Amazon’s stock surges following better-than-expected earnings results

Amazon (AMZN) revealed Q4 earnings that exceeded analysts’ projections on Thursday and provided an upbeat outlook for the coming months.

In after-hours trading, the stock increased by 7%.

Net sales totaled nearly $170 billion, compared to expectations of $166.2 billion, representing a 14% increase over the prior year’s almost $150 billion. The company also surpassed forecasts for the current quarter, with an upper range estimate of $143.5 billion.

“This Q4 was a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon,” CEO Andy Jassy stated in the earnings release.

Amazon’s strong earnings report and subsequent investor reaction came after several more skeptical responses to similar strong performances from some of its Big Tech peers.

These were some of Amazon’s key metrics in comparison to the Wall Street estimates for the company’s fiscal fourth quarter, based on Bloomberg data:

  • Revenue: $169.9 billion vs. expected $166.2 billion ($149.2 billion in Q4 2022)

  • Adjusted earnings per share: $1.00 vs $0.78 expected ($0.03 in Q4 2022)

  • Amazon Web Services: $24.20 billion vs $24.22 billion expected ($21.4 billion in Q4 2022)

  • Advertising: $14.7 billion vs. $14.2 billion expected ($11.6 billion in Q4 2022)

The company also introduced a new shopping helper named Rufus, trained on Amazon’s product catalog and broader web data. This AI-powered chatbot can answer customer questions and recommend products on the Amazon mobile app. Initially, a limited number of customers will have access to the chatbot, with broader availability in the US to come later.

Amazon’s results follow the recent news of laying off several hundred roles across Prime Video and MGM Studios, as well as a significant staff reduction at Twitch, laying off more than 500 people. The tech sector continues to face challenges, with companies still adjusting and retracting from ambitious investments made during the pandemic.

During the earnings call, executives stated that AI product deployment is still in its early stages, but revenues are “growing rapidly” as demand for AI tools develops.

Amazon CEO Andy Jassy mentioned that every consumer business at Amazon is developing multiple AI applications driven by generative AI.

The company sees the potential for AI development to generate billions of dollars for its cloud business. AI tools rely on cloud providers for essential infrastructure and demand vast amounts of data and processing power to train and run advanced language models and applications.

Amazon stated that 2024 will see an increase in capital expenditures due to the expansion of its AI operations. Earlier this week, cloud rivals Microsoft (MSFT) and Alphabet (GOOG, GOOGL) reported double-digit capex increases.

Amazon introduced ads on Prime Video recently. Executives did not provide estimates but noted that expanding advertising on its streaming properties is a crucial part of its business model to continue investing in content. They anticipate a lighter ad load for Prime Video audiences compared to network TV and other services.

Prime Video rolled out ads alongside movies and shows as the default option for users, who have the option to pay more for an ad-free version. Analysts have noted significant potential for ad growth due to Amazon’s large built-in audience.

FILE - The price of Amazon stock is shown on a screen at the Nasdaq MarketSite, Wednesday, Dec. 20, 2017, in New York. Amazon reports their earnings on Thursday, Feb. 1, 2024. (AP Photo/Mark Lennihan, File)FILE - The price of Amazon stock is shown on a screen at the Nasdaq MarketSite, Wednesday, Dec. 20, 2017, in New York. Amazon reports their earnings on Thursday, Feb. 1, 2024. (AP Photo/Mark Lennihan, File)

FILE – The price of Amazon stock is shown on a screen at the Nasdaq MarketSite, Wednesday, Dec. 20, 2017, in New York. (Mark Lennihan/AP Photo, File) (ASSOCIATED PRESS)

In September, Amazon introduced its AI service, Amazon Bedrock, enabling customers to develop generative AI applications using existing models from Anthropic, Stability AI, and Amazon.

The same month, Amazon announced an investment of up to $4 billion in the AI startup Anthropic, as tech giants compete for positioning in the future of AI.

Amazon Web Services, the leading player in cloud computing, commands about 30% market share, followed by Microsoft Azure and Google Cloud, with the three collectively accounting for roughly two-thirds of the market.

Hamza Shaban is a Yahoo Finance reporter covering markets and the economy. Follow Hamza on Twitter @hshaban.

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