Seattle After a frightful day for technology stocks, Amazon brought good news after the New York stock exchange closed: The world’s largest online retailer posted a jump in profits in the fourth quarter, mainly thanks to high special proceeds. In the final quarter, profits doubled to $14.3 billion. Sales increased 9 percent to $137.4 billion.
The main reason for the strong increase in profits was Amazon’s stake in the electric car manufacturer Rivian, from which the group benefited greatly when it went public in November. Amazon’s operating profit, on the other hand, fell by almost half to $3.5 billion. The stock initially shot up by more than 15 percent in after-hours trading, having previously closed with a minus of almost eight percent.
“Over the holiday season we have seen higher costs due to labor shortages and inflationary pressures and these issues have carried over into the first quarter because of Omicron,” said CEO Andy Jassy. “Despite these near-term challenges, we remain optimistic and excited about the business as we emerge from the pandemic,” he said.
While Hargreaves Lansdown analyst Spohie Lund-Yates called the results “disappointing,” other observers took a more positive view of the situation: “Amazon’s fourth-quarter growth confirmed that the company continues to benefit from increased consumer demand as a result of the pandemic,” commented, for example trade expert Julian Skelly from the consulting firm Publicis Sapient. “Although Amazon’s sales growth has slowed since the peak of lockdowns, the numbers continue to rise at a good pace.”
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At its core, it was again Amazon Web Services (AWS)’s cloud division that grew the fastest and contributed the most to earnings. AWS increased its quarterly operating profit by almost half to $5.3 billion. Classic online trading, on the other hand, lost 1.8 billion dollars.
The cash cow is called AWS
“Amazon isn’t as dependent on retail sales as it used to be,” says Skelly, praising the strength of AWS. As the world ramps up its investments in online business, he expects Amazon Web Services’ cloud business and digital advertising revenue to grow and help offset any retail challenges.
Three months ago, Amazon had already warned investors of additional billions in expenditure due to higher wages, global problems in the supply chain and increased freight costs and had adjusted to relatively meager numbers. For the current quarter, the company expects sales growth of between three and eight percent.
>> Read here: Andy Jassy: The man who needs to clean up after Jeff Bezos
The group also announced that it would be raising prices for its “Prime” service in the United States for the first time since 2018, which offers access to free shipping and streaming services, among other things. The service will be significantly more expensive: from February 18, new US customers will pay $14.99 instead of $12.99 per month and $139 instead of $119 per year.
In the US, the price for Prime was last increased from $99 four years ago. “It’s about time,” said expert Michael Pachter from Wedbush Securities before the publication of the quarterly figures, referring to the higher transport costs. In the US, a majority of households use Prime, and there are more than 200 million subscribers worldwide.
Publicis Sapient consultant Skelly believes that the price increase for Prime is a sign of self-confidence. “Amazon is betting that people will try to get as much out of the subscription price as possible, which will drive more of that extra spending their way.” He thinks it’s probably just a matter of time, and the same will happen in others regions can be seen.
“We will decide that from country to country,” said Amazon CEO Andy Jassy meanwhile about the possible price increases in other countries.
With its growth, Amazon remains unparalleled in the industry. Global sales have increased almost tenfold in the past ten years, from $48 billion in 2011 to now $470 billion for all of last year. Amazon still makes the lion’s share of this in the USA with 279 billion. But the online giant was also able to increase sales internationally. Last year it was $127 billion.
AWS’s smaller but significantly more lucrative cloud business, from which Jeff Bezos’ successor Andy Jassy descends, also grew the fastest for the full year. The division contributed three-quarters of profits last year, even though it accounted for only 13 percent of sales at 62 billion.
With dpa material
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