Why Amazon Stock Was Surging Today

Shares of Amazon (AMZN 7.29%) were soaring today after the tech giant delivered a strong fourth-quarter earnings report after hours, beating estimates on the top and bottom lines, as profit margins ramped up in the quarter and results were solid across the board.

As of 10:18 a.m. ET, the stock was up 6.8% on the news.

Person packing an Amazon box at a fulfillment center.

Image source: Getty Images.

Amazon delivers the profits

Revenue in the quarter, which included the holiday season, jumped 14% to $170 billion, ahead of estimates at $166.2 billion, driven by solid growth in all three of its business segments.

North American sales rose 13% to $105.5 billion, international segment sales increased 17% to $40.2 billion, and Amazon Web Services (AWS) sales were up 13% to $24.2 billion, a slight sequential improvement.

Profits also rose significantly in all three segments as its higher-margin businesses outgrew overall revenue. In North America, it flipped a $200 million loss in the quarter a year ago into $6.5 billion, driven by 27% growth in advertising to $14.7 billion and 20% growth in third-party seller services to $43.6 billion.

In the international segment, its operating loss narrowed from $2.2 billion to $0.4 billion, and AWS operating income improved from $5.2 billion to $7.2 billion.

Overall, operating income rose from $2.7 billion to $13.2 billion, and it reported $1.00 in earnings per share, up from $0.03 in EPS a year ago and better than estimates at $0.80.

CEO Andy Jassy noted the delivery speed and costs had improved, saying, “The regionalization of our U.S. fulfillment network led to our fastest-ever delivery speeds for Prime members while also lowering our cost to serve.”

Is Amazon a buy?

Looking ahead, Amazon expects net sales of $138 billion-$143.5 billion, up 8%-13%, which compares to the consensus at $142.1 billion, and it projected operating income of $8 billion-$12 billion, compared to $4.8 billion in the first quarter of 2023.

Amazon is proving that it’s able to deliver solid top-line growth despite its massive size, and its operating margins should continue to expand as its growth is driven by higher-margin businesses like its third-party marketplace, advertising, and AWS.

If that pattern continues, the stock should continue to move higher.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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