Amazon Q4 Profit Nears $1.9B but Analysts Say Potential Is Much Greater

Amazon headquarters Seattle

SEATTLE – Life continues to be good if you’re Amazon. The online mammoth reported its 11th straight quarter of positive net income and the largest in its history.

Net income jumped to $1.86 billion, or $3.75 per share, in the quarter ended Dec. 31. In the same quarter one year prior, Amazon reported net income of $749 million, or $1.54 per share. The results include a tax benefit of about $789 million related to the recently passed U.S. tax law.

Net sales increased 38.2 percent to $60.5 billion, from $43.7 billion a year earlier. Net sales in North America surged 42.2 percent to $37.3 billion. Amazon’s operating income increased 69 percent to $2.1 billion in the fourth quarter, up from $1.3 billion last year.

Its cloud services business, AWS, continues to be the company’s fastest growing and most profitable division. AWS’ revenue jumped 44.6 percent to $5.11 billion in the quarter, beating estimates of $5 billion. It generated $1.3 billion in operating income, accounting for 64 percent of Amazon’s total operating income for the quarter.

Operating expenses did increase 37.3 percent to $58.33 billion as Amazon continues to invest in its warehouse and delivery capabilities, expand Prime, and create original video content.

Amazon Founder and CEO Jeff Bezos suggested the company will not be resting on its laurels. “We don’t see positive surprises of this magnitude very often – expect us to double down,” he said. 

As impressive as Bezos’s tenacity and Amazon’s numbers are, Neil Saunders, managing director of GlobalData Retail, says Amazon is still nowhere near its potential. He writes that there are categories, like home and apparel, where it’s under-penetrated – and with tweaks to its proposition, it should be able to make further gains. 

Saunders adds that Amazon’s international growth is still in its infancy. “There are markets around the world, like Australia, where Amazon is just getting started and has significant scope to boost sales,” he writes. “Amazon has a lot more runway to grow.”

But he added a cautionary note. “Amazon is now rapidly moving to a company that supports consumers across multiple aspects of their lives,” Saunders said. “As much as this maximizes growth opportunities, it also comes with two inherent dangers. One of these is the increased risk of regulatory intervention and oversight. The second is a backlash from consumers who could become concerned about Amazon’s power.”