Amazon has most profitable quarter ever over holidays
Analysts gush over ‘hottest company in world right now.’
Amazon.com Chief Executive Officer Jeff Bezos can take a victory lap.
Years of investments in warehouses and robots and data centers and gadgets, which often tested investor patience, paid off big for Amazon over the holidays. Shoppers threw their money at the e-commerce giant, giving the company its strongest fourth-quarter sales growth in eight years and its most-profitable quarter ever.
The shares rose early Friday, bucking much of the rest of the tech sector and the broader markets.
The results announced late Thursday reassured investors that Amazon can spend money in areas such as advertising, entertainment and groceries while maintaining its dominance in online shopping and cloud computing. Revenue growth is accelerating even as the company is expected to cross $200 billion in sales this year and make more money from its original U.S. online retail business.
“They are on fire,” Forrester Research analyst Sucharita Kodali said. “It’s the hottest company in the world right now, hands down, and they seem pretty unstoppable.”
Chief Financial Officer Brian Olsavsky said Amazon Web Services, the company’s profitable cloud-computing unit, and its emerging advertising business were strong contributors to sales growth and earnings. Revenue from AWS increased 45 percent to $5.1 billion, the Seattle-based company said in a statement. Increasing efficiency in its U.S. warehouses — where products are stowed, packed and shipped to customers — also helped, Olsavsky said.
Revenue gained 38 percent to $60.5 billion in the fourth quarter, the biggest increase in a holiday period since a 42 percent jump in 2009. Net income was $1.9 billion — a record for the company — or $3.75 a share. Analysts projected earnings of $1.83 per share on sales of $59.8 billion.
Amazon said its profit included a $789 million benefit as a result of the new U.S. tax law.
“They’re topping expectations in terms of driving new demand to the platform and becoming more profitable,” said James Cakmak, an analyst at Monness Crespi Hardt & Co.
Amazon is the e-commerce leader in the U.S. with its $99-a-year Prime subscription, which includes delivery discounts, music and video streaming. The program is intended to keep shoppers engaged with the website. The company said it will continue the global expansion of the Amazon Fresh grocery delivery service and Prime Now, a one-hour delivery service, to strengthen Prime membership overseas.
Prime also helps Amazon sell services to independent merchants who want access to the website’s most loyal and biggest-spending customers. More than half of the units sold on the company’s website come from these merchants.
Revenue from warehousing, packaging and other logistics services for these thirdparty businesses increased 41 percent to $10.5 billion in the holiday quarter. It has grown into a profitable business because Amazon doesn’t take on the risks associated with owning inventory, said Tom Forte, an analyst at DA Davidson & Co.
“Amazon is the pipe and they’re collecting commissions on all that volume,” he said. “That’s their second-most profitable business behind AWS.”
Often the question for investors is how quickly Bezos will spend his company’s money. Operating expenses in the quarter gained 37 percent to $58.3 billion — about the same pace as revenue growth. His latest target is tackling rising health care costs, which he intends to do in partnership with Berkshire Hathaway and JPMorgan Chase.
Amazon’s voice-activated Alexa platform also will get more funding.
Exxon spent $13 billion on dividends and buying back its own stock in 2017. Jeff Woodbury, vice president of investor relations, said buybacks would be limited in the first quarter of 2018.
Chevron Corp. earned $3.11 billion, two-thirds of it from the tax law. Excluding that services enabling domain owners to keep their information secret. Joe Rotunda, director of enforcement for the securities board, said “there are other ways we’re going to get (the order) to them” as well.
Rotunda said it appears DavorCoin began marketing itself in Texas to fill the gap left by BitConnect, which ended up closing its cryptocurrency lending program and its cryptocurrency exchange program after the gain, Chevron earned 73 cents per share, but FactSet said analysts expected adjusted earnings of $1.23 per share.
Chevron’s oil and gas production rose 5 percent, helping push revenue up by 19 percent to $37.62 billion, slightly higher than analysts expected.
Both companies are counting on higher production from U.S. shale formations to boost production and profits. state agency issued a ceaseand-desist order against it early last month.
The agency says investments in BitConnect’s cryptocurrency lending program actually were securities and therefore subject to regulation.
The investment being offered by DavorCoin are “very, very similar to BitConnect,” Rotunda said.
According to the securities board, DavorCoin announced after BitConnect closed its operations that DavorCoin is “now the new standard” and “many people are going to join us,
“They’re both targeting doubling their shale production over the next three or so years,” Youngberg said. “The expectations are that the return for every dollar they invest will be stronger there than elsewhere.”
More drilling in the U.S. shale fields also will give their portfolios a better balance of big, risky long-term projects — often overseas — and ones with a quicker payoff. the price will increase and all of you already in the game with us will benefit” from it.
Rotunda said his agency’s goal in issuing the cease-anddesist order “is to stop the fraudulent sale of this program in Texas.”
In addition to its action against BitConnect and DavorCoin, the Texas State Securities Board has issued similar cease-and-desist orders since late December against cryptocurrency-related companies USITech and R2B Coin.