Amazon's net profit in the fourth quarter was only $300 million, down 98% year-on-year

Focus:

• 1Amazon's fourth-quarter net sales rose 9% year-over-year to $149.2 billion, beating Wall Street expectations.
• 2 Amazon's fourth-quarter net profit fell to $300 million, with diluted earnings per share of $0.03, falling short of Wall Street expectations.
• 3 Amazon's cloud computing business, AWS, saw fourth-quarter net sales that fell short of expectations, indicating a slowdown in spending in the business. AWS grew just 20 percent over the same period, down from 27.5 percent in the third quarter.
• 4 Amazon advertising revenue increased 23% year-over-year, once again surpassing online advertising companies such as Google, Facebook and Snap.
• 5Amazon expects net sales in the first quarter of 2023 to be between $121 billion and $126 billion, with analysts averaging $125.1 billion.

Tencent Technology News News on February 3, local time in the United States on Thursday, Amazon released the company's unaudited financial results for the fourth quarter and full year ended December 31, 2022 after the US stock market. According to the financial report, Amazon's net sales in the fourth quarter were $149.2 billion, up 9% from $137.4 billion in the same period last year, exceeding the average Wall Street analyst's expectation of $145.4 billion.

Amazon's fourth-quarter net income fell to $300 million, down 98% from $14.323 billion in the year-ago quarter, and diluted earnings per share were $0.03, below Wall Street analysts' average earnings of $0.18 per share. In comparison, Amazon's net profit for the fourth quarter of fiscal 2021 was $14.3 billion, or $1.39 per diluted share. After the earnings report, Amazon shares fell more than 3% in subsequent after-hours trading.

1. Key points of financial reporting

1. Key points of the fourth quarter of 2022 financial report

— Amazon net sales rose 9% to $149.2 billion in the fourth quarter, compared to $137.4 billion in the fourth quarter of 2021. Excluding the $5.0 billion negative impact of year-over-year currency changes in the quarter, Amazon's fourth-quarter net sales increased 12% from the same period in 2021. thereinto

● North America sales increased 13% to $93.4 billion, up 14% after currency changes

International Group sales decreased 8% to $34.5 billion, up 5% after currency changes

AWS segment sales increased 20% year-over-year to $21.4 billion

— Amazon's operating profit fell to $2.7 billion in the fourth quarter, compared to $3.5 billion in the fourth quarter of 2021. Fourth-quarter 2022 operating profit includes approximately $2.7 billion of expenses to cover expenses related to self-insurance liabilities, property and equipment impairments, and operating leases, as well as redundancy and severance pay. These charges mainly affect the North American market. thereinto

● Operating loss in North America was $200 million, essentially the same as operating loss in the fourth quarter of 2021

● International operating loss was $2.2 billion, compared to an operating loss of $1.6 billion for the fourth quarter of 2021

AWS segment operating income was $5.2 billion, compared to $5.3 billion for the fourth quarter of 2021

— Amazon's fourth-quarter net income fell to $300 million, or $0.03 per diluted share, compared to $14.3 billion in the fourth quarter of 2021, or $1.39 per diluted share. Net income for the fourth quarter of 2022 included a pre-tax valuation loss of $2.3 billion, including non-operating income (expense) from investments in common stock of Rivian Automotive, compared to a pre-tax valuation gain of $11.8 billion on investments in the fourth quarter of 2021.

— Amazon's total operating expenses in the fourth quarter were $146,467 million, compared to $133,952 million in the same period last year. thereinto

Cost of revenue was $85.64 billion, compared to $82,835 million in the year-ago quarter;

● Performance costs of $23.1 billion, compared to $22,445 million in the year-ago quarter;

Technology and content spending of $20.8 billion, compared to $15.3 billion in the year-ago quarter;

Sales and marketing expenses of $12.82 billion, compared to $10.8 billion in the year-ago quarter;

• General and administrative expenditure of $3.33 billion, compared to $2.53 billion in the same period last year;

Other operating expenses were $75,900, compared to $24 million in the year-ago quarter.

