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So this is for the fourth quarter.
The look back, we are looking at EPs a dollar ninety five a share.
That's a penny light from what the street was expecting.
Fourth quarter operating margin that came in smack in line with what the street was forecasting eleven point seven percent. Here's to the outlook. Amazon ce's first quarter net sales one hundred and seventy three point five billion to one hundred and seventy eight point five billion. The estimate on the street kind of in the middle of that one hundred and seventy five point fifty four billion, So maybe potentially it could be below that based on that range.
Taking a look at shares of Amazon low in the aftermarket.
Done by about four point four percent, now three point nine percent, bouncing around a little bit, but still lower by two and a half percent.
Now, yeah, they are definitely bouncing around. So let's see, let's go through some more than numbers.
Yeah, the one that you hit that really sticks out, Carol, is first quarter net sales. That outlook sees net sales one seventy three and a half to one seventy eight and a half billion dollars. That's within estimates of one hundred and seventy five point five to four billion. Amazon ce's first quarter operating income coming in. This is really light, sixteen and a half billion to twenty one and a
half billion. The estimate was for twenty two point twenty four billion dollars, so profit expected to take a hit, at least not looking like what analysts wanted to see. Again, twenty two point two four billion is what analysts wanted to see. First quarter operating income set to look sixteen and a half to twenty one point five billion dollar.
All right, let's continue with the look back there.
Fourth quarter North America net sales one hundred and twenty seven point zero eight billion. The estimate was slightly above that at one twenty seven point twenty one billion.
You've seen this capex number. Now we're getting the good stuff. Twenty twenty six capecks about two hundred billion dollars. That way exceeds estimates. That estimate was for one hundred and forty six point one one billion dollars shares moving lower in the after hours, now down by about seven percent eight percent.
All right, so we are seeing some pressure here. Hey, let's go through. There's more results.
As we mentioned, net sales two hundred and thirteen point thirty nine billion for the fourth quarter. The estimate on the street was two hundred and eleven point forty nine billion according to Bloomberg consensus.
Physical stores.
Let's actually go to online stores net sales eighty two point ninety nine billion. That's pretty much what the street was expecting. The estimate was for eighty two point three billion dollars. AWS net sales thirty five point fifty eight billion was the quarterly results for the fourth quarter. Estimate was for thirty four point eighty eight billion dollars, so a little bit better than what the street was expecting.
And let's go to we saw the EPs. That was a penny light. Where else do you want to go?
I want to go to some commentary Amazon. I'm looking through the press release, sees twenty twenty six capex again two hundred billion, estimates of one hundred and forty six point one one billion. That's the headline. That's the story. We're going to stick to that one. Throughout the program, we are going to get additional details. For example, Amazon saying that demand is strong for AI, for chips, robotics,
saying strong demand for its existing offerings. I'm looking through the press release, right, Can I just say, please God.
That strong is demand for their shares? Because that's doc Right now. Amazon shares are down about nine percent tim in the aftermarket.
The company is saying that aws growing twenty four percent, our fastest growth in thirteen quarters, Advertising growing twenty two percent, stores growing briskly across North America, International chips business growing triple digit percentages year over year. This growth is happening because we're continuing to innovate at a rapid pace and identify and knockdown customer problems. This is a quote from
Andy Jasse, President and CEO of the company. He says, quote, with such strong demand for our existing offerings and seminal opportunities like AI, chips robotics, and low Earth orbit satellites, we expect to invest about two hundred billion dollars and capital expenditures across Amazon in twenty twenty six and anticipate strong long term return on invested capital. That two hundred
billion dollars is not what investors were expecting. Again, investors were expecting one hundred and forty six point one to one billion dollars. That is a huge increase from those expectations.
Yeah, right now, shares of Amazon, they're down about ten almost eleven percent here in the aftermarket. So that capex line, just like we saw play out with Alphabet last night, a bit of a shocker, and certainly initially we have investors not liking that number. So again Amazons seeking now eleven percent on that higher than expected twenty twenty six
capex for cast. We also mentioned that companies forecast for the first quarter in terms of net sales one hundred and seventy three point five to one hundred and seventy eight point five billion. Street estimate was for one hundred and seventy five point fifty four billion. So maybe a combination of potentially a lower mark when it comes to first order net sales along with that higher capex certainly
creating some stress in terms of investors. The share price now down about ten percent tim in the aftermarket.
