With Amazon (AMZN) and Google (GOOGL), together representing a whopping $3.1 trillion in market cap almost as large as the entire Russell 2000, set to report earnings after the close Bloomberg noted that some investors were nervous that anything but a massive beat, well in excess of expectations would be required to avoid a dip in the Nasdaq (recall last week's drop in AAPL and TSLA stock following stellar earnings reports).

So what is the absolute lowest numbers that Amazon has to beat in Q4 to avoid sliding? Here are the consensus estimates:

• Net sales: $119.70 billion
• GAAP EPS: $7.34
• AWS net sales: $12.77 billion
• Operating income: $4.47 billion

Amazon is expected to post a record year, its sales supercharged by the pandemic with the online retail giant among the main beneficiaries. The debate retail watchers are having now is the extent to which people are going to go back to physical stores when the virus recedes.

As a reminder, 2020 was an investment year for Amazon, with the company opening warehouses and other logistics depots at a rate of about one a day. The pandemic’s surge in online shopping both drove demand for those facilities, and made Amazon’s operations more costly (mainly by reducing the efficiency of warehouses that weren’t designed for social distancing). Investors often take their cues after Amazon reports earnings by reading the tea leaves on the company’s spending plans. Does Amazon think it needs to keep building new warehouses and cloud-computing data centers? Or will Amazon use 2021 to grow into all the capacity it added a year ago?

With all that in mind, how did Amazon do? Well, it was another blowout quarter for the retailer:

• Q4 Net Sales $125.56B, beating estimates of $119.70B
• Q4 EPS $14.09, smashing estimates of $7.340, and more than double the $6.47 year ago.
• Q4 Operating Income $6.9B, beating estimates of $4.47B, and up 77% Y/Y
• Q4 AWS Net Sales $12.74B, just missing estimates of $12.77B
  • Amazon Web Services net sales +28% vs. +34% y/y, estimate +28.3%
• Fulfillment expense $18.47 billion, estimate $18.52 billion

Looking ahead, the company's guidance was also solid:

• Amazon Sees 1Q Net Sales $100.0B to $106.0B, Est. $95.72B
• Operating income Q1 expected between $3.0 billion and $6.5 billion, compared with $4.0 billion in first-quarter 2020.

... but the real bombshell in today's report is that CEO Jeff Bezos will step down as CEO and "transition" to the role of executive chair in Q3 2021, ending an era at Amazon; Bezos will be replaced with Andy Jassy - currently the CEO of Amazon Web Services - as CEO of the entire company at that time.

Here is the letter sent from Bezos to the company's employees:

Fellow Amazonians:

I’m excited to announce that this Q3 I’ll transition to Executive Chair of the Amazon Board and Andy Jassy will become CEO. In the Exec Chair role, I intend to focus my energies and attention on new products and early initiatives. Andy is well known inside the company and has been at Amazon almost as long as I have. He will be an outstanding leader, and he has my full confidence.

This journey began some 27 years ago. Amazon was only an idea, and it had no name. The question I was asked most frequently at that time was, “What’s the internet?” Blessedly, I haven’t had to explain that in a long while.

Today, we employ 1.3 million talented, dedicated people, serve hundreds of millions of customers and businesses, and are widely recognized as one of the most successful companies in the world.

How did that happen? Invention. Invention is the root of our success. We’ve done crazy things together, and then made them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more. If you get it right, a few years after a surprising invention, the new thing has become normal. People yawn. And that yawn is the greatest compliment an inventor can receive.

I don’t know of another company with an invention track record as good as Amazon’s, and I believe we are at our most inventive right now. I hope you are as proud of our inventiveness as I am. I think you should be.

As Amazon became large, we decided to use our scale and scope to lead on important social issues. Two high-impact examples: our $15 minimum wage and the Climate Pledge. In both cases, we staked out leadership positions and then asked others to come along with us. In both cases, it’s working. Other large companies are coming our way. I hope you’re proud of that as well.

I find my work meaningful and fun. I get to work with the smartest, most talented, most ingenious teammates. When times have been good, you’ve been humble. When times have been tough, you’ve been strong and supportive, and we’ve made each other laugh. It is a joy to work on this team.

As much as I still tap dance into the office, I’m excited about this transition. Millions of customers depend on us for our services, and more than a million employees depend on us for their livelihoods. Being the CEO of Amazon is a deep responsibility, and it’s consuming. When you have a responsibility like that, it’s hard to put attention on anything else. As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I’ve never had more energy, and this isn’t about retiring. I’m super passionate about the impact I think these organizations can have.

Amazon couldn’t be better positioned for the future. We are firing on all cylinders, just as the world needs us to. We have things in the pipeline that will continue to astonish. We serve individuals and enterprises, and we’ve pioneered two complete industries and a whole new class of devices. We are leaders in areas as varied as machine learning and logistics, and if an Amazonian’s idea requires yet another new institutional skill, we’re flexible enough and patient enough to learn it.

Keep inventing, and don’t despair when at first the idea looks crazy. Remember to wander. Let curiosity be your compass. It remains Day 1.

Jeff

The stock initially tumbled on the news of Bezo's departure, only to rip higher as attention shifted back to the company's blowout earnings:

(Click on image to enlarge)