Amazon shares fell as much as 4% on Friday, after the e-retailer gave downbeat guidance and posted soft growth in retail and cloud computing. In comparison to peers Apple and Alphabet , which also reported on Thursday evening, its stock was hit harder. Apple’s shares were up about 4% on Friday morning, while Alphabet’s shares were down about 1%. In both cases, the top and bottom lines were poor.
In its fourth quarter, Amazon’s revenue grew by 9% to $149.2 billion, exceeding analysts’ expectations of $145.4 billion. However, the revenue beat was overshadowed by the slowing growth of Amazon’s core retail business and Amazon Web Services, which have been hit hard by the tough economic conditions. Analysts were expecting $125 billion in revenue in the current quarter, but Amazon expects revenue of between $121 billion and $126 billion.
In a note Friday, Piper Sandler analysts, who have an overweight rating on Amazon shares, said that consumers appear cautious and that the Cloud deceleration cadence appears to be “mid-teens” for [the first quarter]. As a result, the analysts concluded, Amazon is still in a difficult position.
In an effort to control Amazon’s costs after a period of unbridled expansion, Jassy has been working. During the past month, Amazon announced it would lay off more than 18,000 corporate employees. The company halted hiring, cut some projects, closed some physical stores, and halted warehouse expansion.
Despite Alphabet’s misses, analysts remain optimistic about its prospects in artificial intelligence, as well as its strong core business. As a result of its utility of search, expense flexibility, healthy margins that will minimize cash flow concerns, and opportunity for buybacks, Bank of America’s Justin Post believes Alphabet is a more defensive stock in 2023.