Amazon Q4 and FY 2023 Earnings: Free Cash Flow Engine - Activate!

Amazon reported its earnings yesterday and with it, served notice to the retail industry that it's profitability-challenged 2022 was fully in the rear view mirror. Investors loved what they had to say, and in a huge turn of events, started wondering what Amazon would do with its growing pile of cash.

Sounds like a good place to be. Let's get into it:

FY 2023:

* Net sales increased 12% to $574.8 billion in 2023, compared with $514.0 billion in 2022.

* Operating income increased to $36.9 billion in 2023, compared with $12.2 billion in 2022. Tripled operating income.

And now for the eye-popping turnaround:

- NA operating income was $14.9 billion, compared with an operating loss of $2.8 billion in 2022.

* Net income was $30.4 billion in 2023, compared with a net loss of $2.7 billion, in 2022.

Q4 2023:

* Net sales increased 14% to $170.0 billion in the fourth quarter, compared with $149.2 billion in fourth quarter 2022. (stable to Q3 growth)

- NA increased 13% (growth up), International increased 17%

- AWS increased 13% year-over-year to $24.2 billion. (vs Q3 12%)

* Operating income increased to $13.2 billion in the fourth quarter, compared with $2.7 billion in fourth quarter 2022.

- NA op income was $6.5 billion, compared with an operating loss of $0.2 billion in fourth quarter 2022. ($4.3B in Q3)

Clearly the company has remembered how to make money. Oh yeah, put inventory closer and reduce transportation costs. More to come here.

* Net income increased to $10.6 billion in the fourth quarter, up from 9.9 billion in Q3 2023.

Q4 Segment Data

* Seller Services: 3P Revenue Up 19% y/y (+20% yearly) (2023 FY revenue 139.9B)

* Advertising: $14.6B, up 26% y/y, (2023 FY revenue 46.7B)

Q1 2024 Guidance:

* Net sales are expected to be between $138.0 billion and $143.5 billion, or to grow between 8% and 13% compared with first quarter 2023. (down)

* Operating income is expected to be between $8.0 billion and $12.0 billion, compared with $4.8 billion in first quarter 2023.

* No full-year 2024 guidance, boo!

Tidbits:

* # items same day or overnight up 65% y/y

* AWS lion share of optimization has happened, new projects have restarted. (good sign for software vendors)

* 3P Seller Unit Mix up to 61% from 60% (vs 1P)

* “This Q4 was a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon,” Andy Jassy

* Increased total viewership for the second season of Thursday Night Football (TNF) on Prime Video by 24% year over year,

* • Salesforce, which runs much of its cloud on AWS, expanded its global partnership.

(your move, Larry Ellison)

* Announced Rufus, a new generative AI-powered conversational shopping experience. This one could go south fast. Reserving judgment :-)

* Notably missing - grocery. But you knew that right? Amazon's physical store strategy is MIA and is in the "willing to be misunderstood" (or even forgotten) phase.