Looking through other highlights. I mean, this is a very long press release that goes through what the company has done over the last quarter, new agentic capabilities in aws Transform, new Agentic AI capabilities for Amazon Connected. It's an AI tool that the company says enables contact centers to provide consistent,
personalized customer service experiences. AWSAI factories fastest speeds ever for Prime members globally in twenty twenty five shares, though still taking a hit in the after hours, down more than ten percent.
I also want to point out, in terms of the guidance that we're getting from Amazon, they are saying that the Amazon guidance assumes no additional restructurings.
Those restructurings, I.
Guess you could go as far as to say whether or not there's more layoffs. Keep in mind, we just heard at the end of January, right that this company's cutting sixteen thousand corporate jobs worldwide in an effort to remove layers of bureaucracy and increase ownership. So we saw this company, I'm certainly announcing some movements.
Some restructuring.
So we'll have to get some more clarity about what that means, what possible additional restructurings could be coming.
We'll look for that on the call.
Yeah, just looking at some updates here twenty twenty six CAPEX. Again, this is the story here. This is the headline. Two hundred billion dollars above the average estimate of one hundred and forty six point one one billion dollars.
All right, let's get to it. Punam goils with us.
She's senior analyst for e commerce and at leisure for Bloomberg Intelligence. She joins US for BI headquarters out there in Prince.
Of New Jersey.
Punham investors not loving it. Is it all about that CAPEX number?
You know it is? But I think the CAPEC summer is fine. We were looking for one hundred and forty billion dollars. Two hundred billion dollars just continues to show that they're investing.
And I think, wait, that's sixty billion dollars more.
That's a lot of money.
So yes, but they need to invest, right. We know that Amazon has to continue to invest in cloud services, it needs to invest in AI. So there's a lot of ketchup that needs to be done here. I think the long run narrative here is still good. The underlying results were solid across both a WUS and retail.
Interesting and so even though they talked about seeing first quarter net sales one hundred and seventy three point five billion. Tw one hundred and seventy eight point five billion Street estimate is kind of in the middle of that one seventy five point fifty four.
That's okay, Yeah, that's okay.
Like the results are good to okay. I think the numbers show that Amazon continues to plug away across its businesses and it is making progress. And I mean, we're happy with those numbers. We think it's making the right investments, we think it's moving in the right direction, and we think it's growing profitably. The North America profit margins were better than expected, and aws A thirty five percent is still respectable.
Okay.
So if we're if we're not too concerned about the capex here, why are we seeing investors react like this, down as much as ten percent in the after hours, down as much as eleven percent in the afternoon.
I think, I think we'll have to see what they say on the call on where this capex is exactly going, what the backlog looks like. I think the call will give us a little more insight onto where they are investing, and they'll be important. But I think, you know, expecting higher Capex, and what we had thought yesterday, especially after Alphabet's result, was what we were kind of expecting.
So the reason Carol and I are like fighting to get to ask you this question because maybe we're maybe we're going to the same place. So Andy Jasse in his press release, in his comments, actually has two sentences here, and one of them does mention the two hundred billion dollars in Capex, but he says there are seminal opportunities like AI chips, robotics, and low Earth orbit satellites. Therefore, we expect to invest about two hundred million dollars in
Capex across Amazon in twenty twenty six. Of those AI chips, robotics, low Earth orbit satellites, where do investors want to see the investment? Would they rather see them in AI and Chip than in lower orbit satellites. I mean, SpaceX kind of owns that I.
Would agree with you there. I would like to see more on their core business rather than innciliary businesses.
So one of the things that caught my attention, I'm thinking about, you know, the jobs that they are already cutting, those corporate jobs. We got that late January Punam Amazon saying guidance that they put out assumes no additional restructurings.
How do you what you read on that is? Is it yeah?
