Amazon just revealed a booming ad business, helping to send its shares skyrocketing
Investors showed faith in Amazon on Thursday despite the online retail giant posting lukewarm financial results for its latest quarter.
Amazon’s sales grew 9% year-over-year to $137.4 billion for its fourth quarter, roughly in line with analyst expectations of $137.6 billion. Additionally, the company forecast revenue of $112 billion to $117 billion in the upcoming quarter, short of the $120 billion that analysts had projected.
As Amazon chief financial officer Brian Olsavsky explained during a call with analysts, the pandemic—with its supply chain issues and labor supply problems—has challenged the company.
And yet, Amazon’s shares soared 14% in after-hours trading on Thursday to $3,175, a sign that investors believe the company will soon do better. Olsavsky helped give that impression by telling analysts that while “all our teams are all battling Omicron right now,” executives “do see the sun coming out” over the next few quarters.
Amazon has several fast-growing business units that are giving investors hope. For the first time, the company broke out financial details about its online ad business, in which quarterly sales grew 32% year-over-year to $9.7 billion. Amazon’s online ad business is dwarfed by only Google-parent Alphabet and Facebook-parent Meta.
Meanwhile, sales in the Amazon Web Services cloud computing business rose 40% year-over-year to $17.8 billion and continues to be a market leader.
And, Amazon announced a $20 price hike for its annual Prime subscription service, which will help with revenue growth starting in the current quarter.
The investor reaction to Amazon’s results was in sharp contrast to that of Meta, which reported financial results on Wednesday. Meta CEO Mark Zuckerberg failed to convince investors that his social media giant’s stagnant user growth would soon accelerate or that its core online ad business, impacted by Apple’s privacy changes, would soon recover.
Zuckerberg talked up the potential of a yet-to-be developed metaverse—a virtual world where people can interact,—on which his company spent $10 billion last year. Meta is unlikely to make money anytime soon from the metaverse because virtual reality adoption still remains sluggish.
Amazon’s rising cloud and online ad businesses, however, are something investors are more eager to rally behind.
Never miss a story: Follow your favorite topics and authors to get a personalized email with the journalism that matters most to you.