Amazon Stuns With Excellent Earnings: Surges Towards $1 Trillion Market Cap

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Amazon (NASDAQ:AMZN) just took the wraps off its Q4 2019 earnings today, easily trumping expectations on both the top and bottom lines.

Official earnings statements can be found here: Link

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Key Facts

  • Revenue posted a mild beat at $87.4 billion versus $86.17 billion expected
  • Earnings crushed earnings with $6.47 versus $4.11 per share expected
  • Prime Subscriptions and AWS leading the charge
  • Almost every Amazon business segment is doing well

Fourth-quarter revenue came in at $87.4 billion which gives Amazon a nice top-line beat on revenue given consensus expectations were shy of $86.2 billion. Profit soared to $3.3 billion, easily surpassing expectations of $2.1 billion. That would make 2019 Amazon's most profitable ever with a total of $11.6 billion in net income, versus $10 billion in 2018.

Almost every segment posted eye-watering numbers. AWS increased sales by 34% YoY, Ad revenue was up 41%, Subscription Services up 31%, North America Amazon.com sales increased 22%.

Here's the overall breakdown of the major product lines for Amazon net sales $ in millions:

Q4 2018 Q4 2019 Year over Year change %
Online Stores $39,822 $45,657 15%
Physical Stores $4,401 $4,363 (1)%
3rd Party Sellers $13,383 $17,446 30%
Subscription Services $3,959 $5,235 32%
AWS $6,679 $9,954 34%
Other (Ads) $3,388 $4,782 41%

Amazon Web Services and Subscription Services Are the Stars of the Show

Amazon's AWS segment is the worldwide leader in cloud computing, easily dwarfing Microsoft's Azure and Google Cloud... combined.

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Here's a sobering statistic: AWS has broken 34% or more (more often in the mid to upper 40 percent range) for the past twelve quarters. AWS now counts for nearly $10 billion in sales for a single quarter and its profit margins are simply incredible when compared to Amazon's physical and online stores.

While its web services segment only accounted for 11% of the company's total revenue, AWS notched $2.6B in operating income, good for two-thirds of Amazon's total operating income for the quarter.

Subscription services, which is more-or-less Amazon Prime is an equally compelling story with now over 150 million annual subscribers globally signed up for the service. 150M subscribers means Jeff Bezos has built a service that enticed 50 million additional people to sign up for the premium service since the first quarter of 2018.

Amazon doesn't break out profitability numbers on subscriptions like Prime, but we can tell you that the product line grew 32% in revenue Year-over-year.

You can probably count on that number continuing to grow as Amazon looks to ever-increase what folks get from the service, and announced today that free deliveries from Whole Foods and Amazon Fresh will be made available to subscribers.

The (not so) Mysterious "Other" Segment

Maybe Jeff Bezos doesn't want you to think of Amazon as a Google competitor, well, aside from cloud computing. Google may be the official "king of ads" but don't sleep on Amazon just yet. Its ad-focused segment just posted nearly $5 billion in revenue when it was less than half of this less than a year-and-a-half ago.

Its "Other" segment should really be called its "Advertising Business" since this is mostly ad revenue. No one knows Amazon's customers better than Amazon itself, and you better believe that the ads it sells to its partners come at a premium versus what you might see from Google's ad services.

Revenue for the Other segment has been growing steadily, and quickly over the last several quarters. Take a look.

The business has been growing steadily, but it simply exploded in Q4 by 50% compared to the previous quarter. Amazon is showing some real strength here by leveraging its exclusive data set on its customers and nearly $5 billion in revenue this quarter means its ad business has quietly grown to rival entire businesses.

Interestingly, Amazon drove its own stock price down when it released less-than-stellar guidance for the fourth-quarter back in Q3. And here we are after Q4 and Amazon destroyed its own lowered guidance. Since shares were already held down somewhat by the weak guidance, investors weren't expecting anything groundbreaking and shortly after the news broke that Amazon beat earnings by over half investors rushed to buy up $AMZN stock.

Shares are up over 10% in after-hours trading and its market cap has eclipsed $1 trillion for now. We will need to see what happens when much larger volumes swap hands tomorrow, but right now most tech stocks are up in after-hours simply due to how strong Amazon's showing.

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