Amazon Q4 - First Annual Loss Since 2014

Last week, Amazon reported its first unprofitable year since 2014, losing $2.7 billion despite good holiday-season sales. The company's share price dropped by 8.4% on the day.

Note that the primary cause of the loss was a write-down of Amazon's investment in the electric automaker Rivian, which faced challenges including pricing missteps and falling short of growth targets, resulting in an 82% drop in its share price.

Amazon's CFO, Brian Olsavsky, said the company is expecting slower growth rates in the next few quarters due to uncertainty around consumer and corporate spending in the US and abroad. Although Amazon posted fourth-quarter revenue of $149.2 billion, up 9%, beating Wall Street expectations, its e-commerce segment saw a 2% decrease.

Web-hosting division AWS grew revenue by 20%, while its profit for the quarter came in 9% below expectations. Olsavsky also mentioned a potential slowdown in AWS spending as customers try to cut costs, which could lead to challenges in the next couple of quarters. AWS reported $5.2 billion of operating income in the quarter, almost double the profit of the whole company, but down 2% year-on-year.

Meanwhile, Amazon's advertising business recorded a 19% increase in revenue. That was a shining light in the numbers.

The company is currently going through a difficult period as it adjusts its business post the Covid boom, leading to higher operating expenses in the fourth quarter.

CEO Andy Jassy is cutting costs while still investing in long-term priorities, and has made some changes such as closing physical bookstores and specialty stores, slowing down new warehouse openings, and laying off over 18 000 corporate employees.

Even with all its challenges we still like Amazon, they are the outright e-commerce leader and they've done an incredible job with AWS. They will remain one of the world's leading companies. As margins recover, so will the share price.