Amazon posts mixed Q4 results as AWS continues to grow

Amazon Web Services had yet another stellar quarter, with an operating income that surpassed Amazon's North American e-commerce business.

Amazon on Thursday posted mixed fourth quarter results, exceeding earnings expectations but falling short on revenue. Amazon Web Services had yet another stellar quarter, with an operating income that surpassed Amazon's North American e-commerce business.

Overall, Amazon's net income came to $749 million in the fourth quarter, or $1.54 a share. Revenue came to $43.7 billion. In the same quarter last year, Amazon reported earnings of $1 a share on $35.75 billion in revenue.

For the full year, net income came to $2.4 billion, or $4.90 per share, compared with a net income of $596 million, or $1.25 per share, in 2015. Revenue for 2016 reached increased 27 percent to $136 billion, compared with $107 billion in 2015.

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Wall Street was looking for fourth quarter earnings of $1.36 a share on revenue of $44.67 billion. Full-year earnings were expected to hit $4.76 a share on revenue of $137 billion.

Operating income was $1.3 billion in the fourth quarter, compared with $1.11 billion in fourth quarter 2015.

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Breaking it down by segment, Amazon's North American e-commerce business posted a Q4 operating income of $816 million. AWS, meanwhile, posted an operating income of $926 million. AWS also had a higher full-year 2016 operating income ($3.1 billion) than the North America segment ($2.36 billion).

AWS' annual operating profit margin was more than 25 percent. By comparison, Amazon's North American e-commerce operating margin was 2.95 percent.

On a conference call Thursday, Amazon executives said they're continuing to see growth across all sectors of its AWS business, including SMBs, large enterprises and the public sector. It's now in 42 availability zones in 16 geographic regions, and Amazon says it will continue to grow that business globally.

AWS had seven price cuts in Q4, and that will continue to be a "constant" in the business, Amazon said, as well as creating new functionality for customers. AWS introduced more than 1,000 new services and features in 2016, compared with around 700 in 2015.

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In a statement, CEO Jeff Bezos noted that "tens of millions of new paid members" joined Amazon Prime in the past year. Amazon Prime now offers free two-day shipping for over 50 million items -- up 73 percent since 2015. Also, Prime Now added 18 new cities, "which means millions more members now get one and two hour delivery," Bezos said.

It also means the company has to spend more on shipping. The company has consequently started investing significantly in logistics, recently announcing plans to spend about $1.5 billion in an air cargo hub in Kentucky.

For its Q1 2017 outlook, Amazon said it expects revenue between $33.25 billion and $35.75 billion

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