Amazon slumps despite a earnings blow: 7 Key Takeaways's plans to pick up its recent bad spending pace weigh on the stock following its latest earnings blow.

Following the clock on Thursday, Jeff Bezos reported Q4 revenues of $ 72.38 billion up 20% annually and GAAP EPS of $ 6.04 (up 61%), toppings consensus analyst estimates of $ 71.89 billion and $ 5.65. However, it also managed $ 56 billion to $ 60 billion (up 10% to 18%) and $ 2.3 billion to $ 3.3 billion (up $ 1.9 billion a year ago) to revenue quarter. It compares with consensus estimates of $ 60.83 billion and $ 3.09 billion.

Amazon shares initially did not move much after the report's arrival. However, the shares sold by CFO Brian Olsavsky on Amazon's earnings call for accelerated expenditure growth in 201[ads1]9. They ended up trading down 4.9% to $ 1,635.00, having increased 2.9% in regular trading.

Here are some notable takeaways from Amazon's report and conversation.

1. Amazon's e-commerce business had another solid quarter

Amazon's North American segment revenue (61% of total revenue) rose 18% to $ 44.12 billion, while international segment revenue increased by 15% to $ 20.83 billion. North American revenues lost a consensus of $ 44.23 billion, but this comes from $ 300 million, plus a lack of "physical stores" revenue (more about this) than e-commerce revenue streams.

International revenues topped a consensus of $ 20.49 billion. The growth benefits from the time of India's Diwali holiday over a year ago, but also saw a 4 percentage point from forex fluctuations. In Q1, Amazon forex expects to negatively impact total revenue growth by 2.1 percentage points.

The North American unit is now highly profitable: Operating profit for GAAP increased 33% to $ 2.25 billion. The international segment (among the major Indian investments) generated an operating loss of $ 642 million, having seen a loss of $ 919 million the year before.

2. AWS Juggernaut Rolls on

Revenue for Amazon Web Services (AWS) increased by 45% to $ 7.43 billion and reached a consensus of $ 7.29 billion. The segment's operating profit increased by 61% to $ 2.18 billion.

When the announcements were made in November: Inventory Conference drove home, AWS remains outstanding among public ship platforms, although there is still room for Microsoft (MSFT) and Alphabet / Google (GOOGL) (but perhaps not many others) to thrive. And for a number of reasons, companies' adoption of public cloud infrastructure continues to grow at a high pace., Microsoft and Alphabet are holdings in Jim Cramers Action Alerts PLUS Member Club . Want to be notified before Jim Cramer buys or sells AMZN, MSFT or GOOGL? Learn more now.

3. Expenditure on growth was moderate, but it could soon change

Still a trend seen in the 2nd and 3rd quarters, moderate spending growth (given Amazon's revenue growth) EPS. While marketing expenditures increased by 41% to $ 4.99 billion, and technology / content spending increased by 21% to $ 7.7 billion, fulfillment expenses increased by only 12% to $ 10 billion, and G & A spent only 7% on $ 1 billion, $ 1 billion.

Similarly, Amazon's total capital expenditure increased only 17% (much less than many other tech giants). Procurement of property and equipment via capital commitments increased by 33% to $ 3.68 billion, but direct property and equipment purchases (driven by retail infrastructure investments) increased by only 3% to $ 3.73 billion.

But on the call, Olsavsky called 17% capex growth "a low number for us" given the growth seen by both AWS and Amazon's e-commerce operations, as well as the efforts to expand into new regions. He called 2018, a year when Amazon only grew up to 15% of the fulfillment / freight field by 15%, and by 14%, "a lighter investment year" for both fixed and headcount.

"I expect the investments to increase compared to 2018, and we have reflected what we see so far in the first quarter of our guidance," he said. Surely, the history of Amazon shows that it is not shy about raising its investment rate when it sees growth opportunities justifying it.

4. Amazon believes that new Indian e-commerce rules introduce uncertainty

Recently, the Indian government began banning foreign online stores, which were already unable to directly sell products, from selling products from market vendors to having a stake in as well as striking exclusivity agreements. with suppliers. This only led Amazon to draw many items from its Indian website, including its echo-sounders.

When asked about India on the call, Olsavsky said that Amazon's Q1 guidance reflects the "best estimate" it has for Indian sales. But he added, "There is a lot of uncertainty about what the impact of the government's regulatory change will be on the e-commerce sector there," and he made it clear. Amazon does not think the rule is changing positively for Indian consumers. .

When subsequently asked if the rule changed, Amazon, which has invested billions in India, would change its strategy in the country, said Olsavsky that Amazon is still "very good about the long-term outlook in India." also said that Amazon is "still considering the situation."

5. Services Continued Margin Expansion, but at a Slower Pace

In addition to reporting 45% AWS growth, Amazon reported its third-party merchant revenue sales increased by 27% to $ 13.38 billion, and subscription revenues increased by 25% to $ 3 billion. , 95 billion. The company's "Other" revenues, which largely driven by Amazon's growing advertising business, increased 95% to $ 3.39 billion and grew around 38% following the impact of a recent financial change. In comparison, Amazon's online store revenue, which covers direct e-commerce sales, increases 13% to $ 39.8 billion.

The continued growth of high-quality service revenue streams as a percentage of revenues contributed to Amazon's gross margin increasing by 1.8 percentage points annually to 38.1%. However, there is a smaller increase than the 4.6-point increase seen in the third quarter.

Some factors were at work here. "Other" revenue was slightly below expectations; subscription revenue experienced about $ 300 million from an accounting change related to the recognition of the premium subscriptions; Amazon's free shipping budget increased shipping costs; The company passed 1 year anniversary of the acquisition of Whole Foods (a relatively low margin activity) in August; and strong sales of Amazon's own units, which the company treats as loss managers, had a margin impact.

6. Whole Foods' Bricks-and-Mortar Revenue Fall … But Amazon Has An Explanation

Amazon's "physical stores" revenue, which mostly comes from Whole Foods, fell 3% to $ 4.4 billion , lacking a consensus of $ 4.78 billion. However, Olsavsky Amazon discovered 5 fewer days of full food revenue this year due to differences in Amazon and Whole Foods' pre-acquisition calculators, and that physical store revenues do not include Whole Foods delivery and retrieval orders placed online. [19659002] Adjustment for these factors, the entire food's turnover is said to be about 6%.

7. Traffic-free cash flow increased sharply

Although time will tell if this trend continues during a retrieval of expenses, the Amazon's subsequent 12-month (TTM) free cash flow (FCF) minus lease commitments and assets acquired under capital leasing increased to $ 8.4 billion. at the end of 2018. It is up from $ 5.4 billion at the end of the third quarter and $ 1.5 billion at the end of 2017.

In addition to profit growth, the FCF has had a 28% increase in Amazon's unearned income balance – powered by Prime and other subscription services that have not yet been recognized – to $ 6.54 billion.

TheStreet Eric Jhonsa has previously covered Amazon's report and calling through a live blog .

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