Financial Performance

Amazon Posts Record Earnings But Stock Falls

“The question for investors now is if Amazon can grow profits fast enough to make up for slowing revenue growth."
Matthew HellerFebruary 1, 2019
Amazon Posts Record Earnings But Stock Falls

Amazon posted record quarterly earnings and revenue on Thursday but its shares dropped in extended trading amid downbeat guidance that reflected its decelerating sales growth.

The e-commerce giant said revenue rose 20% to $72.4 billion in the fourth quarter, powered in part by a 45% gain in Amazon Web Services sales and a 95% jump in “other revenue,” which consists mostly of advertising. Net income increased 61% to $3 billion, or $6.04 per share.

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Analysts were expected earnings of $5.67 per share on revenue of $71.87 billion. But its shares fell 4.9% to $1,635 in the after-hours session.

“For most companies, 20% revenue growth would be worth celebrating, but for Amazon that pace marked its slowest top-line growth in more than three years,” The Motley Fool said. “It’s been more than a year since the Whole Foods acquisition, Prime membership is approaching a saturation point and the company is facing the law of large numbers.”

“The question for investors now is if Amazon can grow profits fast enough to make up for slowing revenue growth as the company forecast a sales increase of just 10%-18% in the current quarter,” the publication added.

Amazon is now expecting first-quarter revenue of $56 billion to $60 billion, below analysts’ expectations of $60.83 billion. The company also indicated on Thursday that it will likely increase spending faster in 2019 than it did in 2018, when it reported annual net income of more than $10 billion in 2018, up from $3 billion in 2017.

“In a lot of ways, 2018 was about banking the efficiencies of investments in people, warehouses, infrastructure, that we had put in place in 2016 and 2017,” CFO Brian Olsavsky said in an earnings call. “So while … we certainly do take costs seriously and we will continue to work on operational efficiencies, I would expect investments to increase relative to 2018.”

Amazon also faces the challenge of reviving growth at Whole Foods, which it has now owned for a full year. In the fourth quarter, revenue from its physical stores, which include Whole Foods, fell 3% to $4.4 billion.