I'm just curious, is it more job cuts other shifts? How what's our takeaway there?
I think you'll continue to see job cuts. I don't think we're over. You know, they've highlighted it pretty clearly in their shareholder letter last year that AI is going to allow them to pair back on jobs, especially when it comes to some of those jobs that can be automated in the distribution centers and the logistics and in the technology workspace. So I don't think it's over. I
think there's more to come. But I do think that they started and they're continuing to just push through what their original plans were for now.
In terms of operating margin, eleven point seven percent, so that was bang in line with what the street was expecting. They're managing costs, they're getting ahead of things there. That was a good thing to see that they kept that margin.
Yeah, it was actually really good. In fact, when I look at the margin composition and I look at the North America operating profit margin, which is largely retail, that was slightly ahead of expectations at nine percent, so that was encouraging to see their international margins that were okay and AWS once again, that's really where you get the margin from. Thirty five percent was right in line with expectations. So I really think the quarter was in line to
slightly better. From an operating fundamental standpoint. I think capecs obviously higher. We want to see where that investment is going, but hopefully they're making the investments and where they need to grow both the AWS and the retail business.
All right, just to recap, we've got shairs of Amazon pairing their decline a little bit. The stock has been down as much as eleven percent post market right now down about seven and a half percent. Here again some of the headlines that we have highlighted on the Bloomberg. The company says twenty twenty six CAPECK about two hundred billion. The street estimate was one hundred and forty six point
eleven billion. Sees first quarter net sales. We've talked about this range one hundred and seventy three point five billion, two hundred and seventy eight point five billion. Street estimate is one hundred and seventy five point fifty four billion.
What else are you looking for?
I mean, obviously more clarity in terms of what we'll get on the club call, but there's you know, we were talking to Spencer Soper early and he's like, there's just so much that comes out when you're dealing with Amazon. What other clarity are you looking for from this company or what are their aspects?
Sure? I guess number one, we discussed the capex where it's going. Number two the backlog on AWS. I think that would be an interesting point to look at. And on the retail side, they're doing a lot, whether it's Rufus, whether it's Alexa plus. I'd love to hear how they're integrating AI into the workflow for consumers to just make that conversion much easier. And then what they're doing with open AI right, we don't know. There was news earlier
about a ten billion dollar potential investment. What does that mean? Where is that going? What does it do for Amazon? What is the actual end result here from that investment?
What about advertising? The company calling out advertising growing twenty two percent? Are we looking at that growth? Are we giving that enough credit?
I don't know if we're giving it enough credit, But what I would say is it's still you know, twenty percent plus growth is admirable for Amazon. We think that advertising is a segment that sometimes overlooked as we get kind of caught up into AWS. I'd just say that for US, advertising is very important because it helps funnel
the retail business. It's where you get the money to fund the retail business and the growth that you're having its pursue, especially when it comes to physical stores is groc free, its high profit margin, higher than the cloud business. So clearly a very important vehicle for them as they move forward.
Where are the opportunities for advertising?
I mean, I.
Finally did it. I said, yes, three dollars a month because we want to watch The Night Manager without any ads. Those ads were really annoying me, and I did it. So I guess I'm part of the problem, or I guess for Amazon, part of the solution. But where's the growth?
But there's just so much more, right if you think about the retail platform, there's a lot of advertisement done just on the e commerce aspect of the business. When you have Alexa plus, when you have Rufus, you know they're embedding advertisement in all sorts of ways. On the media side, yes, you're one of the few people that is, you know, opting out for those ads, but there are
still millions of people who want it ad free. And therefore, you know, as they increase content, especially and now they're increasing content using AI to help facilitate even faster content, there's just so much opportunity for advertising.
Still listen.
I know this isn't your Baillywick, but I just think about Microsoft Alphabet, like all of these these hyperscalers, you know, when it comes to the cloud and the AI spend. Is there a takeaway for you on all of this as you kind of watch these numbers that have come out over the last week or so.
And Alphabet, of course was just last night.
