Thu. Feb 29th, 2024

Amazon.com Inc.’s stock ended Thursday’s choppy after-hours trading about 5% higher as the technology’s profit progress appeared to overshadow a slight miss on quarterly cloud sales and a soft fourth-quarter outlook.

The seesawing stock movement initially started after Amazon 
AMZN
released results showing that third-quarter revenue swelled 13% to $143.1 billion from $127.1 billion in the same quarter last year. That exceeded the FactSet consensus of $141.5 billion.

The company saw an even bigger beat on the bottom line, as it delivered a profit of $9.9 billion, or 94 cents a share, improving from $2.9 billion, or 28 cents a share, a year ago. Analysts on average expected Amazon to report earnings of 59 cents a share. Net income included a pretax valuation gain of $1.2 billion from the company’s investment in electric car company Rivian Automotive Inc.
RIVN.

Equally important, operating income increased to $11.2 billion in the third quarter, compared with $2.5 billion in the same quarter last year and well above the company’s forecast range of $5.5 billion to $8.5 billion.

Though AWS sales improved 12% to $23.1 billion, they fell a bit short of the $23.2 billion expected from analysts polled by FactSet. Earlier this week, Alphabet Inc.’s
GOOGL

GOOG
Google reported cloud sales that disappointed investors.

The company also offered soft fourth-quarter revenue guidance of between $160 billion and $167 billion, while FactSet analysts were projecting $167.1 billion.

“We had a strong third quarter as our cost to serve and speed of delivery in our stores business took another step forward, our AWS growth continued to stabilize, our advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” Amazon Chief Executive Andy Jassy said in a statement announcing the results.

During a conference call with analysts after market close Thursday, Jassy said some deals signed in September didn’t start until October, and won’t be reflected in revenue until the fourth quarter.

In the days leading up to the quarterly earnings report, analysts were keenly focused on the performance of Amazon’s online-shopping business and whether Amazon Web Services’ growth reignited as the market leader.

In Thursday’s earnings report, Amazon reported sales in North America of $87.9 billion, while analysts on average were expecting $86.1 billion.

Online store sales were $57.3 billion, up 7% year-over-year.

Amazon’s advertising business surged 26%, to $12.1 billion from $9.6 billion a year ago. Analysts had predicted $11.6 billion. The performance paralleled a bounce back in digital advertising for Alphabet, Facebook parent Meta Platforms Inc.
META
and Snap Inc.
SNAP.

Amazon reported amid a backdrop of concerns over its cloud and artificial-intelligence businesses, as well as an antitrust lawsuit from the Federal Trade Commission.

Amazon, which has trailed Microsoft and Google in the race to develop and deploy AI, last month said it would invest up to $4 billion in AI startup Anthropic to turbocharge its efforts in the cloud and e-commerce.

“We’re very early in generative AI,” Jassy told analysts on the conference call. “Companies are still sorting out for themselves” large-scale use of AI.

Investors were also intrigued by Amazon’s response to the FTC’s action last month accusing the company of operating a monopoly that squeezes smaller competitors.

Amazon General Counsel David Zapolsky claimed the suit would lead to “higher prices and slower deliveries for consumers — and hurt businesses.”

Shares of Amazon have advanced 42% so far this year, while the S&P 500

is up 8%.

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