By geography

— Amazon North America (U.S., Canada) net sales of $93,363 million in the fourth quarter, up 13% from $82.36 billion in the year-ago quarter; Operating loss was $240 million, compared to an operating loss of $206 million in the year-ago quarter.

Amazon International (United Kingdom, Germany, France, Japan and China) reported fourth-quarter net sales of $34,463 million, down 8% from $37,272 million in the year-ago quarter; Operating loss was $2,228 million, compared to an operating loss of $1,627 million in the year-ago quarter.

— Amazon's revenue from North America as a percentage of total sales in the fourth quarter, compared to 60% in the year-ago quarter; Revenue from the International segment accounted for 23% of total revenue, compared to 27% in the year-ago quarter.

Amazon Web Services AWS net sales of $21.378 billion in the fourth quarter, up 20% from $17.78 billion in the same period last year; Operating profit was $5,205 million, compared to $5,293 million in the year-ago quarter. Revenue from cloud services accounted for 14% of total sales, up from 13% in the year-ago quarter.

By service and business type

— Amazon's net sales from online stores were $64,531 million in the fourth quarter, down 2% from $66,075 million in the year-ago quarter;

— Amazon's net sales from gyms were $4.957 billion in the fourth quarter, up 6% from $4.688 billion in the year-ago quarter;

— Amazon net sales from third-party seller services were $36,339 million in the fourth quarter, up 20% from $30.32 billion in the year-ago quarter;

— Amazon's net sales from subscription services were $9,189 million in the fourth quarter, up 13% from $8,123 million in the year-ago quarter;

— Amazon's net sales of self-service services were $11.557 billion in the fourth quarter, up 19% from $9.716 billion in the same period last year;

— Amazon's net sales from AWS cloud services were $21.378 billion in the fourth quarter, up 20% from $17.78 billion in the same period last year.

— Amazon reported net revenue from other businesses of $1,253 million in the fourth quarter, up 77% from $710 million in the year-ago quarter.

2. Key points of the 2022 full-year financial report

— Amazon's full-year 2022 net sales grew 9% to $514 billion from $469.8 billion in 2021. Excluding the $15.5 billion negative impact of year-over-year currency changes for the full year, Amazon's 2022 net sales increased 13% compared to 2021. thereinto

● Sales in North America increased 13% year-over-year to $315.9 billion

International sales decreased 8% to $118 billion, up 4% after currency changes

AWS segment sales increased 29% year-over-year to $80.1 billion

— Amazon's full-year 2022 operating profit fell to $12.2 billion from $24.9 billion in 2021. thereinto

● Operating loss in North America was $2.8 billion, compared to operating profit of $7.3 billion in 2021

● Operating loss for international operations was $7.7 billion, compared to an operating loss of $900 million in 2021

AWS segment operating profit was $22.8 billion, compared to $18.5 billion in 2021

— Amazon's full-year 2022 net loss was $2.7 billion, or $0.27 per diluted share, compared to $33.4 billion in 2021, or $3.24 per diluted share. Amazon's 2022 net loss includes a pre-tax valuation loss of $12.7 billion, including non-operating income (expenses) from its common stock investment in Rivian Automotive, compared to a pre-tax valuation gain of $11.8 billion on the 2021 investment.

— Amazon's total operating expenses for the full year 2022 were $501,735 million, compared to $444,943 million in 2021. thereinto

● Cost of revenue was US$288,831 million, compared to US$272,344 million in 2021;

● Performance costs were US$84,299 million, compared to US$75,111 million in 2021;

● Technology and content spending was $73,213 million, compared to $56,052 million in 2021;

● Sales and marketing expenses of $42,238 million, compared to $32,551 million in 2021;

● General and administrative expenses of US$11,891 million, compared to US$8,823 million in 2021;

Other operating expenses were $126,300, compared to $62 million in 2021.

