Downbeat Amazon outlook takes gloss off record profit

Jeannie Matthews
February 2, 2019

Net income increased to $3.0 billion, or $6.04 per diluted share, compared with net income of $1.9 billion, or $3.75 per diluted share, a year ago and easily topping Street estimates of $5.65 a share.

They still have some breathing room, however, as Facebook this week reported more than $16 billion in ad sales in just the fourth-quarter of previous year, while Google is expected to top $135 billion in ad revenue in 2018 when it reports next week.

Advertising is another fast-growing source of revenue for Amazon.

"Right now we are working through some next issues in both cities", Chief Financial Officer Brian Olsavsky said on the call. "Retail sales were certainly strong".

For the full 2018 fiscal year, Amazon reported a net sales increase of 31 percent to $232.9 billion, up from $177.9 billion in 2017.

The e-commerce giant delivered earnings of $6.04, beating estimates by 45 cents. This represents a 20% increase in revenue from a year ago, but it's at the slowest pace in three years. This time that didn't happen.

While growth in Amazon's maturing North American business slowed, the company's global sales picked up steam after it threw resources behind markets such as India and Australia. But those results still fell short of Wall Street's expectations, even despite the broadly-popular discount event, Prime Day.

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Also, Amazon's purchase of slower-growing Whole Foods is expected to weigh down its robust growth rate.

Amazon's voice-controlled virtual assistant Alexa, and the devices which play it, helped the performance. But so far that hasn't appeared to happen. reported its third record quarterly profit in a row, showing increasing strength in its Amazon Web Services cloud-services division along with continuing increases in retail sales.

"In 2018, we improved Alexa's ability to understand requests and answer questions by more than 20 per cent through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017".

Amazon sells search ads similar to Google's search system and it sells display and video ads.

Shoppers will spend $484 billion globally on Amazon this year, up 26 percent from 2018, and the Seattle-based company will capture more than half of all online spending in the USA, according to EMarketer Inc.

The company's subscription services grew 45 percent from a year ago, while advertising revenue almost doubled, to $3.4 billion for the quarter. The online retailer's brick-and-mortar strategy also includes bookstores and a cashierless convenience store called AmazonGo, which lets customers check in with a smartphone app and be charged automatically based on what they remove from the store. That may drag down Amazon's recent big jumps in profit.

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