Amazon sales, profit top estimates as retail, advertising soar

Amazon's Day 1 headquarters building in Seattle                  James Martin  CNET

Amazon's Day 1 headquarters building in Seattle James Martin CNET

In the three months to the end of the year, which included the crucial Christmas period, profit rose 63% to $3bn (£2.2bn) while revenue was up 20% to $72.4bn.

Amazon (AMZN) reported strong fourth-quarter results, with earnings smashing expectations and revenue also stronger than expected.

Despite the overall strong year and ability to convert customer spending into profit, investment analysts were disappointed with the tech titan's estimated $56-60bn Q1 2019 revenue outlook (they hoped for $61bn).

Stock. Jumped 3% in after-hours trading on the earnings report. For the full fiscal year 2018, Amazon Web Services grew at a robust 47 percent and accounted for the bulk of the company's profit.

In an attempt to partially offset these rising costs, Amazon bumped up the cost of a Prime membership previous year for the first time since 2014. More than 100 million Prime members worldwide pay monthly or yearly fees in exchange for shipping discounts and music and video streaming. The stock closed Thursday at $1,718.73, up 2.8 percent.

Net income increased to $3.0 billion, or $6.04 per diluted share, compared with net income of $1.9 billion, or $3.75 per diluted share, a year ago and easily topping Street estimates of $5.65 a share.

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Amazon is pleased with the Q4 margins of 29.3 percent, he said, and the cloud division's net earnings will always be affected by a combination of price decreases, geographic expansion, added headcount, "and staying very relevant in our customers' minds". Further down the income statement, operating income surged year over year from $2.1 billion to $3.8 billion, surpassing the company's guidance.

Amazon is expected to roll out the attribution tool more widely this year, and advertisers say the early results were already promising, showing that Amazon ads are driving sales. Amazon has been expanding grocery delivery from Whole Foods stores, and the service is now active in more than 60 USA cities.

They still have some breathing room, however, as Facebook this week reported more than $16 billion in ad sales in just the fourth-quarter of past year, while Google is expected to top $135 billion in ad revenue in 2018 when it reports next week.

Market capitalization. Grew to $840 billion Thursday afternoon, more than Microsoft, Apple, or any other publicly traded company.

"Amazon will now need to work doubly hard to achieve any future sales gains".

Bezos pointed to the Amazon-branded Echo speakers that are at the heart of the new strategy. Building warehouses and data centers around the world, inventing new devices and automating tasks usually done by humans are just some of the places Amazon spends its money.

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