Amazon’s slower-than-expected cloud business growth and rising fulfillment center costs took a toll on the company’s fourth quarter results.
Amazon's Q4 financial results missed Wall Street targets across the board, which is driving its stock is down more than 12% in after-hours trading.
Here are the most important numbers:
  • Earnings per share (EPS): $1 vs. $1.56 estimated (GAAP).
  • Revenue: $35.75 billion, up 22% year-on-year, but short of the $35.9 billion estimated by Wall Street. 
The miss largely had to do with the slowing growth of AWS, its cloud computing service. It grew 69% year-over-year to $2.4 billion in revenue, but not as fast as expected. In the last two quarters, it grew approximately 80% year-over-year.
During the earnings call, Amazon CFO Brian Olsavsky said AWS was "just short" of the $10 billion run rate it had previously projected.
There were also concerns of rising costs for its fulfillment centers, where Amazon stores its products, as it grew 33% year-over-year.

Revenue guidance in-line

Amazon gave revenue guidance in the range of $26.5 billion and $29 billion, or up between 17% and 28% compared with first-quarter 2015. Analysts are expecting $27.65 billion.
Although Amazon missed analyst expectations, its overall sales and profitability have improved.
This was the third-straight profitable quarter for Amazon, pulling in $482 million in net profit, which is also the biggest ever for the e-commerce company. 
For the full year, revenue increased 20% to $107 billion, compared with $89 billion in 2014. Operating-cash flow went up 74% year-over-year to $11.9 billion for the past year, while free-cash flow increased $7.3 billion.

Big expectations

But it looks like investors were expecting another beat, since they drove up Amazon's stock price by over 9% on Thursday afternoon, even before the company released its earnings.
Last month, Amazon indicated that it had a strong holiday season, announcing that its Prime service had a record number of units shipped, with more than 3 million new customers joining its membership program. Amazon never released exact figures for its Prime members, but CIRP recently estimated it to be 54 million, up 35% from last year.
Amazon said in its release that Prime membership, which includes free two-day shipping and access to a bunch of video and music content, grew 51% last year, and 47% in the US.
There were also multiple reports in the last quarter indicating that Amazon may possibly expand its logistics business across truck trailers, flight delivery, and ocean-freight services. Amazon typically stays coy about these things on earnings calls, but investors will keep an eye out for any mentions.
Here are some of the notable highlights Amazon shared in its press release:
  • Fire TV remains the No. 1 best-selling streaming media player in the US, having added over 1,000 new apps, channels, and games since September, including NBC, NBC Sports, Watch HGTV, Watch Food Network, and Watch Travel Channel.
  • The $50 Fire tablet has been the No. 1 best-selling, most gifted, and most wished-for product across all items available on Amazon.com since its introduction 19 weeks ago.
  • In 2015, worldwide paid Prime memberships increased 51% — 47% in the US but even faster outside the US.
  • In the fourth quarter, Prime Music streaming hours more than tripled in the US, compared with fourth-quarter 2014.
  • Sellers on Amazon.in sold more in the fourth quarter than in all four quarters combined in 2014.
  • Since launching in December 2014 with one location, Prime Now has grown to more than 25 metropolitan areas across the U.S., U.K., Italy, and Japan.
  • In 2015, Fulfillment by Amazon (FBA) shipped over one billion units on behalf of sellers. The number of active sellers using FBA grew more than 50%.
  • In the fourth quarter, FBA units represented nearly 50% of total third-party units.Amazon Web Services (AWS) announced the launch of its Asia Pacific (Seoul) Region in Korea and its plans to open a new region in Canada. The AWS Cloud is now available from 32 Availability Zones across 12 geographic regions worldwide, with another five AWS Regions — and 11 Availability Zones — in Canada, China, India, Ohio, and the UK expected to be available in the coming year.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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