Amazon More Than Doubles Net Income in Q4 to $1.9 billion

Company also increases net sales by 38 percent in Q4.

Subscription News: Amazon More Than Doubles Net Income in Q4 to $1.9 billion

Source: Amazon

The holiday season usually boosts Amazon’s bottom line, but 2017 was an exceptional year with Amazon (NASDAQ: AMZN) reporting net sales of $60.5 billion, a 38 percent increase over $43.7 billion in net sales in Q4 2016. The company also reported net income of $1.9 billion, or $3.75 per diluted share, for the fourth quarter alone, more than double net income of $749 million, or $1.54 per diluted share reported in the fourth quarter of 2016. Total outstanding shares at year end were 504 million, compared to 497 million at the end of 2016.

Net sales breaks down as follows:

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  • North America:                $37.3 billion
  • International:                  $18.0 billion
  • AWS:                                 $ 5.1 billion

The company’s net income includes a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of about $789 million. Amazon also reported net sales of $60.5 billion, a 38 percent increase over net sales of $43.7 billion in Q4 2016. The company’s operating income was $2.1 billion, a 69 percent increase year-over-year.

For the full year 2017, Amazon reported net sales of $177.9 billion, a 31 percent increase over 2016. Operating income decreased 2 percent to $4.1 billion compared to the same period last year. Net income for the full year was $3.0 billion, or $6.15 per diluted share, compared to $2.4 billion, or $4.90 per diluted share in 2016.

Subscription News: Amazon More Than Doubles Net Income in Q4 to $1.9 billion

Source: Amazon

Amazon founder and CEO Jeff Bezos commented on the company’s financials in a February 1 press release:

‘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,’ Bezos said. ‘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.’

Other highlights include:

  • Last year, more than 5 billion items were shipped with Prime worldwide.
  • There were more new paid Prime members in 2016 than in the prior year, but Amazon did not disclose how many.
  • The best-selling products in 2017 were the Fire TV Stick and Echo Dot.
  • There are no more than 30,000 Alexa skills.
  • Amazon created new ways for Alexa developers to earn money.
  • Amazon hired more than 130,000 last year, not including acquisitions.
  • To celebrate the tenth anniversary of Kindle, Amazon launched the Kindle Oasis.
  • NFL Thursday Night Football on Amazon Prime Video had 18.4 million views in 11 games.
  • CBS All Access is now available through Amazon Channels.
  • Amazon launched two furniture brands: Rivet and Stone & Beam.
  • The company launched Amazon Go in Seattle, a no-line, no-clerk grab-and-go store.
  • Amazon received 238 proposals from North American cities to become home to the new HQ2. Amazon winnowed the list of prospects down to 20.
  • Amazon, Berkshire Hathaway and JPMorgan Chase & Co. announced they are partnering to create a healthcare plan for their U.S.-based employees.
  • Amazon Web Services added new enterprise customers including Expedia, Ellucian and DigitalGlobe. In addition, Disney and Turner named AWS as their preferred public cloud provider.
  • AWS introduced four AI services, AWS DeepLens, EC2 P3, Amazon ML Solutions Lab, new database capabilities, and more to better serve its customers.

Amazon offered the following guidance for the first quarter of 2018:

  • Net sales are estimated to be between $47.75 billion and $50.75 billion for growth between 34 percent and 42 percent.
  • Operating income is estimated to be between $300 million and $1.0 billion, compared to $1.0 billion in Q1 2017.
  • Guidance assumes favorable foreign exchange rates and there are no additional acquisitions, investments, restructurings or legal settlements during the first quarter.

Amazon’s stock price has fluctuated a bit since the financials were released on February 1, but Amazon isn’t alone. The Dow Jones has been volatile in February. On February 1, Amazon’s stock price was $1,390.00 per share. On February 9, at 7:53 PM EST, Amazon stock was valued at $1,339.60. Compared to a year ago, when Amazon stock was $836.53 per share (February 13, 2017), Amazon’s value has grown significantly.

Subscription News: Amazon More Than Doubles Net Income in Q4 to $1.9 billion

Source: Google Finance

Insider Take:

Amazon had another strong year in 2017, more than doubling net income, reporting net sales 38 percent higher than Q4 and adding $503.07 per share in value since February 13, 2017. With all the new features, capabilities and enhancements to AWS and other changes in the works, Amazon is likely to see an increase in AWS revenue in 2018, but its expenses will also go up, especially if a site is selected and building begins on HQ2 this year.

At the same time, we anticipate Amazon will bail or products or services that aren’t working, as we’ve seen Amazon done a number of times. In fact, that’s one of their strengths. The Bezos-backed company is willing to take risks to try new things, but it is also willing to pivot quickly when products or services don’t yield the anticipated results. We aren’t surprised that Amazon continues to do so well.