Amazon.com, Inc. (NASDAQ: AMZN) reported its fourth quarter financial results and beat analysts’ estimates in both earnings and revenue. Amazon shares were up 5 percent on Friday.
For the fourth quarter, Amazon reported revenue of $60.45 billion, increasing 38 percent year over year, and beating analysts’ estimates of $59.83 billion. Amazon reported an EPS of $3.75 per share, beating analysts’ estimates of $1.83.
North American revenue increased 42 percent year over year and international sales increased 29 percent year over year.
Amazon’s subsidiary, Amazon Web Services reported $5.11 billion in revenue, beating analysts’ estimates of $4.97 billion, and increasing 45 percent year over year. AWS reported an operating income of $1.3 billion out Amazon’s $1.9 billion net income, which is its record high. AWS continues to be the fastest and most profitable business for Amazon.
The higher revenue was primarily due to the holiday season as more shoppers transitioned to e-Commerce for their holiday gifts. Amazon’s Alexa enabled devices were the most popular devices, as the Echo Dot was the best selling product in 2017.
Amazon shipped more than five billion packages globally in 2017, as it had more paid users join compared to the previous year.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down,” said Jeff Bezos, Amazon founder and CEO. “We’ve reached an important point where other companies and developers are accelerating adoption of Alexa.”
2017 was a big year for Amazon and its heavy investments. In the year, Amazon a total operating expense of $173.76 billion compared to the previous year’s expense of $131.8 billion.
Amazon launched its first physical store location in Seattle, Amazon Go. The store is the first of its kind. It is a checkout-free shopping experience that uses technology based off self-driving cars to track what customers grab and automatically charge them.
Amazon teamed up with Berkshire Hathaway and JPMorgan Chase to tackle healthcare for their U.S. employees with the aim to improve employee satisfaction and reduce costs.
For the first quarter of 2018, Amazon project net sales to be between $47.75 billion and $50.75 billion, increasing 34 percent to 42 percent year over year. The company forecasts an operating income to be between $300 million and $1 billion compared to $1 billion in the first quarter of 2017. Analysts’ consensus for income is $1.5 billion.
Due to the strong quarter, analysts from Morgan Stanley, Barclays, Credit Suisse, JPMorgan, Bank of America Merrill Lynch and others all raised their price targets.
Credit Suisse raised its price target to $1,750 from $1,410. Mizuho raised its price target from $1,300 to $1,700.
Analysts have most likely raised their price targets as Amazon provided its wide ranged operating income guidance, which can point to the company looking into more investments.
“While profitability is taking a step back, we believe Amazon is once again investing ahead of growth in commerce and voice search,” Mizuho said in a note, reported by CNBC.
The stronger than expected quarter blew pasts all analysts’ expectations which has led many to call for a bullish long run for Amazon. Especially with the performance of AWS, Amazon will see even more profitable quarters in the future.