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Investors are looking for evidence that Amazon.com has made progress in its push to rein in costs.
David Ryder/Bloomberg
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com shares fell in late trading Thursday after the company posted mixed fourth-quarter results, with better-than-expected sales growth, but weaker-than-expected profit, largely due to the loss of a stake in electric-truck maker Rivian Automotive.
Revenue at the company’s closely watched Amazon Web Services unit was slightly below expectations. The company’s revenue outlook for the first quarter was well shy of consensus estimates.
The stock was off 3.4% after the earnings report.
This is breaking news. Read a preview of Amazon’s earnings below and check back soon for more analysis.
Amazon’s fourth-quarter financial results, after trading closes Thursday, are likely to show the impact of weak conditions in three of its key markets—online shopping, cloud computing and digital advertising.
The question investors face is how much of that has been discounted in the stock’s price, which has lost nearly half of its value in the past year.
For the quarter, Wall Street consensus estimates for Amazon (ticker: AMZN ), as measured by FactSet, projected revenue of $145.9 billion, up 6%. Company’s own forecast calls for revenue between $140 billion and $148 billion.
Consensus estimates called for fourth-quarter earnings of 17 cents a share, but the number would be muted by mark-to-market accounting for the company’s stake in Rivian Automotive ( RIVN ). The truck maker’s stock fell 44% in the fourth quarter, resulting in a paper loss of about $2.3 billion for Amazon.
Amazon sees operating income between zero and $4 billion for the period; The Street consensus is $2.7 billion.
Meanwhile, Amazon will face scrutiny over the performance of three key divisions.
Street estimates project online store sales of $65.2 billion, down 1% from a year ago. That forecast reflects both a tough comparison to 2021 and a softening of consumer spending during the recent holiday shopping period. The market will be looking for signs of resilience—and evidence that the company has made progress in its push to rein in costs.
Analysts are upset about the outlook for the company’s cloud computing arm, Amazon Web Services Softer-than-expected guidance last week from rivals
Microsoft
(MSFT) Azure. In its December quarter results report, Microsoft said Azure grew 38% on a currency-adjusted basis in the December quarter, which was actually about a percentage point ahead of Street expectations. But Microsoft also said that business slowed throughout the quarter and that it expects Azure’s growth to decline further in the March quarter.
Street estimates called for AWS to report revenue of $21.8 billion for the December quarter, up 23% from a year ago, moderate from a 27% increase in the September quarter. Some cloud vendors Worked with customers On optimizing their costs, some cases shift from pay-as-you-go consumption models to contract-based models to make costs more predictable. Current Street estimates call for further declines from here—the consensus is for AWS revenue of $22.3 billion in the March quarter, up 21% from a year earlier.
Meanwhile, analysts’ models called for $11.4 billion in advertising revenue in the quarter, which would be up 17% from a year earlier. But there are also signs of weakness in the advertising market. Microsoft said ad revenue from both LinkedIn and Bing fell short of expectations in the December quarter, and Snap ( SNAP ) posted disappointing results and guidance this week.
In early January, Amazon has announced plans Just over 18,000 jobs to be cut, as it pushes to cut costs in a weak macroeconomic environment.
“These changes will help us pursue our long-term opportunities with a stronger cost structure; However, I’m also optimistic that we’ll be innovative, resourceful and dirty during this time when we’re not hiring broadly and eliminating some roles,” CEO Andy Jassy said last month when announcing Amazon’s job cuts.
Investors are looking for evidence that cost cutting is impacting profitability and free cash flow – the company has posted negative free cash flow growth in four of the past five quarters.
For the March quarter, the Street is projecting revenue of $139.2 billion, up just 4% from a year ago, operating income of $4.2 billion, and a gain of 28 cents a share.
Write to Eric J. Savitz eric.savitz@barrons.com
