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January 31, 2019 5:15 PM, EST

Amazon Sales, Profit Top Estimates as Retail, Advertising Soar

An Amazon fulfillment center An Amazon fulfillment center. (Luke MacGregor/Bloomberg News)

Amazon.com Inc.’s sales and earnings in the busy holiday quarter beat analysts’ estimates, showing the world’s biggest web retailer can maintain rapid growth while improving profitability and fending off online competition from rivals such as Walmart Inc.

Advertising was a key moneymaker, highlighting Amazon’s ability to charge brands and merchants for visibility to its 100 million-plus loyal Prime subscribers, who pay fees in exchange for delivery discounts, movie and music streaming and other perks. The company’s “other” revenue category, which is mostly advertising, grew 95% to $3.39 billion in the quarter.

Revenue gained 20% to $72.4 billion in the fourth quarter, the e-commerce giant said Jan. 31 in a statement. Analysts projected $71.9 billion. Net income was $6.04 per share, compared with an average estimate of $5.56.

Shoppers will spend $484 billion globally on Amazon this year, up 26% from 2018, and the Seattle-based company will capture more than half of all online spending in the U.S., according to EMarketer Inc.

CEO Jeff Bezos has been pushing beyond the low-margin business of selling goods online into more profitable categories such as cloud computing and advertising. Those profits also help fuel Amazon’s growing devices business, which includes smart-home and connected-car gadgets that operate on Amazon’s voice-activated Alexa platform.

Sales will be $56 billion to $60 billion in the current period, compared with analysts’ average estimate of $61 billion. First-quarter operating income will be $2.3 billion to $3.3 billion, in line with analysts’ estimates of $2.99 billion.

Shares were little changed in extended trading following the report. Investor excitement about Amazon’s growing profits helped push the stock to a record high in September, before the shares dipped during a broader market slump at year’s end. Amazon shares are up about 14% this year on investor optimism that the company can maintain growth and profitability, and closed at $1,718.73 before the results were released. Amazon had jumped back above Microsoft Corp., which is No. 2 in cloud computing, as the most valuable publicly traded company, with a market capitalization of $840.4 billion.