Fourth Quarter

Amazon Shocks with Strong Fourth Quarter Results, Driven by 14% Revenue Growth surprised Wall Street with better-than-expected fourth-quarter 2022 results, which were released on February 1st. Despite difficult year-over-year comparisons, the company’s top-line growth was strong, and bottom-line profits exceeded analyst expectations.

Overall fourth-quarter revenue was $149.2 billion, up 14% from $130.2 billion in the same period last year. More impressively, the top line outperformed the average analyst estimate of $145.7 billion. Meanwhile, quarterly profit was $0.03 per share, exceeding expectations of a loss of $0.11.

The strong close to 2022 demonstrates that Amazon’s core strategic bets on e-commerce and cloud are paying off. The company saw particular growth in its cloud computing and advertising units. After disappointing results for much of last year, Amazon appears to be turning a corner.

Key Financial Metrics are Positive Across the Board

A closer look at Amazon’s latest earnings report reveals an overwhelmingly positive picture. In addition to exceeding top and bottom line expectations, the company achieved 14% revenue growth during a period of difficult year-on-year comparisons. Furthermore, each of Amazon’s key reporting segments showed impressive growth:

  • North America segment sales were $95.4 billion, up 13%.
  • International segment sales are $34.3 billion, up 17%.
  • AWS segment sales are $21.3 billion, up 20%.
  • Advertising services sales: $11.6 billion, up 23%.

The breadth of double-digit percentage revenue increases demonstrates that Amazon is firing on all cylinders in its core e-commerce and cloud computing businesses.

Prime Subscriber Growth Drives North America’s ecommerce Momentum

A closer look at Amazon’s North America e-commerce segment reveals several promising trends. Net sales totaled $95.4 billion, setting a new fourth-quarter record. Management specifically highlighted strong growth in the consumer electronics, home, and beauty subcategories.

Amazon’s Prime membership program remains a key driver of its domestic e-commerce momentum. Since transitioning to one-day shipping, the company has aggressively expanded Prime perks while boasting about faster delivery capabilities. Those efforts are now paying off, with management revealing that Amazon will add 10 million new Prime subscribers in 2022, bringing the total to more than 200 million members worldwide. More Prime members naturally leads to increased purchase frequency and sales.

International E-commerce Recovers as Macroeconomic Headwinds Stabilize

While Amazon’s North American e-commerce segment continues to grow, its international business is showing promising signs of recovery following a turbulent 2022. The quarter’s 17% year-over-year international revenue growth suggests that the worst effects of rising energy costs, supply chain issues, and a strong dollar may be in the past.

Specific international highlights included India, where Amazon held its largest-ever Prime Day event in July. The company also singled out standout Prime Day performances in Spain, the United Kingdom, and Japan. If global economic conditions continue to improve gradually in 2023, international e-commerce sales will accelerate even further.

AWS Cloud Leadership Intact, with Sales Approaching $100 Billion Run Rate

As in previous quarters, AWS remains the brightest spot in Amazon’s portfolio. The cloud computing segment generated net sales of $21.3 billion in Q4, establishing a strong $80 billion revenue run rate. The division continues to generate substantial operating income, with Q4 profits of $5.1 billion.

The latest earnings report reaffirmed AWS’ market leadership in the global cloud infrastructure industry. Management highlighted strong customer momentum in the financial services, media and entertainment, consumer goods, and industrial sectors. AWS also highlighted how customers are increasingly using advanced technologies such as machine learning and analytics.

After several quarters of macro-driven slowing growth, the return to 20%+ AWS revenue acceleration is another positive sign that Amazon’s fortunes are improving as the company enters 2023.

Advertising Momentum Emphasizes the Importance of New Monetization Efforts

Rounding out Amazon’s earnings were yet another quarter of incredible momentum in its emerging advertising segment. Advertising services generated net sales of $11.6 billion, establishing a near $50 billion run rate and expanding 23% compared to last year’s Q4.

The outstanding advertising performance demonstrates that Amazon’s strategic expansion into new monetization channels beyond e-commerce and cloud is paying off. Amazon, fueled by its valuable trove of shopper data and premium digital real estate, is increasingly stealing advertiser dollars from Google and Meta’s Facebook.

