Amazon closed 2018 with a record $3 billion in profit in the fourth quarter, running off the fuel of the holiday season to beat Wall Street expectations. But its guidance for the start of 2019 fell short.
On Thursday, the retail giant announced its sales were up 20 percent in the last quarter to $72.4 billion. Amazon Web Services, the company’s cloud computing division, reported a 45 percent jump in the fourth quarter to hit $7.43 billion in sales. AWS revenue alone made up 10 percent of Amazon’s total quarterly sales — reinforcing just how dominant cloud computing has become for a company broadly thought of as an online retailer.
The results also offered a full look at Amazon’s performance in 2018. For the year, net sales were up 31 percent to $232.9 billion, compared to $177.9 billion in 2017.
The company said that for the first quarter of 2019, net sales are expected to fall between $56 billion and $60 billion — though some analysts had set their sights on nearly $61 billion. Amazon projected first-quarter growth to hit between 10 and 18 percent compared to the same period last year.
Amazon stock was up nearly 3 percent Thursday evening and closed for the day at $1,718.73 per share.
Amazon founder and chief executive Jeff Bezos pointed to sales of Echo Dot devices in 2018 and said “Alexa was very busy during her holiday season.” He said that the number of research scientists working on Alexa has more than doubled in the past year.
“In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20 percent through advances in machine learning,” Bezos said in a statement. “We added billions of facts making Alexa more knowledgeable than ever. Developers doubled the number of Alexa skills to over 80,000. And customers spoke to Alexa tens of billions more times in 2018 compared to 2017.”
(Bezos also owns The Washington Post.)
Last month, Amazon celebrated “record breaking” holiday sales, with particularly strong sales on millions of Amazon devices. In the United States, the company shipped more than 1 billion items for free over the holidays with Prime. The retail giant also reported that more than 50 percent of items sold online over the holidays came from small- and medium-size businesses.
In the third quarter, Amazon pulled in $2.9 billion in quarterly profit, with sales that climbed nearly 30 percent to $56.6 billion. But those results still fell short of Wall Street’s expectations, even despite the broadly-popular discount event, Prime Day.
Bob Phibbs, CEO of New York-based consultancy the Retail Doctor, said Amazon’s earnings clearly showed rapid growth. But Phibbs said that much of that growth is sustained by AWS and the company’s advertising business, especially since physical store sales – made up mostly by Whole Foods – were down 3 percent.
“While the retail sector ended the year on a high note, Amazon’s brick-and-mortar ventures are falling behind the pack,” Phibbs said. “Amazon may have changed the way we shop online, but it certainly isn’t able to translate that into the real world.”
On an earnings call Thursday evening, analysts raised questions over Amazon’s international growth, particularly in India. Last month, the Indian government tightened its e-commerce laws for companies like Amazon and Walmart. Indian retailers and traders had raised concerns that the e-commerce giants were creating unfair marketplaces by offering exclusive sales deals that made it easy to sell items for cheap. Amazon executives on Thursday said they were still “evaluating” India’s new law.
Charlie O’Shea, lead analyst for Amazon at Moody’s, said that it’s too soon to tell whether the law will have measurable financial impact, and that Amazon and Walmart are drilling down to figure out how to navigate the law. But he said the regulation is just one example the risks of expanding into foreign markets.
“Any time a company expands internationally, you have to look at the entire picture, and the political environment is obviously very important,” O’Shea said. “We’re seeing now what can happen.”
(c) 2019, The Washington Post · Rachel Siegel