Shares of Amazon (AMZN 3.43%) jumped 7.1% in Thursday's after-hours trading session, following the e-commerce and cloud computing leader's release of its fourth-quarter 2023 report.
The gain is attributable to the quarter's revenue and earnings easily exceeding Wall Street's estimates. Investors seemed to shrug off that revenue guidance for the first quarter of 2024 came in a little lighter than analysts had been expecting.
Below is an overview of Amazon's Q4 2023 results and its guidance, centered around five key metrics.
Image source: Amazon.
1. Revenue grew 14%
Amazon's net quarterly sales grew 14% year over year to $170 billion, surpassing the $166.2 billion Wall Street had projected. That result also topped the company's guidance range of $160 billion to $167 billion. Excluding the negative effect from foreign-currency exchange, revenue increased 13% from the year-ago period.
For context, in the prior quarter (Q3 2023), revenue grew by 13% as reported, and by 11% on a constant-currency basis.
| Amazon Segment | Q4 2023 Revenue | Change (YOY) |
|---|---|---|
| North America | $105.5 billion | 13% |
| International | $40.2 billion | 17% (and 13% in constant currency) |
| Amazon Web Services (AWS) | $24.2 billion | 13% |
| Total | $170.0 billion | 14% (and 11% in constant currency) |
Data source: Amazon. YOY = year over year.
This quarter marked an end to AWS' year-over-year revenue growth slowdown (or standstill, as in the case of the prior quarter) on a sequential-quarter basis. In the prior four quarters, the cloud computing unit's year-over-year revenue grew 12% (Q3 2023), 12% (Q2 2023), 16% (Q1 2023), and 20% (Q4 2022). This slowdown has been industrywide, not just specific to AWS. Many businesses have been cautious with their spending due to the mixed macro environment, which includes high interest rates.
North America and international performed very well during the big holiday quarter. Indeed, "This Q4 was a record-breaking holiday shopping season and closed out a robust 2023," the e-commerce behemoth's CEO Andy Jassy said in the earnings release.
2. Operating income soared 389%
The quarter's operating income increased nearly fivefold year over year to $13.2 billion. This result sped by Amazon's guidance range for this metric of between $7 billion and $11 billion.
| Amazon Segment | Q4 2023 Operating Income | Change (YOY) |
|---|---|---|
| North America | $6.5 billion | Up from a loss of $0.2 billion in the year-ago period. |
| International | ($0.4 billion) | Up from a loss of $2.2 billion in the year-ago period. |
| Amazon Web Services | $7.2 billion | 38% |
| Total | $13.2 billion | 389% |
Data source: Amazon.
AWS' operating income growth was robust, with its percentage growth considerably higher than its revenue percentage growth. Moreover, year-over-year quarterly operating income growth accelerated from 30% in the prior quarter.
3. Earnings per share rocketed 3,233%
In Q4, net income was $10.6 billion, or $1 per share, up from $0.03 per share in the year-ago quarter. This result raced by the earnings per share (EPS) of $0.80 that Wall Street had expected.
The quarter's net income includes a pre-tax valuation loss of $0.1 billion in nonoperating expense from Amazon's common stock investment in electric vehicle maker Rivian Automotive, which went public in November 2021.
In the year-ago quarter, Amazon recorded a pre-tax valuation loss of $2.3 billion from the Rivian investment. So, the just-reported quarter's EPS percentage gain got a notable boost from the Rivian pre-tax valuation loss being lower than in Q4 2022. This is one reason why it's best for investors to use operating income percentage changes to gauge the company's profitability performance.
4. Operating cash flow surged 82% for the trailing year
Operating cash flow surged 82% to $84.9 billion in 2023. Free cash flow (FCF) was $36.8 billion for this period, compared with negative $11.6 billion in 2022.
The company ended the quarter (and year) with cash and cash equivalents of $73.9 billion, and long-term debt of $58.3 billion.
5. Revenue is expected to grow 8% to 13% in Q1 2024
For the first quarter of 2024, management guided for net sales in the range of $138 billion to $143.5 billion, which would amount to growth of 8% to 13% year over year.
Going into the Q4 2023 report, Wall Street had been modeling for Q1 2024 revenue of $142.1 billion. So, Amazon's top-line guidance at the midpoint (which is $140.8 billion) was a bit lighter than what analysts had been expecting.
Amazon, which doesn't provide earnings guidance, also said that it expects Q1 operating income will be between $8 billion and $12 billion, compared with $4.8 billion in the prior-year period.
In short, Amazon turned in a robust quarter, which was particularly impressive given the somewhat challenging macro environment.
