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Amazon Shatters Profit Expectations For Holiday Quarter, Surpasses 150 Million Prime Members

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Investments in one-day delivery may have contributed to earnings misses at Amazon in Q2 and Q3, but they seriously paid off for the e-Commerce giant during the holiday season. In Q4, Amazon reported net income of $3.3 billion, or $6.47 per share, easily outpacing expectations of $4.03 a share from analysts polled by Yahoo Finance and higher than $6.04 per share from the year earlier. Shares of Amazon stock rose more than 12% in after-hours trading.

Net sales in the quarter rose 21% to $87.4 billion, beating both Wall Street estimates and the company’s own guidance.

Beyond impressive financial results, Amazon gets to boast about yet another milestone related to its most dedicated consumers: Prime members.

“More people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,” said Jeff Bezos, Amazon Founder and CEO in a statement. “We’ve made Prime delivery faster — the number of items delivered to U.S. customers with Prime’s free one-day and same-day delivery more than quadrupled this quarter compared to last year.”

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The last reported number of Prime members was 100 million in the U.S. in 2018, so the new 150 million figure is not precisely comparable. However, it does suggest Amazon is luring overseas shoppers to join Prime as the U.S. market becomes saturated.

It’s worth noting that Amazon Web Services (AWS) posted its lowest quarterly growth number ever, at 34%, but the division still brought in $9.95 billion in revenue, continuing to give the e-Commerce giant the extra boost necessary to keep profits healthy.

“AWS continued to drive Amazon’s operating income in Q4 2019, with its $2.6 billion offsetting the delivery expense-driven reduction in retail, as North America was down $400 million to $1.8 billion and international was flat at a loss of $600 million,” said Moody’s lead Amazon analyst Charlie O’Shea in commentary provided to Retail TouchPoints. “Though AWS’ sales growth slowed slightly year over year and margins dropped slightly, it still provided significant support for retail’s ongoing investments.”

Moving ahead, Amazon will need to fend off its main competitor in the cloud category, Microsoft Azure. Microsoft’s Azure cloud revenue growth accelerated significantly in Q4, coming in at 62%. Further feeding the competition, the U.S. Defense Department awarded the Joint Enterprise Defense Infrastructure (JEDI) cloud contract, worth up to $10 billion over the next decade, to Microsoft instead of Amazon.

Full-Year Profits Reach $10 Billion Despite $38 Billion In Shipping Expenses

For all of 2019, Amazon reported sales growth of 20% to $280.5 billion. The growth rate is low compared to the company’s 2017 and 2018 revenue jumps, which were just above 30%, but it’s still well ahead of most retailers. Net income for the year increased to $11.6 billion, or $23.01 per diluted share, compared with net income of $10.1 billion, or $20.14 per diluted share, in 2018.

Amazon revealed its guidance for Q1 2020, projecting net sales between $69 billion and $73 billion, translating to a range of 16% to 22% growth compared with Q1 2019. Operating income is expected to be between $3 billion and $4.2 billion, compared with $4.4 billion in the year-before period.

The profit numbers are even more impressive when heavy global shipping costs are taken into account. Shipping costs hit $12.9 billion in the quarter, up from $9 billion in Q4 2018. For the full year, Amazon shipping expenses reached $37.9 billion, up more than $10 billion year-over-year.

The company’s costs to provide one-day shipping capabilities have continued to rise as Amazon moves inventory closer to customers. One-day spending reached more than $800 million from April to June, and it was expected to nearly double in Q4 to $1.5 billion.

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