Amazon.com beat fourth-quarter revenue expectations on Thursday as new generative AI features in its cloud and ecommerce businesses spurred robust growth during the critical holiday period, sending its shares up eight per cent after the market close.
The company forecast current-quarter revenue of $138 billion to $143.5 billion. Analysts polled by LSEG expect $142.13 billion.
Amazon Web Services (AWS), the world’s largest cloud services provider, posted revenue of $24.2 billion in the fourth quarter, largely in line with analysts’ expectations of $24.26 billion.
AWS CEO Andy Jassy in a statement touted the unit’s “continued long-term focus on customers and feature delivery,” citing efforts to incorporate generative AI into many of its services. The new features “are starting to be reflected in our overall results,” he said.
Amazon’s roster of high-spending business customers have provided it stable growth in an uncertain economy, but its position as the world’s biggest cloud provider is being challenged by Microsoft and Alphabet .
To bolster its cloud business and in response to Microsoft’s promised $10 billion investment in ChatGPT parent OpenAI, Amazon is spending up to $4 billion in chatbot-maker Anthropic.
Earlier this week, Microsoft and Alphabet reported generous cloud revenue gains in the December quarter, beating Wall Street estimates, as customers lined up to test new AI features and build their own AI services.
But mounting costs of developing these cutting-edge features irked investors hoping for a big sales boost from the new technology, sending their shares down.
“All eyes will be on AWS, where the mild acceleration of growth … leaves some lingering doubts about whether the cloud unit will be able to hold its own against rivals,” said Insider Intelligence senior analyst Sky Canaves.
Amazon shares have climbed over six per cent this year and 41 per cent in the past 12 months. The stock, which surged 81 per cent in 2023, helped boost the S&P 500 .SPX by nearly a quarter last year along with other tech giants.
Despite the strong performance, Amazon began the year by shedding jobs in several divisions. Last year, it cut more than 27,000 jobs after hiring heavily during the pandemic like other tech rivals.
“We’re coming off a period where we’ve done a lot of hiring,” Amazon’s Chief Financial Officer Brian Olsavsky told reporters on a call. “There’s a general feeling in most teams that we’re trying to hold the line on headcount.”
Amazon has built fulfillment centers closer to customers, making it cheaper and faster to deliver packages. During the key Black Friday and Cyber Monday holiday shopping events last year, customers worldwide bought more than 1 billion items on Amazon.
The company has also launched Buy With Prime, a service that enables Prime subscribers to get one- and two-day shipping from merchants who may not be on Amazon.com.
“Despite all the concerns plaguing the tech sector, Amazon has managed to perform surprisingly well. The results indicate that ongoing cost-cutting measures are having a positive impact on Amazon’s business prospects,” said Jesse Cohen, senior analyst at Investing.com.
“Amazon’s strong guidance is another indicator that the company may be starting to come out of the woods,” said Cohen, noting the strength in its cloud computing and advertising businesses.
Amazon’s fourth-quarter sales rose 14 per cent to $170 billion, beating analysts’ average estimate of $166.21 billion according to LSEG data. Adjusted profit of $1 per share beat an average estimate of 80 cents per share.
Apple on Thursday reported sales and profit that beat Wall Street estimates, powered by growth in its iPhone business. But China sales missed analysts’ targets.
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The two per cent rise in overall fiscal first-quarter sales for the company ended four straight quarters of sales declines on the strength of its iPhone 15 lineup, which includes devices capable of capturing three-dimensional video for the Vision Pro headset being released this week. Apple’s total installed base of devices hit 2.2 billion, up from 2 billion a year ago.
“We did feel good about the plus six per cent (revenue growth) for iPhone,” Apple Chief Executive Tim Cook told Reuters in an interview. “We had particularly strong double-digit growth on iPhone in emerging markets outside of China. The iPhone is doing well in those markets.”
He added: “China is the most competitive smartphone market in the world, and that hasn’t changed.”
For its fiscal first quarter ended Dec. 30, Apple reported sales of $119.58 billion and profit of $2.18 per share, both above analyst expectations of $117.91 billion and $2.10 per share, according to data from LSEG.
Sales of iPhones hit $69.70 billion, growing six per cent to beat analyst expectations of $67.82 billion, according to LSEG data.
Microsoft in January eclipsed Apple as the world’s most valuable company, with investors viewing Apple as lagging in the artificial-intelligence race between Wall Street’s tech heavyweights. Apple’s stock has dropped more than three per cent in 2024, compared with the S&P 500’s .SPX two per cent increase.
Apple has said it is researching generative AI but has instead focused on its Vision Pro headset, which analysts do not expect to bring meaningful revenue for several years.
In the shorter term, analysts are increasingly worrying about sales of Apple’s signature device in China, whose economy is navigating the burst of a real estate bubble. The iPhone also faces increasing competition in China and has fallen out of favor in government offices.
