E-commerce giant Amazon.com Inc. (AMZN, Financial) reported strong fourth-quarter and full-year 2017 earnings after the closing bell on Thursday, driven by holiday sales and growth in its cloud business.
The Seattle-based company posted earnings per share of $3.75, which were boosted by a one-time benefit of $789 million related to the Tax Cuts and Jobs Act. As a result, they cannot be compared to analyst estimates, which were $1.85 according to Thomas Reuters.
Quarterly revenue of $60.5 billion beat expectations of $59.83 billion and increased 38% from the prior-year quarter.
For the year, the company posted earnings of $6.15 per share on $177.9 billion in revenue.
The company’s shares, which closed at $1,390 on Thursday, jumped more than 6% in after-hours trading following the announcement.
Other results
Amazon’s sales in North America grew 42% to $37 billion, while international sales swelled 29% to $18 billion.
On a call with analysts, Chief Financial Officer Brian Olsavsky attributed the company’s performance to record order volume and improved warehouse efficiency during the holiday season. In addition, he highlighted the growth of its cloud business.
The company’s cloud business, known as Amazon Web Services, recorded $5.11 billion in revenue, beating expectations of $4.97 billion. According to CNBC, it continues to be the company’s fastest-growing and most profitable business.
The popularity of Amazon’s voice-controlled technology, Alexa, has also gained traction. In a statement, CEO Jeff Bezos lauded its success and hinted the company would be investing more in the technology.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down,” he said. “We’ve reached an important point where other companies and developers are accelerating adoption of Alexa.”
Guidance
For the first quarter of 2018, Amazon expects revenue between $47.75 billion and $50.75 billion, which is above consensus estimates of $48.6 billion. Operating income guidance of $300 million to $1 billion, however, is below the consensus expectations of $1.5 billion. This indicates the company is likely to be making more investments going forward.
In addition to investing in its key businesses, which include Prime, AWS, Alexa and the recently acquired Whole Foods, Amazon is also currently evaluating proposed locations for its second North American headquarters, which it plans to invest at least $5 billion in, and recently entered a partnership with Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) and JPMorgan Chase (JPM, Financial) to address health care.
While these investments may have a negative impact on Amazon’s margins in the future, Daniel Ives, head of technology research at New York-based GBH Insights, said in a research note he views this as a “near term pain for long-term gain” as the company “has a unique window of opportunity to double down on its consumer and enterprise initiatives.”
Stock price
The stock’s rally carried over into Friday morning, when shares were up 5.8% at $1,470.60.
GuruFocus estimates Amazon gained nearly 60% in 2017. Year to date, the stock is up approximately 23%.
Disclosure: I do not own any stocks mentioned.
