Amazon beats revenue estimates, provides weak outlook

US retail giant Amazon reported its fourth-quarter sales on Thursday beating analysts’ estimates. The company recorded net sales of $149.20 billion in Q4 that was above analyst firm Refinitiv’s expectations of $145.8 billion. Despite beating estimates, the company provides weak outlook for the coming quarters. 

The e-retailer said that it expects to post first-quarter revenue of between $121 billion and $126 billion, representing year-over-year growth of 4% to 8%. Refinitiv was expecting sales to come in at $125.1 billion.  

Amazon’s cloud business, Amazon Web Services' (AWS) unit net sales came in at $21.38 billion, a growth of nearly 20% compared to the same period in 2022, but down from 27.5% in the third quarter.   

The company's chief financial officer Brian Olsavsky said that sales growth in its cloud business will slow for the next few quarters .

Further, Chief Executive Andy Jassy, on the quarterly call said that "virtually every enterprise" was treading carefully on cloud and other costs in light of economic uncertainty. 

The company's rival Microsoft has also said that economic uncertainty has prompted enterprises to rethink how much they're willing to spend on cloud, according to a report by Reuters published on Thursday.

Amazon's operating income was at $2.74 billion, beating analyst expectations of $2.51 billion. Advertising revenue jumped 19% from a year earlier, which outpaced online ad companies like Google, Facebook and Snap. 

For the fourth quarter that ended December 31, 2022, Amazon closed out its “slowest year of growth in its quarter century as a public company,” the company said, with revenue for the year increasing 9% as inflationary pressures and rising rates put a damper on consumer spending.

The fourth-quarter figure includes about $2.7 billion of charges, of which $640 million came from severance costs related to the layoffs, the company said.  

Last month, the online retailer said that more than 18,000 employees particularly in its commerce and human resources divisions would lose their jobs.  

Further, Amazon has scaled back certain services like its virtual primary care offering for employers. It took another $720 million charge from closing or impairing assets of some grocery stores, among other items.  

Amazon’s report, along with earnings from Apple and Alphabet, presents a mixed earnings season for big tech companies. Apple reported its first revenue decline since 2016 on Thursday, and Alphabet missed on earnings and revenue. 

Alphabet reported fourth quarter sales of $63.1 billion versus analyst expectations of $63.2 billion. Advertising revenue fell by 4% while YouTube revenue dropped 8%, reflecting a challenging ad environment amid a slowing economy.  

Meanwhile, Apple posted its quarterly revenue of $117.15 billion, a decline by 5% year-over-year, missing analyst expectations of $121.14. iPhone sales dropped 8% year-over-year to $65.8 billion, missing estimates of $68.3 billion. Its production and shipments were impacted last year amid Covid-19 lockdowns in China, it said.