Shares of Amazon.com Inc. trended higher in the after-hours session today after the company delivered fourth-quarter financial results that sailed past analysts’ expectations.

The company followed its results with strong guidance for the current quarter, further boosting investors’ optimism.

Amazon easily topped the Street’s expectations on earnings, delivering a profit before certain costs such as stock compensation of exactly $1 per share, versus the 80-cents-per-share forecast. Revenue for the period rose 14%, to $170 billion, clearing the analyst target of $166.2 billion. All told, the company delivered net income of $10.6 billion, up from just $300 million one year ago.

Looking to the next quarter, Amazon officials said they’re expecting sales of between $138 billion and $143.5 billion, which would represent growth of between 8% and 13%. While that’s less than the quarter just gone, it’s still much better than most had hoped for, with Wall Street’s analysts predicting first-quarter revenue of just $142.1 billion.

Investors clearly liked what they saw, as Amazon’s stock gained more than 7% in extended trading, adding to a gain of 2% that came during the regular session.

The results suggest that the efforts of Amazon Chief Executive Andy Jassy (pictured) over the last year to rein in the company’s costs appear to be paying off. Between late 2022 and mid-2023, Amazon laid off more than 27,000 employees and ended some of its more experimental bets, such as its then-nascent telehealth business. Over the last year, the company has continued to trim its costs in other areas, making job cuts within its Prime Video, MGM Studios and Twitch units, among others.

On a conference call, Amazon Chief Financial Officer Brian Olsavsky said the company intends to continue with what he described as a “careful approach” to new investments, though he doesn’t see 2024 as being a “year of efficiency-type thing.”

“We’re going to continue to invest in new things and new areas and things that are resonating with customers,” Olsavsky said. “Where we can find efficiencies and do more with less, we’re going to do that as well.”

The revenue jump was aided by the fact that quarter four is traditionally Amazon’s busiest, reflecting its finances over the Christmas holiday period. It also includes Amazon’s annual October Prime Day event, where sales tend to go through the roof. “This Q4 was a record-breaking holiday shopping season and closed out a robust 2023 for Amazon,” Jassy said. “As we enter 2024, our teams are delivering at a rapid clip, and we have a lot in front of us to be excited about.”

Amazon’s cloud computing business unit, Amazon Web Services Inc., was a strong performer as always, delivering revenue of $24.2 billion, up 13% from a year earlier and in line with Wall Street’s targets. It’s a slight improvement on the previous quarter, when revenue grew by 12%, but slower than a year ago, when AWS sales grew by 20%.

The AWS business has struggled to grow at such a rapid pace over the last year amid a poor economy that has seen many companies attempt to trim their cloud computing budgets. However, Olsavsky said AWS believes many of these cost optimization efforts are diminishing, and that many new workloads are now picking up. He added that there has been “a lot of interest” in the company’s generative artificial intelligence services, such as its Q chatbot for business workers.

Although AWS doesn’t account for a significant portion of Amazon’s overall revenue, the unit is one of its fastest-growing and makes a huge contribution to the company’s profitability, said Rebecca Wettemann of Valoir. So there’s a lot of interest in what AWS is doing in terms of AI, she added. “A big part of its potential future depends on AWS’s ability to compete against Microsoft, Google and others in the AI space, not just in cloud computing, where its market dominance is slowly eroding,” she pointed out.

Wettemann said there’s still a big opportunity for AWS to capitalize on the early momentum shown by Amazon Bedrock, the company’s newly launched large language model service. “Of particular interest is AWS’ adoption of Bedrock internally in areas such as automated code debugging and code generation, which could enable it to deliver new products and capabilities more quickly and cost effectively,” she explained.

Amazon is also making efforts to bring generative AI to consumers. Earlier today, it launched a new generative AI shopping assistant called Rufus, which is now being tested with a small subset of users in the U.S. Rufus, the company explained, is designed to answer questions about various products listed for sale on Amazon. The AI model that powers Rufus was reportedly trained on the company’s own product catalog data, plus shopper reviews and content from its Customer Questions & Answers section.

The other major contributor to Amazon’s bottom line is its advertising business, which saw sales grow by an impressive 27% from a year earlier to $14.7 billion. Last month, the company rolled out new ads on its Prime Video service, in a move that most analysts believe will generate substantial new revenue for the company. Olsavsky said Amazon has seen a “lot of enthusiasm” from advertisers, though he insisted the company will strive to maintain a balance and keep ad loads low.

Photo: Robert Hof/SiliconANGLE