The economy is improving and a persistent virus is starting to weigh on Amazon’s retail business, even as its cloud business grows and an investment boosts profits. .
The company was profitable, the number of employees and the stock price skyrocketed two years before Covid forced people to stay at home, say on Thursday that its operating income for Q4 fell to $3.5 billion, about half of the $6.9 billion it earned in Q4 2020.
To make up for the increased costs, Amazon says it is increasing the annual price of its Prime shipping club to $139, from $119. The company said the 17% increase was its first Prime increase since 2018.
Andy Jassy, chief executive officer of Amazon, said: “As expected during the holidays, we saw higher costs due to labor shortages and inflationary pressures. and these problems continued in the first quarter due to omicrons,” Andy Jassy, Amazon’s chief executive officer, said in a statement.
However, net income rose sharply due to what Amazon calls “pre-tax valuation profit” in the year Rivian Automotive, an Amazon investment that went public in the fourth quarter. Amazon owns about 20% of the electric vehicle maker.
That pushed net income to $14.3 billion from $7.2 billion a year ago. The company said that without Rivian, net income would drop to $2.5 billion. Revenue rose to a record $137.4 billion, just slightly below what analysts expected.
Amazon controls about 40% of the e-commerce market, but that business – the company that started it and is still best known – is increasingly becoming the company’s weakest division. Online retail sales were essentially flat in the fourth quarter from 2020.
“Growth is slowing, no doubt,” said Tom Johnson, global chief digital officer at Mindshare Worldwide. “Compared to the super growth quarters since the beginning of the pandemic, the supply chain issues that have had a direct impact on ad spend and the continued increase in costs all lead to the conclusion that the period of rapid growth has ended. end.”
AWS, Amazon’s cloud division, delivered impressive performance as usual, with operating income up 49%. Advertising revenue was $9 billion, up 37 percent. Twitter, which generates most of its revenue from advertising, compares with less than $5 billion in annual sales.
In the usual trading session on Thursday, as investors worried about what was to come, Amazon shares fell 8%. But after the earnings announcement came in, investors focused on the good news, quickly pushing Amazon stock in after-hours trading up about 17% before starting to fall again.
Andrew Lipsman, principal analyst at research firm Insider Intelligence, attributes Wall Street’s optimism to two things.
“There has been a price increase for Prime membership and a continued increase in AWS growth and its growing impact on bottom line,” he said. “Perhaps there is also some forgiveness for the e-commerce slowdown due to the unusual comparisons of the previous year with the challenging Q4 of 2020.”
Amazon added 140,000 workers in the quarter, bringing its total to 1.6 million. This number has increased 24% in a year. Walmart, the largest US non-governmental employer, has 2.2 million workers.
https://www.nytimes.com/2022/02/03/technology/amazon-stock-earnings-prime-membership.html Amazon post record sales; The cost of Amazon Prime is increasing