Amazon reports Q4 revenue of $43.7 billion, below market expectations

Amazon reported revenue of $43.7 billion in the fourth quarter, failing to meet market expectations, but a 22% increase compared with revenue of $35.7 billion in the fourth quarter of 2015.

The revenue figure for the fourth quarter fell short of what analysts had forecast, of $44.68 billion, according to Thomson Reuters I/B/E/S.

Operating income increased 13% to $1.3 billion, compared with operating income of $1.1 billion in the fourth quarter of 2015.

Net income was $749 million, or $1.54 a share, down from $482 million, or $1 a share, in the same period a year earlier, beating what analysts had forecast of around $1.35 a share.

Net sales for the company’s closely watched cloud computing unit, Amazon Web Services (AWS), rose 47% from the year-ago quarter to $3.536 billion. This was down from a 55% increase in the third quarter.

AWS (in millions $) Q4 2015  Q4 2016  FY  2015  FY 2016
Net sales $2,405 3,536 $7,880 $12,219
Operating expenses $1,718 $2,430 $6,017 $8,513
Operating income before stock-based compensation and other $687 $1,106 $1,863 $3,706
Stock-based compensation and other $107 $180 $356 $598
Operating income$ $580 $926 $1,507 $3,108

AWS is the firm’s fastest-growing and most profitable segment. The segment has an operating margin of 31.3% of all net sales, compared to an operating margin of only 5% of net sales in its North American retail business.

For the full year, revenue rose 27% to $136.0 billion, compared with $107.0 billion in 2015, while operating income rose to $4.2 billion from 2.2 billion, and net income rose to $2.4 billion, or $4.90 per diluted share, from $596 million, or $1.25 per diluted share.

Jeff Bezos, Amazon founder and CEO, said:

“Our Prime team’s customer obsession kept them busy in 2016. Prime members can now choose from over 50 million items with free two-day shipping — up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 new cities, which means millions more members now get one and two hour delivery. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more. And customers noticed — tens of millions of new paid members joined the program in just this past year.”

First Quarter 2017 Guidance

Amazon expects revenue to be between $33.25 billion and $35.75 billion in the first quarter, or growth of between 14% and 23% compared to last year.

However, operating income is expected to dip for the current quarter, down to between $250 million and $900 million from $1.1 billion in first quarter 2016.

The unexpected dip in operating profit expectations for the current quarter, along with Q4 revenue missing forecasts, sent shares in the tech giant down by over 4.16% in after-hours trading on Thursday.