With Amazon.com’s shares having fallen to their lowest levels since the summer of 2020, the bar appears to be set pretty low ahead of the e-commerce and cloud giant’s latest earnings report.
Currently, the consensus among analysts polled by FactSet is for Amazon to report revenue of $137.68 billion (up 10% annually) and GAAP EPS of $3.61 for its seasonally big fourth quarter.
Amazon typically provides quarterly revenue and operating income guidance in its report. The company’s first-quarter revenue consensus stands at $120.94 billion (up 11% annually), and its GAAP operating income consensus stands at $6.4 billion.
Eric Jhonsa, Real Money’s tech columnist, will be live-blogging Amazon’s earnings report, which is due after Thursday’s close, along with an earnings call scheduled for 5:30 P.M. Eastern Time. Please refresh your browser for updates.
6:22 PM ET: Amazon's call has ended. After dropping 7.8% in regular trading ahead of its report, Amazon's stock is up 14.4% after-hours to $3,176 after the company shared better-than-feared Q4 results and Q1 guidance.
Q4 revenue was slightly below consensus, while EPS strongly beat estimates with the help of an $11.8B gain related to Amazon's investment in Rivian (however, EPS would've still beat excluding the gain). Q1 sales and operating income guidance were both below consensus, but pre-earnings expectations were low due to recent earnings reports and industry data.
Amazon also disclosed its hiking Prime's annual fee by $20 to $139, and its monthly fee by $2 to $14.99, in the U.S.. And on its call, the company forecast that its fulfillment capex (up massively in 2021) would moderate in 2022, and that AWS capex (down in 2021) would grow.
Thanks for joining us.
6:14 PM ET: A question about ad sales details. And one about live sports.
Olsavsky: We've been working on getting sports properties that'll be beneficial to Prime. We've struck deals for soccer and tennis content overseas, in addition to our U.S. deal for Thursday Night Football.
Fildes: Sponsored Product and Sponsored Brand ads account for most of our ad sales right now. We haven't shared a regional breakdown for ad sales, but we're investing in making ad products launched in the U.S. available elsewhere.
6:10 PM ET: A question about Q4 supply chain impacts. And one about whether Amazon will hike Prime prices outside of the U.S..
Olsavsky: We evaluate each company differently for Prime pricing. We have nothing else to announce right now. For supply chain impacts, there are some products we're waiting on, but we did a lot in Q4 to address supply chain challenges. We worked with suppliers and also invested in increasing port capacity. Challenges remain, but we don't expect it to be a big issue in Q1.
6:08 PM ET: A question about Amazon's decision to break out ad sales. And one about how much the timing of Prime Day (took place in Q4 in 2020, but not in 2021) weighed on ad growth.
Olsavsky: We got to a point where most of "Other" revenue was advertising. That motivated us to break it out. Prime Day's timing impacted Q4's ad growth relative to the year-ago period. But the ad business continues to do well.
Fildes: We think there are great feedback loops with customers for the ad business that help make ads more relevant over time. We also have new ad opportunities related to things like Twitch and Thursday Night Football. Longer-term, there are also opportunities with our demand-side ad platform.
6:04 PM ET: A question about slowing seller services growth. And one about whether there are any bottlenecks for AWS growth.
Olsavsky: We don't see any capacity bottlenecks for AWS. The main limiter is our ability to work with customers to accelerate their timelines. We're investing in that. Seller services' growth decline fits with that of the rest of the business. But it still saw a 31% 2-year CAGR. And sellers are also big consumers of advertising.
6:02 PM ET: A question about AWS' recent growth acceleration. And one about international AWS growth.
Olsavsky: We're seeing AWS sales and marketing investments pay off. A lot of companies made cloud commitments and are accelerating their cloud transitions. We're also pleased with AWS' improved operating efficiencies.
Fildes: We're seeing considerable AWS momentum around the world. We're investing in expanding our global AWS data center footprint. AWS now has 84 availability zones in 26 regions around the world. And we're looking to add 24 more zones and 8 more regions in the next couple of years.
5:58 PM ET: A question about whether there were any surprises cost-wise in Q4. And one about whether Amazon will see meaningful op. margin improvement over the course of this year.
Olsavsky: We do see things improving. Hiring was strong in Q4, but we could've done better. That led to some greater costs related to things like overtime and transportation. As we go into 2022, we feel better about labor, but Omicron has kicked up, which creates labor shortages related to people testing positive. There's cost pressure into Q1, but the labor challenge won't be as great as in Q3 and Q4. We'll put a lot of effort into increasing transportation speeds.
5:54 PM ET: A question about whether Amazon's investment pace could slow this year.
