E-commerce and cloud-computing giant Amazon.com (AMZN -1.14%) published an earnings report after the closing bell on Thursday, covering the fourth quarter and full fiscal year of 2018. Here's what you need to know right away about this important holiday-quarter report.

Amazon's fourth quarter by the numbers


Q4 2018

Q4 2017

Year-Over-Year Change

Net sales

$72.4 billion

$60.5 billion


Operating income

$3.79 billion

$2.13 billion


Net income

$3.35 billion

$1.87 billion


GAAP earnings per share (diluted)




Data source: Amazon.com.

Amazon's free cash flows rose 43% year over year to $13.4 billion. Trailing cash flows for the full fiscal year landed at $19.4 billion, 134% above the result seen in 2017. This was the result of 67% higher operating cash flows and a restrained investment policy where capital expenses grew by 13%.

Amazon's stated long-term goal is to optimize its free cash flows. Since management places a lot of weight on this metric, analysts and investors are also paying extra-close attention to it.

An Amazon logo, complete with the yellow smiley arrow, on a plank wall at Amazon's Seattle headquarters.

Image source: Amazon.com.


Amazon's fourth-quarter guidance called for roughly 15% revenue growth with top-line sales in the neighborhood of $69.5 billion. Operating income was aimed at roughly $2.7 billion. The company beat both of these targets with room to spare.

  • North American retail sales rose 18% year over year to $44.1 billion. Operating profits from Amazon's largest division stopped at $2.25 billion, 33% above the year-ago period's.
  • International e-commerce sales increased by 15% to $20.9 billion. The growth rate expands to 19% if you prefer to adjust the numbers for currency exchange effects. This segment showed an operating loss of $642 million, 30% below the year-ago period's $919 million.
  • The cloud-computing service known as Amazon Web Services, or AWS, accounted for 10.3% of Amazon's total sales at $7.43 billion. That's a 45% year-over-year increase. Operating profits in this bucket rose 61% to $2.18 billion.
  • The company did not provide any new details on the Amazon Prime program's subscriber counts or revenue contributions, other than pointing out that "more customers signed up for Prime worldwide in 2018 than ever before." The same record-breaking trend held true for the fourth quarter as well. Since the revenue from Prime subscriptions is split between the company's product and service segments in unknowable proportions, it's hard to reach any firm conclusions about this streaming video and free shipping program.
  • CEO Jeff Bezos aimed his entire collection of prepared remarks at extolling the virtues of the Amazon Alexa digital assistant tool and its associated hardware devices. The Alexa-powered Echo Dot gadget was the best-selling product on Amazon's global e-commerce platforms in 2018.
  • Amazon's commitment to a minimum wage of $15 per hour kicked in on Nov. 1 and was in effect for two-thirds of the fourth-quarter reporting period. The wage increase did not result in out-of-control operating expenses, and nearly every reportable portion of those costs showed a slower increase in the fourth quarter than in the year as a whole. That's actually a break from last year when Amazon's operating costs rose faster in the year-ending period than in the full-year view.

Looking ahead

In the first quarter of 2019, Amazon's management expects to show roughly $58 billion in top-line revenue. That would be something like 14% above the same period of 2018, and the guidance includes an expected currency exchange headwind of approximately 2.1%. Operating income should rise by roughly 47%, landing near $2.8 billion.

On the earnings call, CFO Brian Olsavsky explained that 2018's low capital expenses represented Amazon "banking the efficiencies of investments in people, warehouses, infrastructure that we had put in place in 2016 and 2017." In 2019 and beyond, Amazon is switching back to a heavier capital investment mode, which means larger capital expenses and, thus, perhaps slimmer free cash flows over the next couple of years.

Again, everyone from Amazon's upper management to ordinary investors keeps a close eye on the company's cash flow trends. This directional statement looks like a useful signpost along Amazon's road to long-term growth.

Check out the latest Amazon earnings call transcript.