Online shopping giant Amazon dropped the bombshell during the peak of the US earnings season by announcing that chief executive Jeff Bezos will stand aside from the day-to-day running of the company. Andy Jassy, current boss of Amazon’s cloud computing business AWS, will become CEO later this year.

Moving to the role of executive chairman will still see Bezos involved in the business, hence why there wasn’t a big sell-off in the shares on the news. Helping support the stock was a forecast-busting fourth quarter. All parts of Amazon did well, with domestic US revenues jumping 37% year-on-year, international up 57% and AWS, the chief driver of profits, 8% ahead.

With Google-owner Alphabet’s online advertising machine roaring back to life in Q4 2020 and largely knockout earnings from Apple, Facebook, Microsoft, Netflix and others, this has so far proved to be a very strong earnings season from major US companies, even if stock prices haven’t necessarily reflected as much following the announcements.

‘E-commerce stocks have done extremely well during the pandemic driven by necessity from consumers with limited buying options in the physical world,’ says Eleanor Creagh, market strategist at Saxo Bank.

Companies have also used large amounts of data to better manage changes in demand. For example, Google was able to tell German airline Lufthansa which routes users were looking at so that it could meet demand as well as it could considering limitations on travel, notes Richard Windsor of research group Radio Free Mobile.

Fourth quarter reports in the US show the cycle has turned and earnings are now accelerating to the upside. Across the broad S&P 500 earnings growth has increased sequentially by 4.87% versus -7.44% in the third quarter. That suggests the bottom in the earnings cycle is behind us, with the global cycle now in an early expansion.

On average, Q4 earnings have beaten expectations by 20% for the 216 US companies that have reported to date, according to Saxo data.

Analysts believe that the wider implications of strong US earnings are promising for investors. ‘The profit cycle has turned, and earnings are accelerating to the upside far quicker than expected,’ says Creagh.

‘Balance sheets have also been bolstered, cost structures trimmed and optimised, and demand is rebounding and will continue to do so, particularly with vaccines now being rolled out on a large scale,’ she adds.

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