AMAZON: A SHIVER RUNS THROUGH IT / THE WALL STREET JOURNAL

Amazon: A Shiver Runs Through It

Record sales and earnings show signs of deceleration—Amazon investors’ greatest fear

By Dan Gallagher


Amazon.com shares slipped after hours following its quarterly report. Photo: pascal rossignol/Reuters


Amazon.com AMZN 2.89%▲ just reported its best quarter ever and its worst quarter in years. That both are true speaks to the dichotomy inherent in evaluating what is—for now anyway—the world’s most valuable company.

As usual, Amazon beat Wall Street’s sales and earnings projections for the fourth quarter. Also as usual, Amazon’s forecast for the current period was highly conservative, with the midpoints of its revenue and operating earnings projections coming in below Wall Street’s targets. The company also says it expects to invest more heavily in its business in the coming year.

The online retailer’s shares, which have jumped more than 14% since just the start of the new year, slipped after hours following the report.

On the bright side, Amazon has never made this much money. Revenue jumped 20% year over year to $72.45 billion for the holiday quarter while operating income surged by 78% to about $3.8 billion. For the full year, Amazon earned more than three times as much as the previous year.

Meanwhile, Amazon’s growth rate remains unmatched for its size, with full-year sales jumping 31% to $232.9 billion. Even though it is losing some steam, Amazon will surpass Apple Inc.in annual revenue this year.

But deceleration has been something Amazon’s investors have long feared. The fourth quarter’s 20% growth rate is the company’s slowest since early 2015. Even the 45% growth pace of the company’s red-hot AWS cloud business is down from 49% just two quarters earlier.

Complaining about figures like those might seem odd at any other company, but Amazon’s superb execution and endless ambitions have resulted in an $840 billion in market value and a forward price/earnings multiple of 72 times. Some very lofty expectations are baked into those numbers, and sometimes even small doses of reality can be painful.