(Bloomberg) -- Amazon.com, Inc. reported strong sales and gave an operating income outlook that surpassed estimates, suggesting that Chief Executive Officer Andy Jassy’s unrelenting cost-cutting and focus on services that make money is reshaping the once free-spending company.
The Seattle-based company turned in a blowout holiday season, posting the strongest online sales growth since the early days of the pandemic. The cloud computing division, meanwhile, has stabilized and executives say growth will accelerate this year as corporate customers resume their spending. Wall Street cheered, pushing the shares up about 8% in extended trading.
“The bottom line is that despite all the concerns plaguing the tech sector, Amazon has managed to perform surprisingly well,” said Jesse Cohen, a senior analyst at Investing.com. “The results indicate that ongoing cost-cutting measures are having a positive impact on Amazon’s business prospects.”
Operating income in the period ending in March will be $8 billion to $12 billion on sales of as much as $143.5 billion. Analysts, on average, estimated profit of $9.12 billion on sales of $142 billion, according to data compiled by Bloomberg.
Fourth-quarter revenue increased 14% to $170 billion, jumping about twice as quickly as expenses, showing that the measures to reduce costs are boosting profits without hindering growth. Online sales, reflecting the holiday shopping season, rose 9% to $70.5 billion, topping expectations.
Operating income increased to $13.2 billion, Amazon said Thursday in a statement. Analysts, on average, projected $10.5 billion.
Jassy has been cutting expenses, including more than 35,000 jobs last year, to improve profits. The layoffs haven’t let up, with Amazon announcing earlier this month it was letting go of hundreds of employees in its Prime Video streaming and studios business and the Twitch live-streaming service. In November, the company eliminated positions in the music and gaming units as well as in the division responsible for its voice-activated assistant, Alexa. Amazon said it ended 2023 with about 1.53 million full- and part-time workers, a 1% decline from a year earlier.
General and administrative expenses fell by about 10% in the quarter while spending on marketing and sales was about the same as a year earlier. Technology and content spending — which includes salaries for software developers as well as servers and other hardware — rose just 6%, down from 38% growth early in 2023.
AWS Growth
Amazon Web Services revenue increased 13% to $24.2 billion, compared with 12% sales gains the past two periods. The mild acceleration “leaves some lingering doubts about whether the cloud unit will be able to hold its own against rivals,” said Sky Canaves, a senior analyst at Insider Intelligence.
Chief Financial Officer Brian Olsavsky, however, expressed optimism about growth at AWS through the year.
“We are starting to see customers diminish their cost optimization work, and move the discussion more to reengaging on cloud migrations that they had perhaps put on hold last year,” Olsavsky said, adding that there was a lot of interest in the cloud unit’s generative AI products.
In an effort to diversify revenue, Amazon has intensified its effort to generate advertising on its shopping website and last month began airing commercials on the Prime Video streaming service. Advertising sales gained 27% to $14.7 billion in the period ended Dec. 31, accelerating for the fourth straight quarter.
“The highly profitable ads business was lifted by demand from sellers on the fast-growing third-party marketplace,” Canaves said.
The shares climbed to a high of $174.50 in extended trading after closing at $159.67 in New York. The stock has gained 5.1% this year after jumping 81% in 2023.
Earlier, the company announced it was testing a generative AI shopping assistant, named Rufus, “trained on Amazon’s product catalog” with a small group of customers using its mobile app.
Amazon’s results came after Microsoft Corp. and Alphabet Inc. reported strong sales earlier this week, but still disappointed investors whose lofty expectations had propelled the stocks to record highs. Apple, Inc. and Meta Platforms, Inc., part of the group dubbed the Magnificent Seven for their performance, also reported results Thursday.