Cash flow

— Amazon's operating cash flow increased 1% to $46.8 billion in the 12 months ended December 31, 2022, compared to $46.3 billion in the 12 months ended December 31, 2021;

— Amazon had free cash flow outflows of $11.6 billion in the 12 months ended December 31, 2022, compared to $9.1 billion in free cash flow in the 12 months ended December 31, 2021;

— Amazon free cash flow less principal repayments of finance leases and financing obligations increased to $19.8 billion in the 12 months ended December 31, 2021, compared to $20.4 billion in free cash flow for the 12 months ended December 31, 2021;

— Amazon's free cash flow increased to $12.8 billion for the 12 months ended December 31, 2022, net of principal repayments of equipment finance leases, all other finance leases and financing obligations, compared to an outflow of $14.3 billion for the 12 months ended December 31, 2021;

— Amazon held total cash, cash equivalents of $53,888 million as of December 31, 2022, compared to $36.22 billion as of December 31, 2021. During the same period, the value of securities held by Amazon was $16.138 billion, compared to $59.829 billion as of December 31, 2021.

4. Executive reviews

Andy Jassy, CEO of Amazon, said: "Our relentless commitment to providing the widest range of options, exceptional value and fast delivery drove customer demand in our store business in the fourth quarter and exceeded our expectations. We thank all of our customers who purchased Amazon products and used Amazon services this past holiday season. We are encouraged by the continued progress we have made in reducing the cost of servicing some of our store operations. ”

Jassy continued: "In the short term, our economy faces a lot of uncertainty, but we remain quite optimistic about Amazon's long-term opportunities. With the vast majority of the global retail and IT segment market share still in physical stores and in-house data centers, we believe that our leading customer experience in these areas, combined with our daily efforts and continuous improvement in inventions, will deliver significant growth in the coming years. When you consider our extensive investments and innovations in several other customer experiences (e.g. streaming entertainment, customer-focused healthcare, broadband satellite connectivity in more communities around the world), there's even more reason to be optimistic about the future. ”

Second, the interpretation of financial reports

In 2022, Amazon experienced its slowest year of growth in 25 years since its listing. The company's revenue grew just 9% in 2022 as inflationary pressures and rising interest rates dampened consumer spending, and its share price fell by nearly half in 2022.

Amazon expects the company's net sales in the first quarter of 2023 to be between $121 billion and $126 billion, up 4% to 8% year-over-year. Analysts expect on average sales of $125.1 billion.

Amazon, along with earnings reports from Apple and Alphabet, will bring a mixed earnings season to big tech companies. Apple reported its first revenue decline since 2016 on Thursday, with Alphabet's earnings and revenue falling short of expectations. On Wednesday, Facebook parent company Meta reported revenue that beat expectations and expressed optimism about its spending outlook.

Amazon online store sales were down 2% year-over-year. As rising gasoline and food prices have forced consumers to cut back on discretionary spending, the company has been grappling with slowing sales. The pandemic-induced e-commerce boom is also fading as consumers increasingly return to brick-and-mortar retail stores.

Amazon CEO Andy Iasi succeeded founder Jeff Bezos at the helm of the company in July 2021, and he has been working hard to cut costs over the past year. In January, Amazon said it would cut 18,000 jobs among its employees, following a major layoff in November. The company also froze hiring, cut some projects and suspended warehouse expansions to curb rising spending.

In a statement, Jassy said the company's "continued progress" in reducing retail costs was encouraging. "In the short term, our economy faces a lot of uncertainty, but we remain quite optimistic about Amazon's long-term opportunities," he said. ”

Amazon's cloud computing business, AWS, had lower-than-expected net sales in the fourth quarter, reflecting a trend of slowing business expenses. AWS grew just 20 percent over the same period, down from 27.5 percent in the third quarter.

Amazon's advertising revenue grew 23% year-over-year, once again surpassing online advertising companies such as Google, Facebook and Snap. Amazon recently became one of the leaders in digital advertising, giving brands and sellers more ways to pay to advertise on the company's websites, apps, and media properties.

Stock price performance

On Thursday, local time in the United States, Amazon shares rose $7.76, or 7.38%, to close at $112.91 per share in regular trading on the Nasdaq stock market. In subsequent after-hours trading, Amazon shares fell more than 3%. At press time, the share is trading at $108.64 per share.

Over the past 52 weeks, Amazon's lowest share price was $81.43 and its highest was $170.83. Based on Thursday's closing price, Amazon has a market capitalization of about $1.152 trillion. (Golden Deer)