Amazon.com (AMZN Quick QuoteAMZN - Free Report) delivered fourth-quarter 2023 earnings of $1.00 per share compared with 3 cents per share recorded in the year-ago quarter.

AMZN’s net income, totaling $10.6 billion, is inclusive of a pretax valuation loss of $0.1 billion in the non-operating income/expense associated with its investment in Rivian Automotive.

The adjusted bottom-line figure was $1.01 per share, topping the Zacks Consensus Estimate by 24.7%.

Net sales of $169.96 billion rose 14% year over year. The figure exceeded management’s guided range of $160-$167 billion and surpassed the Zacks Consensus Estimate of $166.26 billion.

Amazon witnessed a $1.3 billion impact from favorable fluctuations in foreign exchange rates.

Solid momentum across North America and International segments contributed well.

The robust performance delivered by Amazon during the holiday season drove top-line growth. The company witnessed record-breaking sales on Black Friday and Cyber Monday. During its 11 days of deals, customers across the world purchased over 1 billion items.

Regionalization of the U.S. fulfillment network helped boost delivery speeds to Prime members, which was a plus.

The growing momentum of Amazon Web Services (AWS) segment contributed well.

Strength in the advertising business also benefited the company in the reported quarter.

The company's shares have surged 6.3% in pre-market trading. This is primarily attributed to Amazon’s better-than-expected results.

Moreover, AMZN has gained 41.1% over a year, outperforming the industry’s growth of 18.3%.

AWS’ deepening focus on generative AI and Large Language Models is likely to continue aiding it in gaining momentum among cloud customers in the near term.

Amazon’s strong global presence, growing Prime momentum, improving Alexa skills, expanding smart device portfolio and increasing efforts toward gaining strong traction among small and medium businesses are likely to drive its financial performance in the days ahead.

Top-Line Details

Product sales (45.1% of sales) increased 8.8% year over year to $76.7 billion. Service sales (54.9% of sales) rose 18.5% from the year-ago quarter’s level to $93.3 billion.

By segment, North America revenues (62% of sales) rose 13% from the year-ago quarter’s level to $105.51 billion, which came ahead of the Zacks Consensus Estimate of $103.3 billion.

International revenues (24% of sales) increased 17% year over year to $40.24 billion, which surpassed the consensus mark of $38.4 billion.

AWS' revenues (14% of sales) rose 13% year over year to $24.2 billion, which came below the consensus mark of $24.4 billion.

This apart, strengthening relationships with third-party sellers remained a positive. In the reported quarter, sales generated by third-party seller services rose 20% on a year-over-year basis to $43.6 billion, which surpassed the Zacks Consensus Estimate of $41.5 billion.

Sales from robust advertising services increased 27% to $14.7 billion, which came ahead of the consensus mark of $14.1 billion.

AMZN experienced year-over-year growth of 4% in its physical store sales, which came in at $5.15 billion in the reported quarter. The figure missed the consensus mark of $5.31 billion.

The company’s online store sales came in at $70.54 billion, up 9% year over year. The figure also came ahead of the Zacks Consensus Estimate of $68.5 billion.

Strength in Prime was a positive. Amazon witnessed 14% growth in its subscription services sales, which were $10.5 billion in the reported quarter. The figure came above the consensus mark of $10.4 billion.

Growing momentum with Same-Day Delivery service worldwide was a positive. Also, the expanding original content and international slate of content on Prime Video continued to accelerate Prime engagement.

Operating Details

Operating expenses were $156.8 billion, up 7% from the year-ago quarter’s level. As a percentage of revenues, the figure contracted 600 basis points (bps) on a year-over-year basis to 92.2%.

The cost of sales, fulfillment, technology and infrastructure and sales and marketing expenses increased 8.1%, 12.9%, 5.9% and 0.7% to $92.6 billion, $26.1 billion, $22.04 billion and $12.9 billion, on a year-over-year basis, respectively.

General and administrative expenses were $3.01 billion, down 9.7% year over year.

Other operating expenses were $154 million in the reported quarter, down 79.7% year over year.

Overall operating income was $13.21 billion compared with $2.74 billion reported in the year-ago quarter.

Operating income for AWS was $7.2 billion, up 37.7% year over year.

The North America segment reported an operating income of $6.5 billion against an operating loss of $240 million in the prior-year quarter. The International segment reported an operating loss of $419 million compared with a loss of $2.2 billion in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2023, cash and cash equivalents were $73.4 billion, up from $49 billion as of Sep 30, 2023.

Marketable securities totaled $13.4 billion as of Dec 31, down from $14.6 billion as of Sep 30.

Long-term debt was $58.3 billion as of Dec 31, down from $62 billion as of Sep 30.

In the fourth quarter, AMZN generated $42.5 billion of cash from operations, up from $21.2 billion in the third quarter.

On a trailing 12-month basis, operating cash flow came in at $84.9 billion. Free cash flow was $36.8 billion.

Guidance

For first-quarter 2024, Amazon expects net sales between $138 billion and $143.5 billion. Net sales are expected to grow 8-13% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for net sales is pegged at $142.09 billion.

Management projects a favorable foreign exchange impact of 40 bps.

Operating income is anticipated to be between $8 billion and $12 billion.

Zacks Rank & Other Stocks to Consider

Currently, Amazon carries a Zacks Rank #2 (Buy).

Investors interested in the broader retail-wholesale sector can consider some other top-ranked stocks like The Gap , Booking Holdings (BKNG Quick QuoteBKNG - Free Report) and Globale Online (GLBE Quick QuoteGLBE - Free Report) . While The Gap and Booking Holdings sport a Zacks Rank #1 (Strong Buy) each, Globale Online carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of The Gap have gained 37.9% over a year. The long-term earnings growth rate for GPS is currently projected at 17.3%.

Shares of Booking Holdings have gained 45% over a year. The long-term earnings growth rate for BKNG is currently projected at 19.8%.

Shares of Globale Online have gained 18.3% over a year. The long-term earnings growth rate for GLBE is currently projected at 16.2%.