace and cloud computing platform, beat earnings and revenues estimates for the fourth quarter of 2018.

Its Q4 net income came in at $3 billion ($6.04 per diluted share) compared to a net income of $1.9 billion ($3.75 per diluted share) quarter-on-quarter. Revenue for Q4 jumped 20 percent to $72.4 billion against the $71.9 billion estimated by financial markets firm, Refinitiv.

Earnings per share stood at $6.04 compared to the $5.68 estimated by Refinitiv. In contrast, Wall Street estimated Amazon earnings of $5.67 per share on revenues of $71.87 billion.

Amazon said its net sales increased 20% to $72.4 billion in Q4 compared to $60.5 billion in Q4 2017. Operating income rose 80% to $3.8 billion in the fourth quarter as against $2.1 billion in Q4 2017.

Despite the upbeat figures, Amazon’s stock fell more than 5 percent in afterhours trading on Wednesday after the company revealed plans for increased spending this year. Adding to the gloom in the Q1 2019 picture is an Amazon statement saying it expects revenue to range from $56 billion and $60 billion, which is below the $60.8 billion consensus estimate by some analysts.

Amazon CFO Brian Olsavsky admitted the company did significantly reduce investments in 2018, during a conference call with analysts. He said the investment slowdown last year included both hiring and capital expenditures. On the upside, Olsavsky revealed that spending will likely pick up this year.

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

Analysts said Amazon’s strong fourth-quarter results (due largely to strong holiday sales) follow two straight quarters of disappointing revenue.

Full year 2018 results for Amazon were equally positive. Amazon ended 2018 with $232.9 billion in revenue, the first time the company exceeded the $200 billion milestone. It posted $3 billion in net income, up 66 percent from 2017.

But it was the sterling growth of Amazon Web Services (AWS) that helped Amazon hit record profits for the third straight quarter. AWS maintained its 45 percent growth rate from 2017. It booked operating income of $7.3 billion from sales of $25.65 billion in 2018.

CEO Jeff Bezos pointed to the role of the Alexa voice-assistant in the company’s full-year results.

“Alexa was very busy during her holiday season,” said Bezos. “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.”

Amazon’s market capitalization of more than $840 billion as of Jan. 31 is the largest of any publicly traded company in the world.