For investors, Amazon.com, Inc. (NASDAQ:AMZN) has been full of surprises — but when it comes earnings time, they’re mostly of the unpleasant variety.
This quarter, though, AMZN delivered.
Amazon stock rocketed some 12% higher in after-hours trading Thursday, as Amazon earnings indicated that no one’s tired of buying from the huge e-tailer (count me among those who drove AMZN’s holiday sales higher), and some other initiatives are going well, too.
Amazon earnings came to $214 million, or 45 cents per share, and that came off revenues that grew 15% to $29.3 billion. While revenues slightly missed the Street consensus of $29.7 billion, AMZN scored a big beat on the earnings line — Wall Street was expecting just 18 cents per share.
While the top line was a bit light, remember that the soaring U.S. dollar impacted Amazon’s results (much like a number of other global operators). Without foreign currency impact, Amazon’s revenues would have improved by 18% and beaten that consensus mark.
Amazon also reported plenty of traction in its Prime service. While the company didn’t break out many numbers, we did learn that Prime paid membership soared by 53%; it appears AMZN is benefiting from investments in its Instant Video service, as well as a price hike.
The Amazon earnings report also allayed fears that the company was spending itself into oblivion. The past two reports included net losses, which jolted investors and weighed on Amazon stock.
And frugality has been the word of the month in tech. The Street recently punished bigger spenders Facebook Inc (NASDAQ:FB), Alibaba Group Holding Ltd. (NYSE:BABA) and Google Inc (NASDAQ:GOOG), and there are major concerns that the sector essentially is ramping up to an arms race. Which, let’s face it, the costs of hiring programmers are getting exorbitant, and the price tags on fast-growing startups are reaching nosebleed levels. Infrastructure costs for things such as data centers remain steep, too, and for Amazon specifically, there’s always the cost of new warehouses.
But Amazon’s Q4 earnings pointed to serious restraint on spending, with operating expenses climbing a moderate 15% to $25.1 billion.
The report wasn’t perfect. For instance, the outlook was tepid, with Q1 revenues expected to range from $20.9 billion to $22.9 billion, which fell shy of expectations for $23.05 billion.
And looking ahead, Amazon could always revert back to its free-spending ways. After all, AMZN has its tentacles in many businesses, which generally have tough rivals. Just some of these segments include grocery deliveries, media streaming, cloud services, corporate email/calendaring and so on.
Investors would simply be wise to employ some healthy skepticism for now. The conventional wisdom is that Amazon, by merit of its massive scale, can dial up profits when it needs to — and that certainly could’ve been the case this time, as Amazon stock sold off harshly for months due to worries about red ink. But Jeff Bezos has a proclivity to ramp things up in a hurry, so don’t consider sustained profitability to be a lock going forward.
Still, Thursday’s report was a huge sigh of relief.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
