Amazon, Alphabet Earnings Update
Amazon shares rose strongly in after hours trading, but shares in Alphabet (Google) fell after both companies revealed 4th quarter results after a choppy day’s trading on Wall Street.
US bond yield jumped sharply and the dollar fell. The 10 year bond yield jumped to 2.78%, the highest since April 2014, while yields on 30 year bonds topped 3% for the first time in 10 months.
Amazon shares were down nearly 4% in regular trading but jumped by that much after it reported better than forecast sales and earnings figures, and made upbeat forecasts about the current quarter.
The result will help offset the negative tone around the tech sector during the past couple of days.
Thanks in part to the full inclusion of its Whole Foods acquisition, a surge in sales of Alexa voice products and a sharp rise in prime membership Amazon has beaten market forecasts.
As well the company also saw a surge in sales for the final quarter of 2017 (the Black Monday digital sales day) to a record $US60.45 billion - that’s a rise of nearly 40%.
Sales in North America jumped to $US37.3 billion from $US26.4 billion (That includes all sales), while its cloud computing business, AWS saw revenue hit $US5.11 billion, up 47% on a year earlier.
Amazon also said it saw first quarter revenues in the range of $US47.75 billion to $US50.75 billion, which was higher than market forecasts. Income was estimated at $US300 million to $US1 billion against $US1 billion in the first quarter of 2017.
Amazon said that excluding the $US1.1 billion favourable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales rose 36% compared with fourth quarter 2016. Operating income increased 69% to $US2.1 billion in the fourth quarter, compared with operating income of $US1.3 billion in fourth quarter 2016.
Net income was $US1.9 billion in the fourth quarter, compared with net income of $US749 million in fourth quarter 2016. The fourth quarter 2017 includes a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of approximately $US789 million, Amazon said.
For 2017, Amazon said net sales jumped 31% to $US177.9 billion, compared with $US136.0 billion in 2016. Operating income dipped 2% to $US4.1 billion, compared with operating income of $US4.2 billion in 2016, but net income rose 25% to $US3.0 billion compared with net income of $US2.4 billion in 2016.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down,” according Jeff Bezos, Amazon founder and CEO.
“We’ve reached an important point where other companies and developers are accelerating adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we’re seeing strong response to our new far-field voice kit for manufacturers. Much more to come and a huge thank you to our customers and partners.”
Amazon shares recovered the losses from the regular trading to be up just under 3% just after 8.15 am Sydney time.
Meanwhile Google shares sold off, falling 5.3% in after hours trading before investors halted the rot and bought back, realising a reported loss was due to the impact of the tax cuts and other changes in the US.
They were trading down 2.5% at 8.20 am Sydney time
Alphabet (Google) reported fourth-quarter losses of $US3.02 billion compared with net income of $5.33 billion.The company’s effective tax rate jumped to 138% from 22% in the year-ago quarter and it booked a tax expense of $US9.9 billion due to changes in the US tax law.
Revenue rose 24% to $US32.32 billion from $26.06 billion in the final quarter of 2016.
Traffic acquisition costs totalled $US6.45 billion for the fourth quarter, compared with $US4.85 billion in the year-earlier period, a rise that wll worry analysts (but benefit the likes of Apple).
Google’s other revenues, which includes its burgeoning enterprise business, hardware sales, and app store, posted $US4.69 billion in revenue, bringing total Google revenue to $US31.91 billion.
Overall, Alphabet’s 2017 revenues hit $US110.9 billion, up 23% from 2016.
Alphabet’s adjusted net income for the quarter was $US6.84 billion, compared to $5.33 billion during the same quarter of 2016.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.