Author: Lindsey Boycott
Estimated read time: 3 minutes
Publication date: 10th Feb 2020 09:58 GMT+1
Amazon (NASDAQ: AMZN) might have lost the $10 billion JEDI contract to Microsoft back in October, but CEO Jeff Bezos makes losing look good. Wall Street forecasted that the cloud company’s EPS would tumble down to $4.00 from $6.18 last year after it faltered in its third quarter. But CEO Jeff Bezos was happy to disappoint analysts with a staggering $6.47 earnings per share.
Not surprisingly, Amazon's stocks surged up 11 percent in after-hours trading, and the e-commerce giant joined the trillion-dollar valuation club, along with tech firms like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG). Additionally, Amazon also saw revenue climb to $87.4 billion, with this number decimating the Street’s expectation for $86.02 billion. One of the significant drivers for Amazon's growth is the money-making AWS business, which blew by the forecasted $9.81 billion with an impressive $9.95 billion.
In addition, revenue spiked up by 21 percent to $87.44 billion for the quarter, which suggests that Amazon's investments in quicker shipping options are paying off big for the merchandise-provider. The company reported that customer shopping set new records over the holiday season – quadrupling the business for both one-day and same-day deliveries. Amazon Prime's streaming service has also served the e-commerce firm very well, as Bezos explained in a statement.
“Prime membership continues to get better for customers year after year. And customers are responding – more people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,” Bezos said in a statement.
Despite being proclaimed "the smartest company in the universe" by Mark Cuban, investor, and Dallas Mavericks owner, some analysts remain skeptical about Amazon's ability to maintain its current trajectory. While the majority of Amazon's business comes from its e-commerce unit it’s the fast-growing AWS segment that continues to see substantial increases. The business unit provides its customers with cloud services that support websites, databases, and programs.
Because the e-commerce business unit tends to be slower-growing, it will be necessary for AWS services to maintain steady growth due to its role as the earnings engine for Amazon. In fact, from the $3.88 billion in operating income that Amazon reported for its fourth quarter, $2.6 billion of it, or 67 percent, can be credited to AWS. If there was a disruption to Amazon Web Services’ dominance in the market – and competitors like Microsoft Azure and Google Cloud are doing their best to upset its lead – it could have consequences for the larger Amazon operation.
While Bezos’ Amazon empire continues to defy its bearish naysayers, he has been busy selling off significant amounts of his shares. The CEO has also been down-sizing his Amazon stocks – at an estimated billion dollars at a time ever year for the past three. Most recently, he sold off 905,456 stocks for an estimated $1.84 billion, according to an SEC filing. His decision to divest, Bezos says, is to fund his new rocket startup, called Blue Origin. Bezos’s grand space plan start with reusable launch vehicles, like the New Shephard and New Glenn, to transport equipment and soon astronauts into space. It’s an ambitious undertaking and one that could have Bezos transforming the future for humanity.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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