Amazon fumbles earnings amidst high expectations

Mixed faces in Seattle today as Amazon delivered its Q4 2016 earnings. The e-commerce company reported lower than expected revenue of $43.74 with better than expected earnings per share of $1.54. Expectations had been high in the run up to the release. Wall Street consensus was that Amazon would deliver revenue of $44.68 billion with $1.35 earnings per share.

In the immediate moments after the news dropped, Amazon stock shot down in after-hours trading. Going into Q1 2017, Amazon is forecasting revenue to be between $33.25 billion and $35.75 billion. Operating income is expected to dip from 2016.

Last quarter was rough for investors. Wall Street was largely caught off guard when the company reported EPS 26 cents below 78 cent expectations. In reaction the stock slugged along with little gains to close out the year. But the narrative has been changing in recent weeks.

Amazon stock is up 8.7 percent in the last month, signifying investor confidence in the rapidly diversifying company. Google and Amazon alike are struggling to monetize their large product and service portfolios. But Amazon’s ability to beat Google to  to market is paying off. The company was first to the cloud and first to the smart speaker — two revenue streams that are undergoing massive growth.

Besides the phenomenal upside potential of Amazon Web Services, investors like the business unit because of how lean it is. Overhead costs for AWS are much lower than costs to operate and grow the company’s e-commerce unit.

We are still gathering additional information and will be updating this post on an ongoing basis.


Featured Image: Drew Angerer / Staff/Getty Images

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