Amazon (Nasdaq: AMZN) reported strong Q4 results which marked the company's first time exceeding $100 billion in quarterly revenue. Shares were slightly higher in pre-market trading.
However, the report was overshadowed by CEO and founder Jeff Bezos' decision to step down as CEO and assume the role of executive chairman. Bezos will be replaced by Amazon Web Services (AWS) CEO Andy Jassy who started at the company in 1997 in a mid-level role. In a memo to employees, Bezos said that he would be focusing on new products, initiatives and passions including the Day One Fund, Bezos Earth Fund, the Washington Post, and his space company, Blue Origin. The company also added that Bezos will remain involved in terms of major decisions and refining the company's strategy.
Inside the Numbers
In the first quarter, Amazon generated $125.6 billion in revenue which topped analysts' expectations of $119.7 billion. Additionally, earnings per share also beat at $14.09 per share vs the $7.23 that analysts were expecting. The largest driver of this beat was a "record-breaking holiday season" as the company delivered more than a billion products. Of course, e-commerce sales were even stronger than normal due to the more people opting to shop online with the coronavirus and a later than usual Prime Day.
One contributor to the strong report was that coronavirus costs decreased to $2 billion from $4 billion and $3 billion in previous quarters. The company expects e-commerce volumes to drop by 25% in the next quarter. However, Amazon's projection for operating income was higher than analysts' expectations at $3 billion to $6.5 billion with revenue between $100 billion and $106 billion. This is an increase of 33% to 40% from last year and topped analysts' expectations of $96 billion in revenue.
In Q4, Amazon hired 175,000 new full and part-time employees. In total, the company now has 1.3 million employees which is a 63% increase from last year. Another reason for higher costs was the company paying a $300 bonus to all front-line workers. Shipping costs also increased by 67% to $21.5 billion.
AWS revenue fell short of expectations at $12.7 billion, while analysts were looking for $12.8 billion. The "Other" category which includes advertising is now Amazon's fastest-growing unit with revenue of $7.9 billion an increase of 64%.
Stock Price Outlook
During the initial part of the stock market rally from the bottom in March 2020, Amazon was a leading stock as it made new highs in late-April. However, like many tech stocks, it's been a laggard over the past few months. The stock has been range-bound since July, while the S&P 500 (NYSE: SPY) is 18% higher since then. Given that this remains a bull market and its strong report, shares will likely resolve higher from this range. There could be some near-term selling on Bezos' retirement but it's unlikely to affect the company's trajectory.