Amazon reported what the company described as a record-breaking holiday quarter in results released after the bell in the US on Thursday.
Revenue of $170 billion topped estimates (the Street was looking for $166.2 billion) and represented the briskest pace of top-line growth since the September quarter of 2022, when sales growth rebounded sharply after bottoming at around half the current rate.
Still, 14% (13% ex-currency impact) is a mile below the eye-watering pace observed during the pandemic boom quarters, and indeed well short of growth rates seen prior to the public health crisis.
Amazon guided for between $138 billion and $143.5 billion in sales for the current quarter. Taking the midpoint, that suggests growth will decelerate to around 10.5%.
For all of 2023, the company grew sales by 12% to $574.8 billion. Andy Jassy called that “robust.” Believe it or not (I don’t believe it), sales aren’t at the top of the list when it comes to what Jassy’s really proud of. “While we made meaningful revenue, operating income, and free cash flow progress, what we’re most pleased with is the continued invention and customer experience improvements across our businesses,” he said.
Jassy’s efforts to right-size as pandemic dynamics faded were a focal point for investors. On Thursday, he stressed that Amazon saw its best-ever delivery performance, as Prime customers received their orders in record time thanks to the regionalization of the company’s fulfillment network.
As for AI, Amazon’s offerings are “resonating” with customers and are beginning to show up in the company’s results. It’s early days on that front. Amazon’s behind Microsoft and, some say, Alphabet, when it comes to deploying generative AI.
AWS revenue was $24.2 billion for Q4. That was in-line with estimates. Barely. Growth there was 13%. Maybe that’s good enough. Operating margin looked ok and EPS beat, not that anyone cares about that when it comes to Amazon.
Meanwhile, over at Apple, revenue grew on a YoY basis for the first time in five quarters. Sales were $119.6 billion, up 2% YoY, and easily better than the $117.97 billion consensus expected.
That’s a relief. It was conceivable that sales would come in flat for the holiday quarter, which would’ve doubtlessly weighed on the stock and, ultimately, the entire market.
Tim Cook cited iPhone sales and another record for services revenue. Analysts expected iPhones to bring in $68.6 billion for Apple last quarter. The actual haul was $69.7 billion. That’ll probably work. It’s not a huge beat, but… well, it’s not a miss.
Services revenue of $23.117 billion was actually a bit light. Consensus wanted $23.37 billion there. Mac sales of $7.78 billion also missed ($7.9 billion expected). iPad revenue of $7.023 billion was essentially in-line and wearables matched estimates if you round up.
Investors probably won’t be enamored with Greater China sales of $20.82 billion. That was a meaningful miss versus consensus ($23.5 billion) and appeared to validate concerns about Apple’s prospects in the world’s second-largest economy, where Xi Jinping is cracking down on foreign technology and where domestic demand and consumption are mired in a protracted slump.
Luca Maestri touted record EPS of $2.18, which was better than expected. The goggles go on sale Friday.
Speaking of companies that make goggles, Meta beat on the top-line. Revenue of $40.11 billion was up 25% YoY and costs were lower. Headcount was down 22% as of December 31 versus the same day in 2022.
It’s been all about costs for Zuckerberg since the stock bottomed around 75% below its record highs in autumn of 2022. The stock’s since reclaimed those records, in part due to the perception of cost discipline.
On Thursday, Meta guided for full-year 2024 expenses of between $94-99 billion. That was unchanged from the company’s previous outlook. One contributor (a big contributor) is Reality Labs, home to Zuckerberg’s metaverse ambitions. Operating losses there will likely “increase meaningfully,” Meta said, citing the company’s “ongoing product development efforts in augmented reality and virtual reality.” (Goggles!)
If you’re keeping score, Reality Labs bled more than $16 billion in 2023. Q4’s loss in the segment, $4.65 billion, was the biggest yet.
Meta declared a cash dividend and announced a $50 billion increase to its buyback authorization.
“We had a good quarter as our community and business continue to grow,” Zuckerberg, fresh from Capitol Hill, said. “We’ve made a lot of progress on our vision for advancing AI and the metaverse.”
META stock ripping AM like the beat was much bigger . . . maybe is the dividend? Even though initiating a dividend for “more flexibility in return of capital to shareholders” hints that buybacks are less attractive now?
Anyway, the ARPU growth was higher than 3Q, and estimates will go up for 1Q. After that, the tougher YOY comps may be a concern.
Interesting to see Zuckerberg mention smart glasses + AI as an alternative path to AR (“AR” liberally defined). They are also remind people that META has genAI too, that users can interact with Llama in a different way than the other companies’ genAI. The Meta glasses have some buzz online, I bought a pair to try out.
That Meta position I took in October 2022 (and publicized here at the time in several comments) now stands as one of the better “dumb long” bets I’ve ever made. I can barely believe it at this point.
The nice thing about META and the other big techs is, when you like them, you can put in a bunch of weight and not be taking too much risk vs benchmarks – actually you may be reducing that risk. Vs if you want to load up on some small cap group.
Also, I didn’t hear many questions on Reality Labs on the call. It feels like investors are just treating it like R&D and/or appeased by the positives in the rest of the business.
Yeah, I don’t think anyone cares that he burns money in there anymore. It’s not like he renamed the company after it or anything. 🙂
Jensen ?? Reality Labs
Jensen heart Reality Labs
Those bar charts are amazing. Stocks moving to all time highs based on declining revenue growth. That makes sense!!
It truly does not pay to think. Trend-following CTAs are looking more and more attractive.
AAPL consensus went down markedly on the report. E.g. Mar qtr cons rev down YOY vs guid flat. Fears of underwhelming iPhone 16 cycles, declining China share, Vision Pro not the “next iPhone”, Mac and iPad becoming like PCs growth-wise, late to the genAI party, and how safe is the services walled garden? Stock trying to hold support.
AMZN had arguably as good a quarter as META. Commerce finally growing into the pandemic-built logistics footprint, advertising outgrowing any other big Tech’s ad business, AWS growing as much as peers from a much larger base. No surprise dividend initiation, but tough comps look a quarter further away than META’s.