Olsavsky: If you look at how capex has grown over the last few years, just under 40% is going into infrastructure, just under 30% is related to warehouses, and just under 25% is related to transportation. The remainder is related to things like offices. We see infrastructure capex going up this year as we support AWS. We see fulfillment capex moderating, it'll match the growth of our underlying businesses going forward. For transportation, we still see additional levels of investment.
5:51 PM ET: A question about the long-term profitability of Amazon's retail ops. Has it fallen following the pandemic? Also a question about Amazon's investments in early-stage projects.
Olsavsky: We have a history of making long-term bets on customers. We're encouraged by a lot of things that we've seen over the last two years, such as online grocery growth and greater cloud adoption. Our logistics investments set us up well for the future. But we've also been dealing with a lot of disruptions. Labor availability has been an issue lately. We feel good about the basic contributors to profitability. We do see things getting better over the coming quarters.
5:47 PM ET: First question is about Amazon's same-day delivery efforts.
Olsavsky: We feel good about where we are. We're working to both bring 1-day delivery back to pre-pandemic levels and increase same-day deliveries. We want to do this in a way that we can make money, and our cost structure helps us with that. We've doubled our network capacity over the last 2 years. We know there's work to do to improve our customer service, but we think the future is bright.
5:44 PM ET: The Q&A session is starting.
5:42 PM ET: Olsavsky notes Amazon is increasing its estimated useful life for servers from 4 years to 5 years, and for networking equipment from 5 years to 6 years. This lowers depreciation expenses in the short-term, and is expected to have a $1B Q1 impact.
5:39 PM ET: Olsavsky: For Q4, Amazon had a 2-year compounded annual growth rate of 25%. Employees have doubled over the last two years.
Regarding inflation, he says wages and logistics costs are both issues. He notes these issues are expected to continue in Q1, though their dollar impact will be lower due to seasonally lower volumes.
Olsavsky also notes the massive increase seen in Amazon's fulfillment network footprint will weigh on operating profits in the short-term.
5:36 PM ET: Olsavsky: We continue seeing consistently high Prime member renewal rates. AWS added more revenue Y/Y than in any quarter in its history.
5:34 PM ET: Brian Olsavsky is talking.
5:33 PM ET: IR chief Dave Fildes is going over Amazon's safe-harbor statement. In recent quarters, Amazon's call has featured prepared remarks from CFO Brian Olsavsky, after which Olsavsky and Fildes take questions from analysts.
5:31 PM ET: The call is starting.
5:27 PM ET: The call should start in a few minutes. Here's the webcast link, for those looking to tune in.
5:22 PM ET: Thanks to its aggressive spending, Amazon's free cash flow (after adjusting for lease activity and financing obligations) was negative $14.3B in 2021, after being positive to the tune of $21.4B in 2020. Significant FCF improvement is expected in 2022.
5:19 PM ET: Among the things to look out for on Amazon's call: Any commentary about supply chain/inflation pressures and about their 2022 spending plans. The company is expected to keep spending aggressively this year, but with growth rates cooling meaningfully relative to 2021 levels.
5:12 PM ET: Amazon is holding onto most of its big AH gains: Shares are currently up 15.7% thanks to better-than-feared results and guidance plus news of a Prime price hike. As a reminder, the earnings call starts at 5:30 ET (I'll be here to cover).
5:11 PM ET: Amazon ended 2021 with $96B in cash and marketable securities, and $48.7B in debt.
The unearned revenue balance, which covers revenue that's been received but not yet recognized on the income statement, was up 22% Y/Y to $11.83B. Annual Prime membership payments likely account for much of that total.
5:06 PM ET: On the flip side, purchases of property and equipment via finance leases, which is heavily tied to AWS capex, fell 40% Y/Y in Q4 to $1.61B and was down 39% in 2021 to $7.06B. It wouldn't be surprising to see AWS capex pick up again in 2022.
5:04 PM ET: Amazon's direct purchases of property and equipment, which are heavily tied to its fulfillment/logistics investments, totaled $18.94B in Q4 (+28% Y/Y) and a whopping $61.05B for the whole of 2021 (+52%). Needless to say, quarterly EPS would be higher right now if not for such massive investments.
4:59 PM ET: Amazon ended 2021 with 1,608,000 full-time and part-time employees. That's up 140K Q/Q and 310K Y/Y.
4:56 PM ET: A bunch of e-commerce and payments-related stocks are up strongly following Amazon's report. Shopify is up 10% AH, Affirm is up 11%, Etsy is up 10%, Marqeta is up 7%, Block is up 5% and eBay is up 3%.
PayPal, which had a disappointing earnings report two days ago, is up a relatively modest 1.5%.
4:53 PM ET: Fulfillment spend growth slowed a little from Q3's 26% in spite inflationary pressures and a giant warehouse-building spree. Both the fulfillment and shipping expense figures arguably highlight the cost advantages Amazon obtains from its massive warehouse and logistics infrastructure.