Yeah. I think the big question that I'm hearing everyone ask is we continue to spend all this money, but what is the ROI on this capax? How do we kind of identify what the return is on the incremental investments that they're making, whether it's in chips, whether it's in other parts of the businesses. Help us like understand how to kind of gauge that impact.
All right, great stuff as always covered it all, Punham, Thank you, thank you. We'll be looking for your research I know you're going to be working on it later on. It'll be on the Bloomberg Punham Goyle. She's senior analysts for e commerce and ath Leisure for Bloomberg Intelligence out there at BI headquarters in Princeton, New Jersey.
We're not done. We're going to stay on Amazon because we continue to see this stock. It's off its lows.
It was down as much as eleven percent here in the aftermarket. Now Tim just down about seven percent.
I want to bring in James Chalkmock, partner and chief investment officer at Clockwise Capital. Have got about seventy million in assets under management. Also, they've got the Clockwise US Core equ ETF ticker is TIM and Amazon is the third biggest holding in the fund, more than five percent of the fund. James, with shares down seven and a half percent, are you buying more tomorrow?
I don't think we'll be increasing our positions on increasing the size of any of our positions at this juncture. With the exception of the semiconductor space, you know, we see that the CAPEX numbers continue to come in ahead of expectations across all the hyperscalers, and we think you just have to follow the money in this market, and you know we're equal weight roughly with the index with respect to Amazon. See no urgency in the grossing of Amazon or any other of the megacap names.
Are you concerned about the two hundred billion dollars that Amazon will spend this year?
Obviously it's a concern for them and for everybody else. I mean, we're living in a world now, in a market now where you know, earnings, free cash flow, return on spend, all those things are important again. You know, just a couple of quarters ago you couldn't spend enough and be rewarded for it. And now you know there's the market's kind of getting religion again as it relates to you know, the financial performance and the financial expectations
and projections for these companies. And you know it was bound to become relevant again at some point, and you know it really started last quarter with broad cop in the in the month of December, and now you're seeing it percolaid across all the companies reporting in January February.
I want to ask you about what the details are that matter, And I'm looking at some other highlights from the press release from the last earnings they announced this is.
Some of the highlights since the company's last earnings announcement include that Amazon announced new AWS agreements with Open Ai, Visa, the NBA, black Rock, Perplexity, Lift, United Airlines, Door, Dash, Salesforce, US air Force, Adobe, Thompson, Reuters, AT and T, S and P Global, National Bank of Canada, London Stock Exchange, Group, Choice Hotels, Accenture, Indeed, HSBC.
CrowdStrike, and more.
The reason I went through the list is because I feel like we have this question. Is it just about the hyperscaler spending and building out, but what we're increasingly seeing right is more businesses tap into this.
Can we make the assumption at this point, James.
That these are businesses that are going to continue to have to spend with an Amazon, or for that matter, with an alphabet.
Absolutely, I think you have to make that assumption. I mean, the world is only going in one direction. Productivity is only going to get growth, and you need to leverage the infrastructure that these companies have built in order to achieve those goals and capitalize on those opportunities. That being said, you know, the money and the profits do matter, and
we're going through a transition period right now. Where kind of growth assumptions are being revisited, valuations assumptions are being revisited. I mean, if you look at all the companies that are reported thus far, and a lot of them are traded down. I think Metap being kind of the main exception. Estimates have gone up for the most part. However, I mean Palenteers actually the poster re shop of this. Estimates came up materially. However, the stock has since fallen back
a lot. And what that means is when estimates go up and the stock goes down, that means there's valuation compression. And you're seeing the market right now north of three time sales valuations are at or near all time highs, and you know they have to come in and that's why you got to stay nimble, you got to stay hedged.
And I don't think any of these companies are going to be immune, with the exception of semiconductor companies, which are probably the only area of the market where you can likely see our performance relative to expectations by the biggest margin on on earnings versus other text companies and other sectors.
So when you know when when Meta Platforms was he was Meta earlier this, No, it was Alphabet. I'm losing losing track here, James, Thank.
You, Carol, C.
Matt Miller not the only one who forgets what dat it is when Alphabet.
