Amazon Shares Surge On Top-/Bottom-Line Beat; Shrug Off AWS Growth Disappointment

With The Magnificent 7 stocks getting clubbed like a baby seal in recent days, hope is high that Amazon can save the world (as Nasdaq broke below a key technical level today).

The good news – a top- and bottom-line beat:

• Net sales increased 13% to $143.1 billion in the third quarter (better than the $141.56 billion consensus), compared with $127.1 billion in third quarter 2022.

• *AMAZON 3Q EPS 94C, EST. 58C

Amazon’s advertising division also beat expectations with revenue of $12.1 billion, up from $9.6 billion a year ago, meaning its business is holding up better than Meta’s as advertisers pull back.

“We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” said Andy Jassy, Amazon CEO.

“The benefits of moving from a single national fulfillment network in the U.S. to eight distinct regions are exceeding our optimistic expectations, and perhaps most importantly, putting us on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history.”

However, breaking down the business lines, AWS disappointed (very modestly) as did Physical Stores…

• Amazon 3Q Physical Stores Net Sales $4.96B, Est. $4.99B

• Amazon 3Q AWS Net Sales $23.06B, Est. $23.13B

• Amazon 3Q Subscription Services Net Sales $10.17B, Est. $10.13B

But, AWS operating income improved to $7.0 billion (highest in history), compared with operating income of $5.4 billion in third quarter 2022, but sales growth at AWS (in constant currency) stuck at record low 12%…

Of course, Jassy highlighted AI:

“The AWS team continues to innovate and deliver at a rapid clip, particularly in generative AI, where the combination of our custom AI chips, Amazon Bedrock being the easiest and most flexible way to build and deploy generative AI applications, and our coding companion (CodeWhisperer) allowing enterprises to have the equivalent of an experienced engineer who understands all of their proprietary code is driving momentum with customers, including adidas, Booking.com, GoDaddy, LexisNexis, Merck, Royal Philips, and United Airlines, all of whom are starting to run generative AI workloads on AWS. Between AWS re:Invent and our 29th holiday shopping season, this is a particularly action-packed time of year at Amazon and we’re excited for what’s to come.”

Finally, Amazon appears to have lowered guidance, or at the very least, adjusted it to a much lower band:

• Amazon Sees 4Q Net Sales $160.0B to $167.0B, Est. $166.57B

 The slightly weaker-than-expected guidance is the latest sign of weakening consumer spending heading into the holiday season.

For now, investors are shrugging off the sales guidance and AWS miss with shares up large after hours (after an ugly day session)…

Will AMZN reverse like MSFT and META?