Amazon (NASDAQ:AMZN) turned in another strong quarter to close out 2018, riding a robust holiday season and cloud computing growth, as the e-commerce giant topped its own guidance and beat analyst estimates. But Amazon's revenue guidance for the current quarter fell short of expectations.
Revenue jumped 20% to $72.4 billion for the fourth quarter, coming in at the high end of its guidance range of $66.5 billion to $72.5 billion, and beating analyst expectations for $71.9 billion. Diluted earnings per share came in at $6.04, topping estimates of $5.65. Further down the income statement, operating income surged year over year from $2.1 billion to $3.8 billion, surpassing the company's guidance. This is a sign of strength, as Amazon shifts toward more profitable business segments such as advertising, its cloud computing division Amazon Web Services, and its third-party marketplace and fulfillment services.
CEO Jeff Bezos shined a light on Alexa, the company's voice-activated technology, stating that the Echo Dot was the best-selling item on Amazon in the quarter. "In 2018, we improved Alexa's ability to understand requests and answer questions by more than 20% through advances in machine learning," Bezos said in the earnings release.
In addition, the company said more customers signed up for its Prime membership program in 2018 than ever before, with tens of millions signed up for free Prime trials or beginning to pay for the service during the holiday season. Amazon Web Services (AWS) marked another round of strong growth, recording revenue up 45% to $7.4 billion, and $2.2 billion in operating income. International e-commerce continued to operate at a loss, with a $657 million shortfall.
Looking ahead to the first quarter of its 2019 fiscal year, Amazon projected revenue of $56 billion to $60 billion, for growth of 10% to 18%, which includes 210 basis points in foreign currency headwinds; it anticipates operating income of $2.3 billion to $3.3 billion, up from $1.9 billion in the previous year. Analysts had expected 19.4% revenue growth and EPS rising from $3.27 to $4.44.
Shares were down slightly in after-hours trading.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.