about 3 years ago • 3 mins
Looks like Amazon’s investors got exactly what they’d ordered late on Tuesday: the ecommerce giant’s fourth-quarter results beat expectations.
What does this mean?
It was the success of Amazon’s two biggest businesses that drove last quarter’s strong performance: AWS – Amazon’s cloud computing segment – did typically well, while pandemic-fueled ecommerce growth sent the company’s retail business to new heights.
And the good news didn’t stop there: Amazon primed investors for another impressive quarter, saying it’ll earn 8% more in revenue than analysts are forecasting. There was a “but”, mind you: Amazon founder and CEO Jeff Bezos announced he’d be transitioning to the role of executive chair later this year. That’ll no doubt raise questions about the company’s future, and might be why its $1.7 trillion valuation barely climbed after the update.
Why should I care?
The bigger picture: Retailers are trying to be more like Amazon.
One of the reasons Amazon’s so dominant in the ecommerce space is that it’s a “multi-brand” retailer, meaning it gives its customers a broader range of options than just Amazon-branded products. That’s a lesson British online fashion retailers ASOS and Boohoo seem to have learned too: they both expanded further past their eponymous brands last month, with the former buying Topshop and Miss Selfridge for $400 million, and the latter bankrupt retailer Debenhams for $75 million. The hope’s that those additions will bring in more customers and offer existing ones more choice, giving both companies’ growth a lasting boost.
For markets: Tech stocks aren’t done yet.
Analysts might’ve seen this promising update and upbeat forecast coming, and not just because Amazon’s been on a long run of form. The odds were in its favor after its Chinese ecommerce doppelgänger, Alibaba, announced its own better-than-expected quarterly earnings on Tuesday, along with a first-time profit for its cloud segment.
Keep reading for our next story...
Google-parent company Alphabet pressed all investors’ right buttons late on Tuesday: the tech giant posted better-than-expected earnings, and its stock initially jumped 6%.
What does this mean?
The pandemic’s been forcing us to spend more and more of our time and money online, and advertisers have followed suit: they’ve been spending big on ads across Google and YouTube, which make up the majority of Alphabet’s income. Add to that the jump in demand for its cloud business thanks to the surge in home-working, and it's easy to see why its revenue topped analysts’ forecasts. The company managed to keep its costs in check too, pushing its profit above expectations.
Why should I care?
Zooming in: Cloud’s got some way to go.
Ads are Alphabet’s biggest revenue stream, sure, but investors are paying just as close attention to its fast-growing cloud business. Alphabet’s been investing in the segment for years in hopes of getting a slice of the $1 trillion industry, but the company hadn’t told investors how profitable it was until now. Or rather, how unprofitable it was: the segment posted a loss of over $1 billion last quarter, suggesting Alphabet has some way to go to catch up with front-runners Amazon and Microsoft…
Bigger picture: The regulatory walls are closing in.
To top it all, Australia just proposed a law that would force Big Tech to pay media outlets to show their content in their search feeds. And while Google only made around 2% of its revenue from the country in 2019 – low enough that it’s threatened to ditch Oz altogether – this is becoming a worrying pattern: the tech giant’s already paying for search feed content in France. Still, if Google thinks that’s bad, it ought to spare a thought for all the Aussies out there who might now have to go back to using Bing…
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