Amazon Prime and Amazon's cloud-computing division are killing it.
The company has posted its fourth-quarter earnings, revealing Amazon Web Services is still a very profitable division. While most sales for the holiday quarter came from Amazon's online retail business, which missed analysts' expectations, AWS had a huge jump in revenue and therefore met Wall Street predictions. Amazon also experienced huge Prime growth last year.
Amazon reported a net revenue of $35.7 billion as well as a net income of $482 million, meaning revenue rose 22 per cent compared to the year-ago quarter, while profit grew 125 per cent. As for AWS, it had a whopping 69 per cent jump in revenue, hitting $2.4 billion for the 90-day period, and its profit doubled to $687 million. That's nice, eh? AWS is Amazon’s cash cow.
Thompson Reuters said Wall Street wanted a profit of $1.56 a share on revenue of $36 billion. So, Amazon fell short by just a bit. While investors likely aren't too happy, they should keep in mind that Amazon suffered a $437 million loss in the third quarter of 2014, largely due to in poor sales of the Fire Phone, but this latest quarter is the largest ever in terms of sales.
Another thing investors won't like is Amazon's dent in profits. It had a operating expense of $4.5 billion for the most recent quarter, which came from fulfillment (costs for storing and delivering the goods it sells). Some of that could be blamed on the push to get customers on Prime, a subscription service that encourages more sales but offers free, two-day delivery.
Prime memberships in 2015 grew 51 per cent globally and 41 per cent in the US. Amazon wouldn't confirm how many subscribers it had, but Consumer Intelligence Research Partners estimated that there were 54 million Prime members in the US at the end of 2015.
In reaction to Amazon's earnings report, company shares dropped 13 per cent in after-hours trading.