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Amazon.com Tops Forecasts

February 01, 2019

Amazon.com reported financial results for its fourth quarter ended December 31, 2018.

Net sales increased 20% to $72.4 billion in the fourth quarter, compared with $60.5 billion in fourth quarter 2017. Excluding the $801 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 21% compared with fourth quarter 2017.

Wall Street was expecting net sales of $71.87 billion.

Operating income increased to $3.8 billion in the fourth quarter, compared with operating income of $2.1 billion in fourth quarter 2017.

Net income increased to $3.0 billion in the fourth quarter, or $6.04 per diluted share, compared with net income of $1.9 billion, or $3.75 per diluted share, in fourth quarter 2017. The fourth quarter 2017 included a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of approximately $789 million.

Investors were only looking for net income of $5.68 per per share.

Full Year 2018

Net sales increased 31% to $232.9 billion, compared with $177.9 billion in 2017. Excluding the $1.3 billion favorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 30% compared with 2017.

Operating income increased to $12.4 billion, compared with operating income of $4.1 billion in 2017.

Net income increased to $10.1 billion, or $20.14 per diluted share, compared with net income of $3.0 billion, or $6.15 per diluted share, in 2017.

Operating cash flow increased 67% to $30.7 billion for the trailing twelve months, compared with $18.4 billion for the trailing twelve months ended December 31, 2017. Free cash flow increased to $19.4 billion for the trailing twelve months, compared with $8.3 billion for the trailing twelve months ended December 31, 2017. Free cash flow less lease principal repayments increased to $11.6 billion for the trailing twelve months, compared with $3.3 billion for the trailing twelve months ended December 31, 2017. Free cash flow less finance lease principal repayments and assets acquired under capital leases increased to an inflow of $8.4 billion for the trailing twelve months, compared with an outflow of $1.5 billion for the trailing twelve months ended December 31, 2017.

Common shares outstanding plus shares underlying stock-based awards totaled 507 million on December 31, 2018, compared with 504 million one year ago.

“Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year,” said Jeff Bezos, Amazon founder and CEO. “The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear. In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017. We’re energized by and grateful for the response, and you can count on us to keep working hard to bring even more invention to customers.”

First Quarter 2019 Guidance

• Net sales are expected to be between $56 billion and $60 billion, or to grow between 10% and 18% compared with first quarter 2018. This guidance anticipates an unfavorable impact of approximately 210 basis points from foreign exchange rates.

• Operating income is expected to be between $2.3 billion and $3.3 billion, compared with $1.9 billion in first quarter 2018.

• This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

Wall Street was looking for Q1 net sales of 60.77 billion which is slightly more than the high end of Amazon's range of  $60 billion.

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