Amazon Reports Fourth Quarter 2016 Financial Results (Feb 2, 2017)
Amazon had a somewhat disappointing quarter relative to analyst estimates, as growth slowed in its core e-commerce business. Unit shipment growth, which had been above 25% for the last five quarters, dropped suddenly to 24%, which impacted overall growth rates, as those dropped for the second quarter in a row. The International business had significant losses for the second straight quarter as Amazon invests more heavily overseas in fulfillment, market entry, and extending services like Prime video globally. AWS grew at a healthy clip, though margins are flattening at around 26% lately. As usual, executives on the earnings call were not helpful in understanding or predicting the big swings in both growth rates and investment levels, though guidance for Q1 looks fairly light. The official explanations are the anniversary of a leap year in 2015, which added 150 basis points to growth, and currency headwinds, which are being mentioned more frequently again on earnings calls lately. But it looks as though Amazon may be expecting slightly slower growth in Q1 too. Dropping back down to the high teens and low twenties growth rates Amazon saw in 2014 and 2015 wouldn’t be the end of the world, but it would be a rather different trajectory from the one it’s been on for the past year and a half, and investors would react accordingly.
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