Amazon (AMZN) on Thursday reported fourth-quarter earnings that beat analysts' expectations and offered an optimistic outlook for the coming months.
Shares rose about 7% in premarket trading Friday.
Net sales came in at nearly $170 billion, compared to expectations of $166.2 billion. That's 14% higher than the roughly $150 billion the company generated in the same period last year. The outlook for the current quarter also exceeded expectations, with the company pegging the top end at $143.5 billion.
“This fourth quarter was a record holiday shopping season, capping off a strong 2023 for Amazon,” CEO Andy Jassy said in an earnings call.
Amazon's strong earnings report and subsequent investor reaction followed more critical reviews of some big tech companies, which also came in well above expectations.
Here are some of Amazon's most important metrics compared to what Wall Street expected for the company's fiscal fourth quarter, according to Bloomberg data.
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Revenue: $169.9 billion vs. $166.2 billion expected ($149.2 billion in Q4 2022)
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Adjusted earnings per share: $1.00 vs. $0.78 expected ($0.03 in Q4 2022)
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Amazon Web Services: $24.2 billion vs. $24.22 billion expected ($21.4 billion in Q4 2022)
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Advertisement: $14.7 billion vs. $14.2 billion expected ($11.6 billion in Q4 2022)
The company also announced Thursday a new shopping assistant called Rufus, trained on Amazon's product catalog and extensive information from the web. AI-powered generation tools can answer customer questions and recommend products in the Amazon mobile app. Amazon said the chatbot will initially be available to a limited number of customers, and then expand its release to more users in the United States.
Amazon's financial results come just weeks after the company announced the elimination of hundreds of roles across Prime Video and MGM Studios and more than 500 layoffs at video game live streaming platform Twitch. It was done. Layoffs across the technology industry underscore the industry's painful downturn from an era of rapid expansion, as companies continue to scale back and retreat from ambitious investments made in the early stages of the pandemic.
Executives said on an earnings call that while AI product adoption is still in its early stages, revenue is “rapidly accelerating” as customers express interest in developing AI tools.
CEO Andy Jassy said all of Amazon's consumer businesses are developing multiple generative AI applications.
The company sees AI development as having the potential to generate tens of billions of dollars for its cloud business. AI tools require large amounts of data and processing power to train and run large language models and their applications, and rely on cloud providers to provide critical infrastructure.
Amazon said its capital spending will increase in 2024, primarily due to expansion of its AI business. Cloud rivals Microsoft (MSFT) and Alphabet (GOOG, GOOGL) both reported double-digit capital spending increases earlier this week.
Amazon recently started showing ads on its streaming service Prime Video. Executives did not provide estimates for the size of the new advertising business, but noted that increasing advertising on its streaming properties is a key part of its business model as it continues to invest in content. They don't expect Prime Video to impose a heavy ad load on viewers compared to network TV and other services.
Earlier this week, Amazon's streaming service Prime Video started playing ads alongside movies and shows as a default option for users, who can pay extra for an ad-free version. Analysts note the huge potential for advertising growth given the huge size of Amazon's built-in audience.
In September, the company launched an AI service called Amazon Bedrock. This will allow customers to build generative AI applications through existing models provided by his Anthropic, Stability AI, and Amazon itself.
That same month, Amazon also announced it would invest up to $4 billion in AI startup Anthropic as the tech industry's biggest names vie for position in the coming technology era.
Amazon Web Services, the largest player in the cloud industry, accounts for about 30% of the market share, followed by Microsoft Azure and Google Cloud. Together, these three companies account for approximately two-thirds of the market.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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