Amazon.com (AMZN) is a current holding within the US Growth, and this morning has announced its latest Q4 earnings report, with shares reacting positively, up +10.95% in after-hours trading.
For the first quarter of 2024, Amazon anticipates operating income to be between $8 billion and $12 billion, with sales reaching up to $143.5 billion. This forecast surpasses analysts’ estimates of $9.12 billion in profit on $142 billion in sales.
Amazon reported a strong end to 2023 with the tech giant’s fourth-quarter revenue increasing by 14% to $170 billion, while expenses lagged, highlighting the efficiency of CEO Andy Jassy’s cost-cutting strategy and shift to focus on cashflow positive services.
Amazon’s fourth quarter was supported by a boost in online sales during the holiday season, as online sales rose by 9% to $70.5 billion, exceeding market expectations. Operating income for the quarter increased to $13.2 billion, above analysts’ forecasts of $10.5 billion.
Andy Jassy’s cost-cutting strategy has seen more than 35,000 jobs cut, as the company aims to improve profits in what is a highly competitive industry with new competitors emerging in Temu and TikTok. Earlier in the year Amazon announced they were continuing job cuts, with hundreds of employees in its Prime Video business and Twitch livestreaming service being released. This carries on from the company’s decision in November last year to cut positions in the music and gaming departments, while the division responsible for its voice-activated assistant, Alexa, also saw reductions. In a company statement, Amazon announced its workforce in 2023 had declined 1% on the previous year, with the company reporting 1.53 million full- and part-time workers.
To boost profitability Amazon has increased its efforts to generate revenue from advertising on its website and began airing commercials on Prime Video. For the fourth quarter, advertising sales gained 27% to $14.7 billion, with these figures resembling the fourth-straight quarter of growth. Amazon Web Services, the cloud computing arm of the company, also rebounded, with a 13% revenue increase to $24.2 billion.
Amazon has also started testing a generative AI shopping assistant, Rufus, highlighting its continuous pursuit of technological advancements and customer service enhancements.
As a reminder, Amazon’s inclusion in the US Growth portfolio is based on the momentum component of the portfolio and its inclusion will depend on how the stock trades between now and the next rebalance date of March 1st, 2024.