You know, when when other companies report higher than expecting cap X like Alphabet yesterday, you know, you see at least the knee jerk reaction you could see like a Broadcom moving higher. For example, who's the beneficiary of this two hundred billion dollars?
I mean, it's all the companies that you you'd consider, you know, within the AI ecosystem from Envideon down. But really what we're focused on in terms of our holdings is where the scarcity is. You know, we think there's scarcity in two aspects of the semi conductor industry, and that's memory and manufacturing. You know, that's why we actually took up our Intel position today. You know, Micron continues to be one of our top holdings, and you know
we follow. We think that the other areas of the semi conductor landscape will increasingly become commoditized over time, and that includes Nvidia and d and others. So we're focused on the areas of scarcity and we think those will continue to approve a disproportionate amount of the benefits. But as far as where this capex spend goes, you know, I think there will be a rising times lifts all
both situations. But who has the pricing power of that and the most material upside testaments that's where we are focuses.
We should point out shares of Nvidia in the aftermarket are just up about one quarter of one percent. I'm going to look at something like a Micron and that stock. Let me just pull it up here to see if there's any movement. It's actually down about one point three percent.
Hey.
One of the things I want to just ask you about. It's in the press release Amazon writing that it introduced AWSAI factories to transform customers existing data centers into higher performance AI environments, which accelerates AI buildouts by months or years compared to building independently. So it sounds like they've got a little service, like you've got a data center, we can help get you up to speed. Is that kind of what that's about.
Well, I'm hearing it real time from you right now, so I need to look into it. But you know, services are a big part of the AWS offering, and Amazon offering. And that's because it's all about how do I increase utilization of my platform? And you know, if you can educate, train and build awareness of the capabilities and the trajectory of offerings, that will only increase utilization and stickiness and customer attention over time. So not surprised
that they're doing something like that. Specific of that I need to look.
No, that's okay. I'm getting up to speed too. I just looked at a press release. This is back in December, and they talked about by combining the latest a WS Trainium accelerators and Nvidia GPUs and so on and so forth, They're talking about how they can accelerate these factories. I'm just curious about aws's own chips and accelerators.
That's an important business to them.
I think it increasingly will become an important business to them Google as well. I think there's a lot of opportunity there. It's very early days. Obviously there's a balancing act with Nvidia and other players, so not stepping on toes, but I think it will. That's an area of optionality for the business that's right now not getting an incredible.
Hey, Jim's just an overall sentiment. You say you're not adding any positions except semiconductors right now. I'm just wondering how you're looking at your overall sentiment in an environment where we're seeing, you know, declinekind of more than one percent and tech stocks on the day today, we're seeing decline of seven and a half percent on Amazon.
Right now.
Bitcoin's down, yeah, fifty percent from its October highs It's it's down today eighty nine thousand dollars. What sentiment look like? Is bitcoin a leading indicator to you?
Well, I'll take the first part first. The as far as where we're adding. That was with respect to technology stocks. You know, within technology we're exclusively adding, but we are adding other areas. You know, aerospace defense continues to be an area that we're increasing our weight. We're increasing our
sizing of utilities and staples. You know, we think that you know, any money we can pull out of stocks that have run and the non scarce components of technology, we will we're putting into value, with the exception of seven conductors. As far as bitcoin is concerned, you know, we think that this is all about leveraging the system. You know, Bitcoin crypto has more leverage than pretty much
arguably any other part of the market right now. So you're seeing disproportionate hits from that unwinding, and as that leverage unwinds, you're seeing it trickle down into and proliferate into the other aspects of the market. And we're really unsure, you know, how much leverage there is ultimately how much more is left to unwind. So I've seen some headlines that suggest that, you know, is this does this negate the whole debasement argument, the digital gold argument for bitcoin.
I would venture to say the answer to that is still no. But at the same time, there's a lot of leverage in the system and that's unwinding and that's going to I think exacerbate pressures in the market over the short term, and you've seen thus far.
As always, I'm so glad you could weigh in on this. James, Thanks so much, James chack Mak He's partner and chief investment officer Clockwise Capital. They've got about seven hundred million dollars in assets under management. Joining us on this Amazon Thursday s