Amazon’s outlook disappoints after record holiday quarter; shares fall

Amazon wage hike pays off as it reveals record profits

Amazon's full-year 2018 profit - $10.1 billion - is more than triple the year-earlier result.

Amazon reported strong Q4 2018 revenues in all parts of its business on Thursday afternoon.

Shares of the company fell 5 percent to $1,635 after the bell. Amazon expects to start 2019 with quarterly sales of $56 billion to $60 billion, up 10 percent to 18 percent.

Overall, net sales for the fourth quarter rose 19.7 per cent to US$72.38-billion and beat the analyst average estimate of US$71.87-billion on the back of a strong holiday season, which includes the major USA shopping event Black Friday.

Amazon stock closed at $1,718.73 United States dollars (roughly $2,256.62 CAD) at the end of the day's trading.

The $7.4 billion in cloud revenue for the quarter ending December 31 marked year-over-year growth of 45 percent at AWS-$130 million more than analysts had predicted.

Last year, Amazon streamlined its ad products so they were less confusing to brands, and folded them under the Amazon Advertising moniker. "Tens of millions of people worldwide" signed up for its Prime service, the company stated.

First published January 31, 1: 26 p.m. PT. Update, 2:14 p.m. PT: More details added throughout.

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Wall Street was looking for earnings of $5.67 per share on revenue of $71.87 billion.

Amazon was light on specifics but said that 2018 was the biggest holiday shopping season ever for Amazon devices.

Nicholas Hyett, analyst at Hargreaves Lansdown, said the online retailer was "tightening its grip" on its customers with add-on services such as Amazon Prime which offer free delivery and other benefits. Amazon Web Services (AWS) continued to show strong growth, surging not only 46% to $6.7 billion, but posted an over 30% operating margin for the first time.

Amazon shares have risen 14 percent since the beginning of the year, while the Standard & Poor's 500 stock index has increased almost 8 percent and the Nasdaq composite has risen 9.7 percent.

A tight labor market, rising shipping costs and money-losing investments overseas remain threats.

Amazon stock is down 4 percent in morning trading Friday, primarily thanks to lower than expected projections for its first quarter financial results and potential issues with regulations in India. Amazon in October pledged to pay all of its warehouse employees at least US$15 an hour, while eliminating some bonuses and stock awards.

Amazon's healthy growth is still the envy of the retail world, but its slower revenue growth - which was as high as 43 percent in 2018 - does signal a broader shift for the company.

Amazon has historically delivered relatively little profit as it fulfills Bezos's strategy of investing to stay ahead. Amazon has not fully rolled out an attribution program it tested previous year, which let advertisers detect when their digital ads led to sales on its site.

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