Amazon shares soar on cloud revenue beat and huge profit gain from Rivian stake

Amazon will report its fourth-quarter earnings after the bell on Thursday.

Here’s what Wall Street expects:

• Earnings per share: $3.57, according to a Refinitiv survey of analysts
• Revenue: $137.6 billion, according to a Refinitiv survey of analysts
• AWS revenue: $17.37 billion, according to StreetAccount

Amazon is wrapping up a rollercoaster earnings season for mega-cap tech companies. Netflix shares were hammered late last month after a weak subscriber outlook spooked investors. Upbeat earnings from Apple, Microsoft and Google parent Alphabet in recent days suggested the season could end on a high note, but then Facebook revealed stagnating user growth, which sent its shares plunging and dragged down other social media stocks.

Among the top tech companies, Amazon was the worst performer last year, with the stock rising just 2.4%. It’s down 16% so far in 2022, as investors rotate out of the sector on concerns about inflation and rising interest rates.

Analysts expect Amazon to record year-over-year revenue growth of just under 10% for the fourth quarter, which includes the peak holiday shopping season. That would be the first period of single-digit growth since the third quarter of 2017.

Profit is projected to plunge to $3.68 per share from $14.09 per share a year ago. In recent quarters, earnings have cratered and sales growth has decelerated as the company navigates a slowdown in the pandemic-driven e-commerce bump, global supply chain constraints and labor shortages.

Amazon has been ploughing profits into physical expansion, with Jefferies analysts estimating the company opened 350 new facilities in 2021. It also hiked wages to an average of $18 an hour to lure workers and has increased incentives, offering signing bonuses worth as much as $3,000 in certain markets.

In some cases, the labor shortage forced Amazon to reroute packages over longer and costlier distances to facilities with enough staff to handle them.

CEO Andy Jassy, who succeeded Jeff Bezos at the helm last year, previously warned that Amazon would take on “several billion dollars” of extra costs in the fourth period because of the headwinds. Amazon said its operating profit could be as little as zero.

Wall Street will be paying particularly close attention to Amazon’s first-quarter guidance, as investors try to model how much additional pressure the company expects from inflation and supply shortages.

While its core retail business faces clear challenges, Amazon is leaning on other divisions, including its profitable cloud-computing unit and fast-growing advertising division. Analysts expect Amazon Web Services to post revenue growth of 36% from a year ago.

“Amazon’s growth, similar to most other e-commerce companies, decelerated all through FY21, and the market is concerned about that continuing into Q1, maybe Q2, with uncertainty on where growth rates normalize beyond that,” Guggenheim analysts wrote in a note to clients late last month. “Q1 guidance will be in focus this week, and the bar seems quite low, but more important will be any hints as to where sales and margins can go from there.”

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