4Q23 Operating Income consistently surpassed street and guidance
AMZN reported an operating income of US$13.2bn, (+382% y-o-y) in 4Q23, surpassing both the company’s internal guidance of US$7.0-11.0bn and the Street estimate of US$8.6bn. This resulted to 7.8% operating margin, the highest ever recorded in terms of both operating income and margins. To note, AMZN has consistently surpassed the street estimate and management’s guidance for the past eight consecutive quarters. The Retail North America segment demonstrated robust performance with an operating income of US$4.3bn, (+50% q-o-q). However, the international segment experienced an expanded loss, reaching US$419bn (compared to US$95bn in 3Q23. Retail margin improvement can be attributed to the ongoing enhancement in utilization and efficiency within the regionalization of fulfillment. The advertising business played a pivotal role in boosting profitability, with advertising revenue growing by 21% q-o-q and 27% y-o-y, reaching US$14.6 billion. Notably, this growth was further fueled by the inclusion of ads on the Amazon Prime streaming platform since January 2024.Simultaneously, Amazon Web Service (AWS) achieved an operating income of US$7.1bn, (+37% y-o-y). The margin for AWS also experienced a noteworthy improvement, rising by +526bps y-o-y to reach 29.6%.
4Q23 revenue of US$170bn (+14% y-o-y) was beyond the consensus estimates of US$143bn. Retail business (1P,3P, and Physical) net sales grew by +14% y-o-y to US$145bn, while advertising revenue grew by +27% y-o-y to US$14.6bn. This is on the back of record-breaking Black Friday and Cyber Monday holiday shopping event, where customers worldwide purchased more than 1bn item on Amazon and saved nearly 70 more during the 11 days of deals compared to the same period in 2022. The retail segment surpasses AWS’ growth of 13% y-o-y in 4Q23 to US$24bn. AWS continued to underperform peers which Microsoft’s Azure revenue jumped by +29% y-o-y and Google cloud revenue expanded by +26% y-o-y.
AMZN guides an operating income of US$8-US$12bn for 1Q24F, inline compared to the Street estimate of US$9.2bn. Management guided 1Q24F revenue to hover at US$138-143.5bn (8%-13% y-o-y growth), and the operating income to be in the range of US$8-12 bn, implying an operating margin range of 5.8% – 8.4%. This is in line with the street estimate of US$142bn in revenue and an operating income consensus estimate of US$9.2bn.