On Thursday Eastern Time, Amazon released its Q4 2023 financial report. In the previous quarter, Amazon gave investors almost everything they wanted: strong sales and profit growth, as well as an increasingly stable cloud computing business.
In return, the e-commerce king received a 7% increase in post market stock prices. As of the close of Thursday Eastern Time, the company's stock price has nearly doubled from its historical low at the beginning of last year.
In the three months ending December 31, 2023, Amazon's net profit surged from $278 million in the same period last year to $10.6 billion, the highest level in two years; The overall operating revenue increased by 14% to reach 170 billion US dollars, an increase of about twice the expenditure; Earnings per share jumped from $0.03 in the same period last year to $1, and these core performance indicators exceeded Wall Street analysts' expectations.
The fourth quarter of 2023 is the holiday shopping season in North America, interspersed with Black Friday in November. The large discounts offered by North American retailers have greatly stimulated consumption. According to Adobe Analytics data, American consumers spent a record $222.1 billion online during the traditional golden shopping period from November 1 to December 31, 2023, setting an e-commerce record.
Amazon has become the biggest beneficiary among them. This online retail giant achieved a 9% year-on-year growth in online revenue in the fourth quarter, reaching $70.5 billion, exceeding analyst expectations. Previously, the sluggish online performance was the main reason for Amazon's downturn after the pandemic. Apart from AWS cloud services, Amazon's six main sources of revenue were all related to online business.
In terms of performance guidance that the market is highly concerned about, Amazon expects its operating profit to reach $8 billion to $12 billion in the new fiscal quarter ending in March, and total revenue to reach $143.5 billion, showing a revenue growth rate of 8% -13%, which is more optimistic than the market's higher expected level.
Amazon's network services cloud computing division AWS is another market focus, as its profits are usually higher than the combined profits of other departments of the company. Financial report data shows that AWS Cloud Services achieved sales of $24.2 billion, a year-on-year increase of 13%, in line with analyst expectations. Its operating profit reached $7.167 billion, with a year-on-year growth rate of 38%.
Moving forward one quarter, AWS achieved sales of $23.1 billion in the third quarter of 2023, a year-on-year increase of 12%. This quarter was the first consecutive quarterly growth in AWS revenue in nearly two years, when a Jeffrey analyst explained to clients that this growth rate was "enough to keep fairies away.".
At present, this strong situation has continued. Nowadays, AWS has achieved month on month growth for three consecutive quarters, and this growth rate has exceeded the revenue growth of AWS in previous quarters.
Amazon has stated that it can maintain strong momentum this quarter, partly due to market interest in artificial intelligence. Amazon claims that artificial intelligence has driven healthy sales in its cloud computing division.
During a conference call with analysts, Amazon CEO Andy Jesse stated that Amazon's artificial intelligence revenue is "still relatively small, much smaller than future revenue, and we truly believe it can drive billions of dollars in revenue in the coming years.".
However, similar to Microsoft and Google, Amazon's CFO Olsavski refused to disclose the proportion of artificial intelligence services in AWS sales on Thursday, "it's still too early," he said.
Similar to several financial report meetings last year, Jiaxi spent a lot of time discussing generative artificial intelligence, but he first talked about Amazon's logistics reform before AI.
Since May last year, Amazon has launched a comprehensive reform of its vast logistics network, aiming to shorten the transportation distance of packages in the United States. Afterwards, Amazon gradually completed the transformation from a national distribution network to a regional model to reduce costs and improve delivery speed. By the end of last year, Amazon had completely restructured its logistics business and successfully shifted its focus to innovation in the field of artificial intelligence.
The logistics business restructuring has brought about an increase in delivery speed, further driving more purchasing behavior on Amazon's website, while also leveraging advertising business. In the fourth quarter, Amazon achieved a 27% growth in advertising revenue, and in recent years, advertising has become an important part of Amazon's financial narrative, attracting the attention of many analysts.
Famous technology blogger Ben Thompson believes that Amazon has a very healthy advertising profit margin, and the advertising business does not exist in isolation. It is related to logistics rectification and has more long-term growth potential than pure retail business.
Some highlight businesses have emerged with the rise of advertising. Recently, Amazon launched an advertising service on its streaming platform Prime Video, which is seen as a disruptive exploration by Amazon to expand its weak streaming influence. Benefiting from the large scale of Amazon Prime membership, Prime Video subscriptions, which serve as Prime membership benefits, have a monthly active user base of 115 million in the United States alone.
Moffett Nathanson analyst Michael Morton wrote in a report to clients, "Amazon's Prime Video monetization strategy is another data point in a recent series of corporate decisions, which has enhanced our confidence in Amazon's business's increasing profitability in 2024."
According to Wall Street analysts compiled by Zhitong Finance, they generally believe that Amazon's stock price is expected to return to a strong upward trend after a difficult start in 2024, and may gradually enter a good period, returning to the historical highest stock price record set more than two years ago.
It should be because Amazon has seen the results of cost reduction and efficiency improvement, and its "company slimming" plan since early 2023 is still ongoing. At the beginning of this year, Amazon launched a series of "sporadic" layoffs in multiple departments such as entertainment, hardware, and gaming, with an unknown total number and speculations suggesting it could reach a thousand people.