Wednesday, Feb 3rd 2021
"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." - Jeff Bezos
On Tuesday after hours, both Amazon and Google competed for investor attention after posting blowout quarterly results and unveiling big cloud-related announcements.
Google quickly rose +7% as recovering ad spend and strength in YouTube propelled the company above revenue and profit estimates by an incredible +8% and +41%, respectively.
The big story was on the Cloud side, with the company breaking out the segment's P&L for the first time, setting investors up for more refined sum-of-the-parts valuations, on which the company should screen screamingly cheap.
The new Cloud disclosures also painted the picture of a cloud business that was scaling rapidly (with order backlog up nearly +60% vs. the prior quarter) and starting to see operating leverage, with losses staying flat year over year despite the massive topline growth.
However, all of this paled in comparison to Amazon's big reveal - that storied CEO Jeff Bezos would be stepping into an executive chairman role and passing off CEO responsibilities to "the father of AWS," Andy Jassy.
To some extent, this shouldn't be a huge shock, as Jeff has likely mostly occupied the role of an executive chair for quite some time now, focusing on high level strategic decisions as opposed to more day-to-day functions around operations and execution.
He's also clearly telegraphed his strong interest in passion projects beyond Amazon for quite some time now, projects that span from philanthropy to climate change to space exploration.
However, as one of the most visionary and respected executives of our times, the transition is still a dramatic change for investors to grapple with, which was reflected in the stock's reaction.
Amazon's Q4 results were decidedly stellar. At its mammoth scale, the company somehow managed to top profit expectations by nearly 100% and boosted its Q1 sales outlook +8% above analyst estimates.
But despite these blowout results, the company's stock price remained relatively unchanged, a reaction that we view as a testament to the degree of respect with which investors view Bezos's leadership.
We're optimistic on the transition to Andy Jassy, someone who despite his low public profile was almost single-handedly responsible for the creation of AWS (and by implication, the whole cloud computing market) as we know it today.
In the meantime, for long-term investors, the key performance indicator to track for Amazon will likely remain the same: how closely the company continues to true to its forever "Day 1" mentality.
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