Amazon quintuples operating profit, positive outlook boosts share price
The shopping group's sales increase in all areas and profits rise even more strongly. Investors are pleased with the exceeded expectations and good forecast.
(Image: Michael Vi/Shutterstock.com)
Amazon significantly exceeded both its own forecast and market expectations in the past quarter. In addition to higher-than-expected sales, the Group was able to significantly increase its profits in all three divisions. As the outlook for the first quarter of this year is also positive, the share is once again in greater demand and has risen slightly.
In the fourth quarter of 2023, Amazon was able to increase its total sales by 14% to 170 billion US dollars. This puts the Group ahead of its own forecast from last fall, when Amazon was still expecting between 160 and 167 billion dollars for the Christmas quarter. Market observers had also only expected around 166 billion dollars. Sales rose by 13 percent in North America and 17 percent internationally. The cloud business AWS (Amazon Web Services) also grew by 13 percent, although this division only accounts for 14 percent of total sales.
Operating profits in North America and at AWS
Amazon was able to increase its operating profits even more significantly in the last three months of 2023. This has increased almost fivefold from 2.7 billion dollars in the same period of 2022, when Amazon also exceeded expectations but disappointed investors with a cautious outlook, to 13.2 billion dollars most recently. While operating profit in North America accounted for almost half of this at 6.5 billion dollars, an operating loss of 400 million dollars was recorded internationally. Nevertheless, the losses in this area were significantly reduced, as in the previous year the international operating loss was still 2.2 billion dollars.
The largest share of the current operating profit was achieved by AWS with 7.2 billion dollars – an increase of 38.5 percent. On the bottom line, Amazon was able to increase its net profit from just 300 million dollars in the previous year to 10.6 billion dollars. In the same period of the previous year, the investment in the electric car manufacturer Rivian Automotive had cost 2.3 billion dollars of net profit.
Amazon CEO Andy Jassy attributes the positive development to record Christmas sales. Customers bought more than a billion products from Amazon during the Black Friday and Cyber Monday promotions. In the USA, customers placed more than 500 million orders with independent sellers on the shopping platform.
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Full year 2023 almost mirrors the quarter
Amazon was able to increase its sales for the full year 2023 by 12 percent to 574.8 billion dollars, with business in North America also accounting for the lion's share here at over 61 percent. Overall, Amazon more than tripled its operating profit in 2023 to 39.9 billion dollars. In North America, operating profit has even increased more than fivefold, but Amazon is still recording an operating loss internationally. However, this has been reduced by almost a third to 2.7 billion dollars. AWS operating profit has risen by almost 8 percent year-on-year and accounts for the largest share at 24.6 billion dollars. Net profit for the full year 2023 has increased by a factor of more than 11, from 2.7 billion dollars in 2022 to 30.4 billion dollars most recently.
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The increased operating profits are due to savings. Amazon laid off around 27,000 employees between the end of 2022 and mid-2023, starting with the dismissal of 18,000 employees in January 2023. Some unprofitable projects were also discontinued. According to CNBC, Amazon's CFO Brian Olsavsky explains that the company also wants to proceed cautiously with new investments. However, he did not want to describe 2024 as a "year of efficiency".
Positive outlook rewarded by investors
For 2024, Amazon announced the expansion of drone deliveries in Italy and the UK as well as another location in the USA. This will allow deliveries weighing up to 2.3 kilograms to be delivered within one hour of being ordered. Progress is also being made with the "Project Kuiper" satellite internet. Following the successful testing of prototypes in November 2023, the first satellites for practical use are to be launched into orbit later this year.
In financial terms, Amazon expects sales of between 138 and 143.4 billion dollars in the first quarter of 2024, which would be between 8 and 13 percent more than at the beginning of 2023. Operating profit is expected to roughly double to between 8 and 12 billion dollars. Investors take note of the figures with approval, causing Amazon's share price to rise by just over 7 percent in after-hours trading.
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