Amazon.com Inc. defied its own disappointing forecast and returned to earnings growth in the holiday quarter with more than $3 billion in profit, sending shares soaring toward a $1 trillion valuation in the extended session Thursday.
The e-commerce and cloud-computing stalwart reported fourth-quarter profit of $3.3 billion, or $6.47 a share, on sales of $87.4 billion, after reporting profit of $6.04 a share on sales of $72.38 billion a year ago. Analysts on average expected Amazon AMZN, +0.68% to report earnings of $4.04 a share on revenue of $86.03 billion, according to FactSet, expectations that had declined since Amazon disappointed Wall Street with its holiday forecast three months ago.
Amazon healthily beat that holiday forecast, resuming earnings to growth after a decline in the previous quarter that broke a streak of more than two years without a profit drop. After slowing down its spending in 2018, following the acquisition of Whole Foods Market Inc. and other efforts, the company enjoyed record annual profit of more than $10 billion. In 2019, however, the company resumed spending to halve delivery times to Prime members and bolster its workforce, which had harmed earnings.
“Prime membership continues to get better for customers year after year. And customers are responding — more people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,” Amazon Chief Executive Jeff Bezos said in Thursday’s announcement of the results. “We’ve made Prime delivery faster — the number of items delivered to U.S. customers with Prime’s free one-day and same-day delivery more than quadrupled this quarter compared to last year.”
Amazon stock jumped about 10% immediately in after-hours trading after closing with a 0.7% increase to $1,870.68 that gave it a market capitalization of $927 billion. If those gains hold into Friday’s trading session, Amazon could top a $1 trillion market capitalization, joining Apple Inc. AAPL, -0.14%, Microsoft Corp. MSFT, +2.82% and Alphabet Inc. GOOGL, -0.17% GOOG, -0.19% in that exclusive club. Shares have lagged behind the S&P 500 index SPX, +0.31% amid Amazon’s spending increase, rising 11.9% in the past year as the S&P 500 has gained 22.1%.
For the first quarter, Amazon forecast sales of $69 billion to $73 billion and operating income of $3 billion to $4 billion. Analysts on average were expecting operating profit of $4.04 billion on revenue of $71.63 billion, according to FactSet.
Amazon said that its Amazon Web Services cloud-computing segment was responsible for $2.6 billion in operating profit, 67% of Amazon’s total, on revenue of $9.95 billion. Analysts on average expected operating profit of $2.45 billion on sales of $9.87 billion, according to FactSet. North American e-commerce sales produced operating profit of $1.9 billion on sales of $53.67 billion, while international retail operations produced an operating loss of $617 million on revenue of $23.81 billion.
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