Amazon's stock surges after earnings more than double, revenue beats

Amazon blew past street estimates for its fourth quarter earnings, reflecting strong holiday sales and growth in its cloud business.

Amazon's stock went up more than 6 percent in after hours trading.

Here are the most important numbers:

Revenue: $60.5 billion vs. $59.83 billion, as estimated, according to Thomson Reuters

$60.5 billion vs. $59.83 billion, as estimated, according to Thomson Reuters EPS: $3.75 per share*

$3.75 per share* AWS revenue: $5.11 billion vs. $4.97 billion, as estimated, according to FactSet

Amazon's revenue, which includes sales from Whole Foods, jumped 38 percent year-over-year. Its North America revenue jumped 42 percent to $37 billion, while international sales grew 29 percent to $18 billion.

In a call with analysts, Amazon's CFO Brian Olsavsky credited record order volume and improved warehouse efficiency during the busy holiday shopping season for the successful quarter. He also pointed out AWS's continued expansion and said the advertising business was a "key contributor" in North American revenue growth.

Net income was $1.9 billion, more than double from the same period of last year and the highest in company history. Amazon noted that the fourth quarter earnings includes a tax benefit of roughly $789 million due to the change in U.S. tax code.

Amazon's cloud unit, AWS, continued to be the fastest-growing and most profitable business of the company. For the quarter, AWS sales jumped 45 percent year-over-year, while generating $1.3 billion in operating income, a whopping 64 percent share of Amazon's total operating income.

In a statement, Amazon CEO Jeff Bezos touted the success of Amazon's voice-controlled technology Alexa and hinted that the company would invest more in the space.

"Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don't see positive surprises of this magnitude very often — expect us to double down," Bezos said.

First quarter revenue guidance came in the range of $47.75 billion to $50.75 billion, above street estimates of $48.6 billion. But operating income guidance was between $300 million to $1 billion, below the $1.5 billion street consensus, likely indicating heavier investments going forward.

Amazon has been in heavy investment mode in recent quarters, pouring money into warehouse and data center expansion, while adding more video content for its Prime Video offering. Its total costs jumped 38 percent in the fourth quarter year-over-year, to $58 billion, a significant jump from the 23 percent cost increase between the fourth quarter of 2015 and 2016.

Physical stores revenue, which primarily comes from Whole Foods, came in at $4.5 billion. This is the first full quarter to have Whole Foods revenue included in Amazon's sales, and Olsavsky said the company's "very happy" with the initial results of the grocery chain.

For the full year, Amazon had $177.9 billion in sales, up 31 percent from the previous year's $136 billion. Still, the company continued to invest in its business, resulting in a 2 percent drop in its operating profit to $4.1 billion.

Amazon stock is up more than 70 percent over the past year, and hit the $700 billion market cap milestone for the first time this week.

*Correction: Amazon's EPS number is not comparable against earnings estimates because of the tax benefits the company saw due to changes in the U.S. tax code.

Shares of Amazon.com Inc. AMZN, +4.70% surged 2.5% in after-hours trade Thursday, after the e-commerce giant reported a big jump in fourth-quarter profit and revenue that rose above expectations. Net income rose to $1.86 billion, or $3.75 a share, from $749 million, or $1.54 a share, in the same period a year ago. The results included a one-time benefit of $789 million from tax-reform legislation. The FactSet consensus for earnings per share was $1.88. Revenue rose to $60.45 billion from $43.74 billion, beating the FactSet consensus of $59.75 billion. Sales for Amazon's AWS cloud business rose to $5.11 billion from $3.54 billion, topping the FactSet consensus of $4.97 billion. Looking ahead, Amazon expects first-quarter revenue of $47.75 billion to $50.75 billion, surrounding the FactSet consensus of $48.60 billion. Although Amazon didn't provide details of Alexa sales, Chief Executive Jeff Bezos said 2017 projections were "very optimistic, and we far exceeded them. We don't see positive surprises of this magnitude very often - expect us to double down." The stock has soared 26% over the past three months through Thursday's close, while the S&P 500 SPX, -1.44% has gained 9.4%.

An earlier version of this story incorrectly named Stifel's lead analyst covering Alphabet. He is Scott Devitt.

