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Amazon’s Holiday Quarter Doesn’t Match High Expectations

SAN FRANCISCO — Amazon showed the kind of growth over the holidays that most big companies would die for, as it continued to suck away sales from crumbling bricks-and-mortar retailers. But it was not enough.

Despite a 55 percent increase in profit, Amazon’s revenue in the fourth quarter of 2016 was not as strong as Wall Street had predicted, and an after-hours sell-off by investors dropped the company’s share price more than 4 percent.

“There were great expectations, and they failed to impress,” said Christian Magoon, chief executive of Amplify Exchange Traded Funds, which owns Amazon shares.

Investors have been generous with Amazon for most of its life. Even when the company showed deep losses as it poured money into various investments, they bought its stock, as long as it showed the revenue growth analysts expected. Over the past 21 months, Amazon shares were up 43 percent, and Jeff Bezos is now the third-richest person in the world, according to Forbes.

Still, even if investors were disappointed, Amazon’s long-term growth story was still intact. The company is gradually taking market share from offline retailers, with aggressive pricing, a wider selection and speedy shipping.

The company is building new warehouses at a torrid clip, pushing its fulfillment centers closer and closer to population centers so it can get orders more quickly to customers. During 2016, it added a net of 26 new warehouses, compared with a net addition of 14 warehouses in 2015.

Graphic | Amazon on Wall Street

Amazon’s success in online retail has come at the expense of offline retailers, many of whom are struggling. After a weak holiday quarter, Macy’s said it would cut 10,000 jobs. Even President Obama noted the phenomenon in an interview with several former aides on the Pod Save America podcast shortly before he left office.

“Automation is relentless, and it’s going to accelerate,” Mr. Obama said. “You saw what happened to retail store sales this past Christmas. Amazon and online sales is killing traditional retail.”

For the fourth quarter, which ended Dec. 31, Amazon said its net income was $749 million, or $1.54 a share, up from $482 million, or $1 a share, during the same period a year earlier. The company’s revenue rose to $43.7 billion from $35.7 billion a year earlier.

Amazon’s profit soared in the quarter in part because of the growth of Amazon Web Services, its cloud computing business, which runs many technology functions for customers through Amazon’s data centers. Web Services revenue jumped 47 percent to $3.54 billion, while operating income increased almost 60 percent to $926 million.

The company’s earnings were well ahead of the average earnings estimate compiled by Thomson Reuters of $1.35 a share. Revenue was a different story, falling short of the $44.68 billion average revenue estimate of analysts.

Brian Olsavsky, Amazon’s chief financial officer, said in a conference call that one reason the company’s revenue diverged from expectations was because of fluctuations in foreign currency, which can impact the company’s results from overseas businesses.

While Amazon had told analysts to expect a favorable impact of $230 million on its revenue from currency fluctuations, the changes produced a negative impact of $558 million.

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