Increasing advertising revenue also helps combat margin compression in Amazon’s capital-intensive retail operations. If current growth trends continue in the coming years, advertising has the potential to completely reshape Amazon’s profitability profile.

Bottom Line Performance Encourages Optimism about Improving Cost Dynamics

Moving on to the bottom line, Amazon reported a small Q4 net profit of $0.03 per share. While this may appear insignificant given the company’s large quarterly sales base, it far exceeded expectations for a significant per-share loss. The EPS surprise confirms that Amazon’s cost-cutting efforts are gaining traction.

In recent quarters, Amazon’s profitability has been plagued by runaway cost inflation, masking the inherent earnings potential of the company’s dominant e-commerce and cloud computing market positions. However, following extensive reviews, management took steps in 2022 to optimize fulfillment center staffing levels, reduce certain warehouse expansion plans, and exit unprofitable product lines/businesses.

The Q4 bottom line numbers were better than expected, indicating that those cost-cutting efforts are now bearing fruit. Markets cheered the EPS beat, sending Amazon stock up more than 8% the next trading day. If Amazon maintains its cost-cutting strategy without foregoing growth investments, it is likely to achieve significantly higher profitability in 2023 and thereafter.

Value Creation Initiatives Work Well to Improve Shareholder Returns

In addition to releasing its impressive Q4 earnings results, Amazon announced several new initiatives aimed at increasing shareholder value. First, the board of directors approved a new $10 billion share buyback program. Repurchasing undervalued stock should boost Amazon’s future earnings per share (EPS).

Furthermore, Amazon has announced that it will hold an Investor Day on March 31, 2023. The company intends to provide more insight into the profitability roadmaps for its various business segments. Following years of harsh criticism for lack of transparency, this Investor Day heralds a new era of Amazon openness.

Finally, Amazon stated that it plans to implement a phased approach to completely eliminate historical RSU equity compensation by 2025. Transitioning its entire workforce to performance-based stock awards should encourage employees to work together to increase free cash flow and share price.

Collectively, these value-focused announcements demonstrate that Amazon’s leadership team is receiving frustrated investor feedback about lagging shareholder returns. The initiatives foreshadow the potential for higher total yield and greater capital allocation discipline in the future.

The 2023 Outlook Calls for Accelerating Sales Growth and Lower Costs.

Amazon provided initial first-quarter guidance and commentary for 2023, pointing to growing business momentum and firming cost discipline. Management forecasts Q1 net sales of $121 billion to $126 billion. Achieving the midrange would result in approximately 13% year-over-year revenue growth.

On the cost front, Amazon intends to use previous restructuring actions to drive increased efficiency. As evidence, the company expects Q1 operating income of $0 to $4 billion, compared to $3.7 billion in the same quarter last year. Simply remaining profitable despite massive inflationary headwinds over the past year would be a significant bottom-line victory.

Looking beyond the first quarter, Amazon CEO Andy Jassy summarized the company’s positive outlook: “We’re encouraged by the continued momentum we’re seeing in the business as we remain focused on balancing our investments to drive long-term growth and returns.”

If Amazon meets its preliminary 2023 guidance targets for faster sales growth and higher costs, upside surprises are likely. Strong execution could propel the stock back to the highs it reached before growth and inflation concerns emerged over the last two years.


Amazon’s better-than-expected Q4 results are the latest indication that the company has turned a significant corner after a turbulent 2022. Both revenue and EPS exceeded analyst expectations. Furthermore, key reporting segments such as e-commerce, AWS cloud, and advertising all showed impressive double-digit percentage increases.

Equally important, the bottom line surprise demonstrates that long-term cost inflation pressures are finally abating as a result of proactive optimization efforts launched last year. New value creation initiatives also indicate that Amazon’s leadership is increasing its focus on shareholder returns.

Riding positive momentum, Amazon issued upbeat guidance pointing to accelerated revenue expansion accompanied by improving cost absorption. If early 2023 confirms strengthening financial results, the company’s beaten down stock may deserve another look from opportunistic investors. For now, Amazon appears back on track pursuing its ambitious vision for e-commerce and technology industry dominance.

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