Amazon Exceeded all Expectations with its Q4 2019 Results.

Highlights:

The total revenue of Amazon for Q4 2019 has been reported as $87.44 billion exceeding the estimate of $86 billion maximum.

Amazon Web services have reached almost $10 billion, beating the target of $9.81 billion.

The final earnings per share have been reported as $6.47, crossing the projections at $4.03 per share.

Amazon Prime members have reached an all-time high of +150 million (+50 million since 2018)

Amazon Q4 2019 Results DataHawk Blog
Amazon Q4 2019 Results DataHawk Blog

Last week, during extended trading, Amazon's shares grew by as much as 11%. The main driving force to this being all the projections and estimates for Q4 of 2019 given by Amazon which were later drastically exceeded, and the company made a lot of money.

The earnings report of the company shows that the market cap of the company has skyrocketed over $1 trillion. This means that Amazon is a part of the special club of companies that crossed this threshold, this includes, Microsoft, Alphabet, and Apple. In fact, the first time that Amazon reached this marked cap was in 2018.

The $87.44 billion in this quarter, indicating a 21% growth, justifies rightly the company’s moves and investments to speed up shipping and expand its network. During the last quarter, Amazon reported record-breaking numbers in terms of holiday shopping with both same-day and one-day deliveries quadrupling in size.

The international shipping costs of the company were also increased during the quarter reaching $12.8 billion. This accounted for a 43% increase from last year. When the last earnings report was released, Amazon also reported that the company would look to invest around $1.5 billion for holiday season delivery.

Even though the company increased its investments during Q4, the net income also increased during the quarter. Although analysts had estimated $2 billion for the net income, Amazon’s net income has been recorded as $3.27 billion, which is an 8% increase as compared to the last year. These numbers highlight the upward trajectory of the company.

The company’s revenue related to subscription services has grown steadily during the last several quarters. Subscription services revenue, which takes into account prime video channels, music unlimited, and Prime memberships, reached $5.24 billion in Q4, which is 32% more than the previous year. The earnings release also showed that the number of Music Unlimited subscribers increased by over 50% compared to last year.

Amazon with its excellent growth trajectory in its retail business has also shown increased sales for Amazon Cloud, which is reported to have reached a $9.95 billion - 34% increase as compared to Q4 2018. The expectations, however, were a lot closer in this domain as they were projected at $9.81 billion. Although there is an evident increase in Q4, the growth was 35% in Q3.

The operating income of Amazon Web Services is $2.6 billion, which is 19% higher as compared to the same period in the previous year(the estimate for Q4 2019 was set at $2.45 billion). Other company endeavors, which mostly include advertising, have generated a total of $4.8 billion of revenue in Q4, which is a growth of 41% from Q4 2018.

All of these earnings of Amazon have contributed to a $110 billion increase in the company’s market value in the e-commerce space. As noted in the report, Amazon Prime subscribers have reached an all-time high of 150 million, a 50 million bump since 2018, despite the fee increase in the interim. When the company introduced this special membership that gives users benefits but requires a monthly payment, many experts predicted it to be a fiasco.

Amazon Q4 2019 Results DataHawk Blog

Q1 2020 Projections

Amazon has also changed its projections for the next Q1, saying that the expected revenue is somewhere between $69 - $73 billion. The CFO of Amazon also reflected on the current global situation in the world in a recent interview and said that the company doesn’t know if the Coronavirus will impact its results in the first quarter.

A number of US companies have stated that the virus is likely to affect their numbers. Google, on the other hand, does not have a lot of operations in China and thus, is expecting the disruptions to be minimal.

However, the investments for this quarter have been posted as under $1.5 billion. Amazon has already allocated an additional $1 billion for the Q1 of 2020. However, the company is also being realistic, and they know that these low costs won’t stick around for a long time. It is estimated that as soon as the volume of deliveries will increase and new zip codes and routes will get introduced, the prices are going to increase.

However, it is visible that Amazon is continuing to revive the value of the concept and is successful in adding more and more members every year with a substantial increase. Customers seem to be happy and agreeable to pay for their privileges and are happy to be a part of the Amazon club. The company is looking to develop an even broader retention strategy to ensure that all members will stick around for life. Apart from the content and quality products, Amazon is looking to increase its shipping capacities and build a network that will deliver to all members with ease and without any delay.

Additionally, the company is looking to expand further worldwide. The majority of new prime subscribers are anticipated to come from overseas as the whole US market is currently over-saturated. Given that, the prime members spend around double than regular users, this is a great strategy by Amazon.

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