Amazon Inc. reported a robust performance in its fourth quarter, with earnings per share (EPS) of $1.86, surpassing consensus estimates by an impressive 38 cents. The company's operating income for Q4 soared by 60% year-over-year (YoY), reaching $14.3 billion compared to $8.9 billion in the same quarter of 2023. The Amazon Web Services (AWS) segment emerged as a significant contributor, accounting for about half of the operating income and witnessing a 19% YoY increase in sales, totaling $28.8 billion. Despite these strong results, the company issued a cautious outlook for the first quarter, citing potential headwinds from fluctuating exchange rates.
Looking ahead to Q1, Amazon's management anticipates net sales to range between $151.5 billion and $155 billion. This projection falls short of analysts' expectations of $158 billion, reflecting concerns over an anticipated "unusually large" currency exchange charge of $2.1 billion. The company provided a broad operating income forecast ranging from $14 billion to $18 billion for the quarter, indicating uncertainties in the operating environment.
Amazon's Q4 revenue reached $187.8 billion, marking an 11% increase YoY and surpassing the average forecast by $560 million. However, the company's free cash flow rose only 4% YoY and showed a significant decline from the second and third quarters of the previous year, indicating potential challenges ahead.
The broader economic landscape also presented mixed signals. The unemployment rate decreased to 4.0% in January from 4.1%, accompanied by an unexpected rise in average wage data by 0.5% for the month, against market expectations of a decline to 3.8%. This development could impact consumer spending and inflationary pressures, complicating Amazon's strategic planning.
Additionally, the January payrolls number was weaker than anticipated at 143,000, compared to the expected reading of 175,000. This weaker-than-expected job growth may have implications for economic recovery and consumer demand, further influencing Amazon's cautious outlook.
Despite these challenges, Amazon's AWS segment remains a pillar of strength with its significant contribution to the company's operating income. The segment continues to demonstrate robust growth and underscores Amazon's strategic focus on cloud services as a key driver of future profitability.
Moreover, analysts have noted that if Amazon's stock price experiences a correction, it may drift down to the 200-day simple moving average (SMA) near $196. This potential correction reflects market sentiment and investor reactions to Amazon's cautious guidance amidst broader economic uncertainties.