4:49 PM ET: Amazon's Q4 operating expenses:
Fulfillment +21% Y/Y to $22.45B
Technology & Content +27% to $15.31B
Marketing +46% to $10.81B
G&A +28% to $2.53B
4:46 PM ET: In addition to topping revenue estimates, AWS posted GAAP op. income of $5.29B, up 49% Y/Y and above a $4.84B consensus. That figure spells a Q4 op. margin of 30% for the public cloud giant.
4:42 PM ET: Amazon's report (together with Snap and Pinterest's) is providing cheer to the tech sector following a very rough day. The Invesco QQQ Trust is up 2% after-hours.
4:38 PM ET: Amazon's GAAP gross margin was 39.7%, up from the year-ago period's 36.9% and above a 38.3% consensus. Lower shipping expense growth helped, as did Amazon's ongoing mix shift towards services revenue streams (AWS, seller services, subscriptions, ads).
4:34 PM ET: Giving EPS a boost: Amazon's global shipping costs rose just 10% Y/Y to $23.65B. That's slower than Q3's 20% growth and better than feared given recent inflationary pressures.
4:32 PM ET: Amazon's Q4 sales by revenue stream:
Online Stores (direct e-commerce) - $66.08B (-1% Y/Y and below a $68.59B consensus)
Third-Party Seller Services - $30.32B (+11% and below a $31.05B consensus)
Subscription Services - $8.12B (+15% and below an $8.4B consensus)
Physical Stores - $4.69B (+17% Y/Y and above a $4.39B consensus)
AWS - $17.78B (+40% and above a $17.38B consensus)
Notably, Amazon is now breaking out its ad revenue from the rest of its "Other" revenue, which includes things like its branded credit card. Ad revenue rose 32% to $9.72B, while the rest of the "Other" revenue rose 18% to $710M. Combined sales topped a $10.33B consensus for "Other" revenue.
4:24 PM ET: Here's the earnings release.
4:22 PM ET: Amazon is now up 16.7% after-hours to $3,240. Snap and Pinterest are also up big post-earnings.
4:21 PM ET: Regarding EPS, while it would've been much lower without the Rivian gain, it's worth noting Q4 GAAP op. income was $3.46B -- above guidance of flat to $3B and also above a $2.29B consensus.
Thus EPS would've beaten consensus without the Rivian gain, just by a smaller amount.
4:16 PM ET: Notably, International, which saw a 4-point headwind to growth from currency swings, was the only segment to miss its sales consensus in Q4. North America and AWS both beat.
4:14 PM ET: Q4 sales by reporting segment:
North America - $82.36B (+9% Y/Y and above an $80.4B consensus)
International - $37.27B (-1% and below a $39.75B consensus)
AWS - $17.78B (+40% and above a $17.38B consensus)
4:10 PM ET: Q4 revenue rose 9% Y/Y, while Q1 sales guidance implies 3%-8% Y/Y growth.
Q1 operating income guidance is at $3B-$6B, which compares with year-ago op. income of $8.9B.
4:07 PM ET: Shares are now up 13.1% AH. As mentioned previously, pre-earnings expectations were pretty low. Also, the Prime price hike is likely going over well with investors.
4:06 PM ET: Also disclosed: Amazon is hiking U.S. Prime fees. The annual membership fee is rising by $20 to $139, and the monthly fee is rising by $2 to $14.99. The changes go into effect on 2/18 for new members and after 3/25 for current members.
4:04 PM ET: Shares are up 15.2% after-hours.
4:03 PM ET: Amazon is guiding for Q1 revenue of $112B-$117B, below a $120.94B consensus.
4:02 PM ET: Results are out. Q4 revenue of $137.4B slightly misses a $137.68B consensus. GAAP EPS is at $27.75, far above a $3.61 consensus with the help of an $11.8B gain related to Amazon's investment in Rivian.
4:00 PM ET: Amazon closed down 7.8%. The Q4 report should be out any minute.
3:57 PM ET: Some things to keep an eye out for in Amazon's report: AWS sales (expected to be solid), shipping and fulfillment expenses (rising rapidly lately), and "Other" revenue (dominated by ad sales, which have continued seeing strong growth).
3:53 PM ET: Amid a 3.7% drop for the Nasdaq that's followed Meta's Q4 report, Amazon is down 7.7% and not far from its 52-week low. It's safe to say that a low bar is being set for Q4 results/Q1 guidance.
3:49 PM ET: Amazon's Q4 FactSet revenue consensus stands at $137.68B, while its GAAP EPS consensus stands at $3.61.
The Q1 revenue consensus (Amazon provides sales guidance in its reports) is at $120.94B, though informal expectations might be lower given recent earnings reports and e-commerce data.
3:46 PM ET: Hi, this is Eric Jhonsa. I'll be live-blogging Amazon's Q4 report and call.
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