Amazon stock jumped Friday after the tech behemoth reported quarterly results ahead of expectations for both earnings and revenue.
In results published late Thursday, Amazon.com said it earned $1 per share on sales of $170 billion for the December-ended quarter. Analysts projected the company would post earnings per share of 80 cents on $165.9 billion in sales for the December quarter, according to FactSet.
Sales for the quarter increased 14% year over year, while earnings surged from 3 cents a share in the year-ago quarter.
Meanwhile, sales for Amazon Web Services increased 13% year over year to $24.2 billion, in line with expectations for the closely watched cloud business.
For the current quarter, Amazon projected sales of $138 billion to $143.5 billion. Analysts were looking for $142 billion in Amazon sales for the March quarter heading into the report, according to FactSet.
On the stock market today, Amazon rallied 7.9% to close at 171.81.
Amazon Stock: Retail Margins, AWS In Focus
Coming into the report, analysts were focused on Amazon's cloud-computing business and the margins for its North America retail segment.
"This is a decidedly good print, with better outlook and room for continued upside," wrote William Blair analyst Dylan Carden in a client note. "While AWS revenue came in 'only' in line with expectations, it did so at better margin and with commentary to suggest the accelerated pace of growth should carry into 2024."
The 13% year-over-year sales growth for AWS marked an improvement from a 12% growth rate for the division in the third quarter. Analysts have been looking for signs that AWS could reaccelerate sales after a slowdown for growth last year.
The cloud-computing business remains a huge profit driver. AWS provided $7.2 billion in operating income out of Amazon's total operating income of $13.2 billion.
But Amazon's North America retail segment generated $6.5 billion in operating income for the quarter, compared with a $240 million operating loss for the same period a year earlier.
Evercore ISI analyst Mark Mahaney noted that this quarter marked Amazon's highest-ever operating income.
"Three fundamental catalysts are playing out," Mahaney wrote to clients Thursday. "AWS growth is accelerating, the North American Retail segment is ramping to record-high operating margins, and the company as a whole is ramping to record-high free cash flow margins."
Mahaney reiterated a buy rating and upped his price target for Amazon stock to 220 from 195.
Amazon's Q4 By The Numbers
Meanwhile, Amazon's direct online store sales increased a better-than-expected 9% annually to $70.5 billion in the quarter.
Advertising remained Amazon's fastest-growing business. Sales grew 27% year over year to $14.7 billion. Amazon last month launched advertising on its Prime video service.
The company's second-fastest-growing revenue source was third-party seller services. The fees Amazon collects from companies selling through its platform increased 20% to $43.6 billion for the fourth quarter.
Physical stores, such as Whole Foods, remained a laggard. Revenue from the division increased 4% to $5.2 billion.
"This Q4 was a record-breaking holiday shopping season and closed out a robust 2023 for Amazon," Chief Executive Andy Jassy said in Amazon's news release. "While we made meaningful revenue, operating income, and free cash flow progress, what we're most pleased with is the continued invention and customer experience improvements across our businesses."
Amazon Stock: Up 14% To Start The Year
Prior to the report, Amazon stock gained 2.8% in Thursday trading to close at 159.67. The company also announced a new generative-AI-powered shopping assistant named Rufus. Amazon said Rufus will provide an "expert shopping assistant trained on Amazon's product catalog and information from across the web."
With Friday's gains, Amazon shares have gained about 14% since the start of the year. That has helped build off an 81% surge last year.
Meanwhile, IBD Stock Checkup shows Amazon with a Relative Strength Rating of 89 as of Thursday, indicating it has outperformed 89% of all stocks in the past 12 months.
Amazon has a 92 (99 is best) IBD Composite Rating, which reflects strength across a number of technical and fundamental metrics linked to strong stock performance.
