Amazon 18Q4 growth & margin analysis

In general, diversification supports growth and margins. Specifically: AWS, Prime, hardware, advertising. What's next?

Growth 18Q4

Take-aways: advertising driving a new round of growth. Physical stores (Whole Foods Market and Amazon stores) down on price reductions, footprint expansion seems inevitable.

• Overall +19.7%. Lowest level since 15Q1. Currency neutral +21%, lowest since 14Q4.
• Products +17.3%, Services +52.4%. Revenue contributions 61.8% and 38.2%.
• N-America +18.3%, International +15.5% (currency neutral +19%), AWS +45.3% (currency neutral +46%).
• Online stores +12.5% (currency neutral +14%), Physical stores -2.7%, 3rd Party sellers +27.2% (currency neutral +28%), Subscription services (Prime etc.) +24.6% (currency neutral +26%), AWS (see above), Other (advertising etc.) +95.3% (currency neutral +97%).

Growth 2018

Take-aways: highest growth in US and RoW.

• US +32.9%, Germany +17.3%, UK +27.7%, Japan +16.1%, RoW +42.9%.
• Growth acceleration in UK probably on growth of Prime.
• RoW growth down from previous years. Still high on e-commerce expansion and AWS.
• US contribution up to 68.8%, Germany down to 8.5%, UK down to 6.2%, Japan down to 5.9%, RoW up to 10.5%.

Margins

Take-aways: international still negative. AWS by far most profitable. In absolute terms, AWS contributes almost the same as N-America.

• Gross margin 38.1%. Up from 17Q4 but down from 18Q3.
• EBIT margin 5.2%.
• N-America 5.1%
• International -3.1%
• AWS 29.3%