Amazon’s top-line growth in the last three months of 2022 was far better than investors expected, while its bottom line fell short.
The ecommerce kingpin’s fourth-quarter 2022 results handily beat Wall Street sales forecasts. Amazon reported revenue of $149.2 billion billion, up 9% year over year. Net income of $278 million (or 3 cents per share), compared with $14.3 billion a year earlier, was hurt by higher costs, one-time charges and a decline in the value of Amazon’s investment in electric-vehicle maker Rivian. Q4 is historically Amazon’s biggest quarter, encompassing the holiday-shopping season.
Amazon’s ad revenue increased 19% for the year-end quarter, hitting a record $11.6 billion in the period. AWS, its cloud-services division, posted a 29% year-over-year increase in revenue, to $80.1 billion, and operating income grew 23% to $22.8 billion. Olsavsky, on the earnings calls, said that starting in mid-Q3 2022, AWS year-over-year growth rates slowed “as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macroeconomic conditions.” Amazon expects that to “continue to be a headwind to AWS growth in at least the next couple of quarters,” the CFO added, noting that AWS year-over-year revenue growth in January 2023 was in the mid-teens.
For Q1, Amazon expects net sales to be between $121 billion and $126 billion, or to grow between 4% and 8% compared with the first quarter of 2022 (in-line with analyst forecasts). “We do expect to see some slower growth rates for the next few quarters,” CFO Brian Olsavsky told reporters Thursday.
Last month Amazon CEO Andy Jassy announced the layoff of 18,000 corporate employees, citing the need to cut costs amid the backdrop of an “uncertain and difficult” economic outlook. The company incurred $640 million in severance-related expenses in Q4. The headcount reduction, which includes layoffs Amazon made last fall, represents about 1.2% of the 1.54 million full- and part-time workers the company reported as of Sept. 30, 2022. For Q4, Amazon’s operating expenses climbed 9.3%, to $146.5 billion.
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“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” Jassy said in a statement. “When you also factor in our investments and innovation in several other broad customer experiences (e.g. streaming entertainment, customer-first healthcare, broadband satellite connectivity for more communities globally), there’s additional reason to feel optimistic about what the future holds.”
Jassy joined the Q4 earnings call Thursday — a first for the exec — who took over the CEO role from Amazon founder Jeff Bezos in mid-2021. Jassy told analysts he planned to join Amazon’s earnings calls from time to time. “Being maniacally focused on the customer experience is always going to be a top priority for us,” while Amazon also works to “streamline” costs, he said.
On the call, Jassy touted the “remarkable value” of Prime, currently priced at $139/year (or $14.99/month) in the U.S., especially relative to rival streaming services that cost $14-$15 monthly, evidently referring to Netflix and HBO Max. “If you think about the value of Prime, which is less than what I just mentioned, where you get the entertainment content on the Prime Video side” — plus free shipping benefits, Amazon Music, gaming and other perks — “that is remarkable value that you just don’t find elsewhere,” he said. “And as we continue to make the service better and better and fully featured, we see people continuing to spend more at Amazon across our various businesses.”
The company’s Q4 2022 decline in net income comes after Amazon posted a profit gain of nearly $12 billion from its investment in Rivian in the year-ago period. Fourth quarter 2022 net income included a pre-tax valuation loss of $2.3 billion from the Rivian investment. In addition, the company recorded $2.7 billion of charges in the most recent quarter, including the $640 million for severance payments, impairments of property and equipment and operating leases, and changes in estimates related to self-insurance liabilities.
Analyst consensus estimates were for $145.42 billion in revenue and earnings of 17 cents per share, according to Refinitiv data.
On the Prime Video front, Amazon boasted that Season 1 of “The Lord of the Rings: The Rings of Power” was the most-watched original series worldwide, attracting more than 100 million viewers and generating more than 24 billion minutes streamed. The first season of the pricey fantasy show — with an estimated production budget of $450 million — also drove more Prime signups worldwide during its launch window than any previous Prime Video content, according to Amazon.
Amazon’s exclusive streaming of the “Thursday Night Football” games for the 2022 season yielded the youngest median age of any NFL broadcast package since 2013 — with viewership up 11% from the prior season among the coveted 18-34 demo, according to Nielsen. In a historic milestone, Prime Video also became the first streamer to place on Variety’s Top 100 Primetime Telecasts of 2022, with four of the “TNF” telecasts making the list.