Apple said sales in China were $20.82 billion, missing analyst estimates of $23.53 billion, according to LSEG data.
Cook told Reuters that, when accounting for currency exchange rates, iPhone sales in mainland China were down “mid-single digits” in the quarter but said the company’s installed base of iPhones in China is at an all-time high.
Counterpoint Research reported China iPhone unit shipments fell during the quarter, with Chinese consumers looking to novel folding phones and homegrown rival Huawei, which re-entered the market with a flagship phone powered by a Chinese-made chip.
In the rest of Asia beyond China and Japan, Apple’s sales hit $10.16 billion, above analyst estimates of $9.75 billion, according to LSEG data. Cook said that iPhone sales hit an all-time high in South Korea, home to Apple’s longtime rival Samsung Electronics 005930.KS.
Investors will be listening closely for the Cupertino, California-based company’s forecast for the fiscal second quarter on a conference call at 5 p.m. EST (2200 GMT).
The biggest growth area for Apple during its fiscal first quarter was its services business, which includes the Apple TV+ service as well as music, iCloud storage and the App Store, and which rose 11 per cent to $23.12 billion in sales. The results were slightly below analyst expectations of $23.35 billion, according to LSEG data.
But Apple’s App Store faces a challenge in Europe, where a new law that takes effect in March will allow developers to skip paying commissions to Apple and place alternative app stores on the iPhone.
Apple’s first-quarter Mac sales were up slightly to $7.78 billion, in line with analyst expectations of $7.73 billion, according to LSEG data. Sales of iPads were down 25 per cent to $7.02 billion, missing expectations of $7.33 billion, according to LSEG data.
Apple’s wearables segment, which includes its AirPods and Apple Watch sales, fell to $11.95 billion after company executives had warned of weak demand. The results were just above expectations of $11.56 billion, according to LSEG data.
Several Apple Watch models have been at the center of a legal dispute with medical device maker Masimo and were briefly pulled from shelves before Apple removed a blood-oxygen monitoring features to comply with legal rulings and keep selling the devices.
Meta Platforms issued its first ever dividend days ahead of flagship social network Facebook’s 20th anniversary, while reporting revenue that beat expectations as a result of robust ad and device sales in the holiday shopping period.
Shares soared more than 14 per cent after the bell, extending a long recovery in which Meta hit record highs in recent weeks for the first time in over two years.
The company’s stock market valuation surged by about $130 billion, pushing it to five times that of smaller rival Snap Inc SNAP.N.
The company, one of the tech sector’s original unicorns, said the dividend would be 50 cents per share. It also announced it had authorized an additional $50 billion in share repurchases.
“We’ve made a lot of progress on our vision for advancing AI and the metaverse,” Meta CEO Mark Zuckerberg said in a prepared statement.
Revenue rose 25 per cent to $40.1 billion for the quarter ended Dec. 31. Analysts were expecting revenue of $39.2 billion, according to LSEG data.
“This was one of the most impressive quarters – intrinsically and vs. expectations,” said Evercore ISI analyst Mark Mahaney.
Meta forecast first quarter revenue of $34.5 billion to $37 billion, above Wall Street expectations of $33.8 billion. It said it expects full-year 2024 total expenses to be unchanged at $94 billion to $99 billion.
On Tuesday, fellow digital ads heavyweight Alphabet posted results that disappointed Wall Street, after holiday season advertising sales came in below expectations.
Shares of Meta, which also owns Instagram and WhatsApp, have been steadily climbing back from a meltdown in 2022 that wiped out more than three-quarters of the company’s one-time value.
Its recovery has been aided by a rebound in user growth and digital ad sales. It also has shed more than 21,000 employees since late 2022.
Improvements to the social media business have made investors more tolerant of Meta’s undiminished spending, with investments in “metaverse” technologies and billions to build out its artificial intelligence infrastructure.
Meta said ad impressions, or views, increased 21 per cent from a year ago and the average price per ad increased two per cent.
“Meta ended 2023 on an extremely strong note, with revenue soaring above analyst expectations,” said Debra Aho Williamson, an independent tech analyst and former principal analyst at eMarketer.
“The company can talk all it wants to about AI and the metaverse, but it’s still a social media company that gets nearly all its revenue from advertising, and advertisers still clearly love Meta.”
The company’s metaverse-oriented Reality Labs division handily beat revenue expectations for the fourth quarter, posting record sales of $1.1 billion from “strong sales” of its Quest device over the holiday season, Zuckerberg told analysts after the report. Investors had been expecting $804 million, according to LSEG data.
Meta said it still expected operating losses for Reality Labs to “increase meaningfully” as it invests more in augmented and virtual reality in 2024.
