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Amazon shares soar on cloud revenue beat and huge profit gain from Rivian stake

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Amazon on Thursday said revenue climbed 9% in the fourth quarter and the company reported a gain of almost $12 billion from its investment in electric vehicle company Rivian.

Amazon shares popped as much as 17% in extended trading. Should the stock sustain this rally on Friday, it would be the biggest one-day gain since 2009.

Here are the key numbers:

Earnings per share: $27.75
Revenue: $137.4 billion vs $137.6 billion expected, according to a Refinitiv survey of analysts
AWS revenue: $17.8 billion vs $17.37 billion expected, according to StreetAccount

Amazon guided for first quarter revenue of between $112 billion and $117 billion, below the average estimate of $120 billion, according to Refinitiv. Operating profit in the fourth quarter will be in the range of $3 billion to $6 billion.

Fourth-quarter sales grew 9.4% to $137.4 billion. That’s Amazon’s first period of single-digit growth since 2017.

Even with the weaker-than-expected sales number and disappointing guidance, Amazon gave investors enough confidence that growth will recover. The market had a very different reaction to Facebook’s results on Wednesday, sending the social media company’s stock to its worst ever drop after its earnings and forecast missed estimates.

Amazon disclosed revenue from its fast growing advertising business for the first time. Advertising services grew 32% year over year to $9.7 billion during the quarter. Previously, Amazon included advertising revenue in its “other” business segment.

“It had been the majority of other revenue,” Amazon CFO Brian Olsavsky said on a call with reporters. “We’re very happy with ad growth. It continues to drive value.”

While advertising has always been viewed as a tangential business for Amazon, the company has had so much success attracting ad dollars that it’s now third in the U.S. market, behind Google and Facebook. Google reported fourth-quarter ad revenue of $61.2 billion, while Facebook notched ad sales of $32.6 billion in the period.

Amazon’s big profit gain on Rivian is the result of the electric vehicle maker’s IPO in November. The deal priced at $78 a share, valuing the company at $66.5 billion. The stock climbed past $172 at its peak, but has since fallen back to about $60. Shares of Rivian gained 3% in extended trading on Thursday.

Amazon, which invested more than $1.3 billion into Rivian, owned 22.4% of the company’s Class A shares prior to the IPO.

Amazon is the last of the mega-cap tech companies to report in what’s been a rollercoaster earnings season. Netflix kicked it off in disastrous fashion, with a miss on subscriber estimates. Microsoft, Apple and Alphabet followed by cruising past estimates, all before Facebook’s troubling numbers.

Amazon CEO Andy Jassy, who succeeded Jeff Bezos last year, said the pandemic continues to pose challenges. Facing a tight labor market, Amazon last year hiked wages to an average of $18 an hour to lure workers and has increased incentives, offering signing bonuses worth as much as $3,000 in some markets.

“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” Jassy said in the earnings statement. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Amazon also hiked the price of its Prime membership for the first time in four years. The company said it will raise the price of its annual Prime membership to $139 from $119. The cost of the monthly Prime membership will also increase to $14.99 from $12.99. The price change will go into effect for new members on Feb. 18 and for current members after March 25.

The company’s cloud computing business was one notable bright spot. Revenue at Amazon Web Services climbed almost 40% to $17.78 billion, topping analysts’ estimates.

This is breaking news. Please check back for updates.

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