Following Alphabet Inc.'s GOOGL, -5.03% fourth-quarter earnings release, analysts at Stifel have cut their rating on shares to hold from buy. The analysts, led by Scott Devitt, raise a number of "longer-term concerns," including the impact of Amazon.com Inc.'s AMZN, +4.08% ever-expanding retail dominance on Google's search segment. Devitt cites a third-party study saying that more than half of all consumer-product searches begin at Amazon: "This has the potential to cannibalize Google's revenue from retail advertisers." He added that Google's traffic-acquisition costs have been rising as a percentage of total gross revenue. "Rising TAC presents a greater risk to multiple compression rather than margin erosion in the near term, though greater-than-expected TAC could continue to create a headwind to margin expansion," Devitt wrote. He kept his price target of $1,150 unchanged. Alphabet shares are down 4.1% in premarket trading but up 44% over the past 12 months. The S&P 500 Index SPX, -1.78% is up 24% in that time.

Futures for the S&P 500 index futures turned sharply lower Friday morning as a global bond sell-off continued with the U.S. January jobs report on tap. Nasdaq 100 futures reversed sharply, with Amazon (AMZN) still booming on Q4 results but Apple (AAPL) giving up most of its post-earnings gains.

X The 10-year Treasury yield traded at 2.79%, continuing its strong 2018 rise. The 30-year yield topped 3% for the first time in years Thursday. The Bank of Japan said it would buy 5- and 10-year government debt after the 10-year Japanese yield threatened to top 0.1%. German bund yields are multiyear highs.

S&P 500 index futures fell 0.6% vs. fair value. Dow futures sank 0.8%, or more than 200 points. Nasdaq 100 futures, up solidly Thursday night, lost 0.7%.

Separately, Bitcoin and other cryptocurrencies continued to plunge as regulators and Facebook (FB) crack down and euphoria fades following a climax-type run that peaked in December. Bitcoin dipped below $8,000 Friday morning, currently down 12% to $7,968.23, according to CoinDesk. Bitcoin crashed below $9,000 on Thursday.

The January employment report is due at 8:30 a.m. ET. Economists expect to see nonfarm payrolls up 175,000 and the jobless rate holding at 4.1%. But the focus may be on average hourly wages, which are seen up 0.3% vs. December and 2.6% vs. a year earlier.

Apple

Apple reported better-than-expected earnings and revenue for the holiday fiscal first quarter, though iPhone shipments missed forecasts. Apple guided current-quarter revenue forecasts sharply lower. Shares rose more than 3% late Thursday, but with futures tumbling Apple was up just 0.6%.

Extended trading often doesn't translate into the following session. There is a strong case that Apple's bad news was already priced in the stock price. Several analysts warned of weaker iPhone production and demand leading up to the earnings report. That sent the stock below a recent buy point and its 50-day moving average, even as the broader market was soaring in January.

But on the other hand, Apple's news wasn't great. And the AAPL stock chart is still in bad shape. The relative strength line, which tracks a stock's performance vs. the S&P 500 index, has been lagging for months, and recently hit its worst levels since mid-June. Technically, a 176.34 buy point is still valid, though you'd want to see the RS line top at least short-term highs to provide some confirmation.

IPhone Stocks Rally

Apple, which is the biggest member of the S&P 500 index, Nasdaq composite and Dow industrials, also gave a boost to iPhone-related stocks such as Broadcom (AVGO), Applied Materials (AMAT) and Universal Display (AVGO).

Broadcom rose 0.5% early Friday. But the chipmaker, which set a four-month closing low Thursday, is stuck below its 50-day and 200-moving averages.

Applied Materials is a chip- and display-equipment maker. It is not an Apple supplier, but some analysts have pegged it as an iPhone X play due to its involvement in OLED displays. Applied Materials rose 1% late Thursday but reversed to down about 1% early Friday. Applied Materials is in a cup-with-handle base, but the stock is finding resistance at its 50-day moving average.

Universal Display also is not an Apple supplier, but as its OLED ticker suggests, makes technology used in producing the high-end screens for premium smartphones. Universal Display rose 3.9% early Friday. The stock had closed at its lowest level in almost three months after a January breakout broke down.

Qorvo (QRVO) is an iPhone chipmaker, but shares weren't that active overnight. They might be tired after skyrocketing 16% to close at 83.34, clearing an 81.30 cup buy point. Qorvo guided lower late Wednesday, but touted a big Apple contract win that will increase its iPhone business, at the expense of Broadcom.

Amazon

Amazon reported blowout earnings, helped by a big tax-cut benefit, while revenue also topped. Shares rose 5.7% early Friday after falling 4.2% Thursday. Amazon has been a huge winner so far in 2018 after clearing a late-stage base.

Meanwhile, Amazon's upside was offset by Google parent Alphabet (GOOGL) and Amgen (AMGN), which both missed on earnings. Alphabet lost 3.2% early Friday and Amgen 2.2%.

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