At the end of this earnings season, Facebook went out on a stretcher (-25%), Amazon under the cheers (+15%).

In value terms, this now gives $600bn for Facebook against $1640bn for Amazon. Almost three times more: we can't even put them in the same category!
 
However, here is the resume of each of our champions:
 
Amazon:
- Sales growth (4th quarter): +11%.
- Operating income: $3.5 Bn
- Return to shareholder (2021): $0
- Debt and off-balance sheet commitments: $310 Bn (Debt $50 Bn and off-balance sheet commitments $260 Bn)
 
Facebook :
- Sales growth (Q4): +21
- Operating income: $12.6 billion
- Return to shareholder (2021): $44bn (share buyback)
- Debt and off-balance sheet commitments: $20bn (off-balance sheet commitments only - no debt)
 
So Facebook is growing twice as fast, making four times as much money and has no debt. Maybe the market has got it wrong with these values...
 
And especially, if you take a closer look, these results of Amazon are quite disturbing.

Amazon has three segments: US e-commerce, international e-commerce and AWS (the cloud). Here's what it looks like for the fourth quarter of 2021:
1/ US e-commerce: sales +9%; result: $200M loss
2/ international e-commerce: sales -1%; result: loss of $1,600M
3/ AWS: sales +40%; result: gain of $5,300M 

So, as in the previous quarter, the business Amazon is known for - the one that delivers the toothbrush you ordered in 12 minutes by talking to Alexa - is losing money. And it's been happening for the past 20 years. Even with a worldwide pandemic (Jeff Bezos must have dreamed of it: all those stores with the curtain down...), still losses. Right.

What's more annoying is this drop in international sales. A year ago, Amazon had sold $37467 M worth of toothbrushes and bras internationally. Well this year, despite Black Friday, Cyber Friday and tutti quanti, they only made $37,272M in that same segment this quarter. Is this important? Yes, at Amazon it's important because they have always explained that the metric to follow at Amazon is the operating cash flow. Which until now has only gone up - as long as there is growth - because when you pay the toothbrush now, they pay the supplier in two months. But now, with growth evaporating, this is not the case: " our operating cash flow is down 30% compared to 2020". Not good.
 
You will tell me, " yes but Charles, look, AWS! +40% and it earns $5 billion in one quarter" . I agree. Impressive this growth of AWS. With such a growth, these servers must be running at full speed and therefore hot like French fries. But then in this case, what surprises me is to find this sentence in the press release: " as of January 1st we will increase the life of our servers from 4 to 5 years. This accounting change will have a positive impact of $1 billion on our Q1 operating income". As the operating profit forecast for the first quarter of 2022 is $4 billion, the billion added by this slight change is not a straw. And I'm even more surprised because Amazon has already done this three years ago, by increasing the duration from 3 to 4 years. So AWS, the more the business sputters, the less the servers wear out. I'm puzzled by this...

Well, if you thought the CEO was going to answer pointed questions on this topic during the call, how can I put this... no. Because in fact, the CEO wasn't there - he's never there, by the way - only the CFO was. But it doesn't matter because no analyst asked the question.

That said, for the next quarter, Amazon is reporting growth of about 5%. That's less than inflation. Even with such elastic accounting rules, it's going to be fun this year 2022. 
 
Have a good week,
Charles