Amazon's holiday sales surge, while tax bill gives it a profit one-time boost
When Alexa loses her voice, celebrities—including Rebel Wilson, Cardi B, and Anthony Hopkins—help her get it back.
SAN FRANCISCO — Amazon late Thursday said sales surged as customers tapped and clicked their way through the holiday shopping season, though the cost of its sprawling and increasingly international business clipped profits.
Sales in the December quarter jumped 38% to $60.5 billion, slightly topping forecasts. Net income more than doubled, to $1.9 billion from $749 million in the fourth quarter of 2016, helped by a $789 million provisional tax benefit from the recently enacted federal tax bill.
Earnings per share of $3.75, or $2.15 minus the impact of the jobs bill, topped forecasts of $1.83 expected by analysts polled by S&P Capital IQ.
Amazon (AMZN) stock rose in after hours trading, up 6%. The stock has risen sharply of late, making founder Jeff Bezos the richest man in the world. It closed Thursday at $1,390, up 65% from a year ago.
For all of 2017 Amazon made $177.9 billion in sales, a 31% increase. In spite of the large growth in revenue, operating profit dropped 2% to $4.10 billion for the year.
“It’s the same story as always, revenue’s up and profits are still anemic,” said Sucharita Kodali, an Amazon analyst with Forrester Research.
For the current, March quarter, Amazon forecast sales will jump 34% to 42% from the year-ago period, while operating income will be flat to lower, at $300 million to $1 billion.
“What the market is looking at is their top line growth. At some point, that’s the real question. The company is so large, and the expectations are so high, it’s staggering what they’re expected to grow,” said Kodali.
Christmas was good for Amazon. North American e-commerce revenue was $37.3 billion in the fourth quarter, an increase of 42% year-over-year Market research company eMarketer estimates that Amazon accounts for 44% of all e-commerce in the United States.
Lucrative Prime memberships continue to increase. The company reported that in 2017 more than five billion items shipped with Prime worldwide and more new paid members joined than any previous year.
These shoppers to spend on average $1,300 per year, compared with roughly $700 for those who aren’t members.
Amazon’s international enterprise has been aided by strong growth in Europe and momentum India, in which the company has invested heavily.
International sales rose to $18.03 billion, up 29%. The division showed an operating loss of $919 million, more than double a year ago.
Amazon’s cloud computing business, AWS, has consistently been a profit engine for Amazon and this quarter was no different, with AWS’ operating income accounting for 73% of the company’s net income. AWS reported operating income of $1.35 billion for the fourth quarter, up 45% year-over-year.
That income is one reason the company has had the luxury of testing and working out the kinks in its multiple experimental projects, including its recently opened to the public no-checkout Amazon Go store in Seattle, said Josh Olson, a technology analyst for Edward Jones.
“Retail has razor thin margins. But AWS gives them the luxury of trying things out,” he said.
Amazon does not break out profits for its Amazon Studios division. But it has been spending heavily on creating original content and buying already made movies and shows.
Its Amazon Studios division originally focused on movies that would win it awards and give it clout in Hollywood. Now it’s shifting more towards mainstream offerings that will appeal to a wide audience, according to a report by Reuters last month. That’s in part to help attract still more of its customers to sign up for Prime memberships, which comes with video streaming.
Amazon is in a fight with streaming media giant Netflix, which has pledged to spend as much as $8 billion in 2018 on original content.
“We’ve seen Amazon trying desperately try to play catch up. I expect they’re going to take spending from $4 billion to about $6.6 billion,” said Michael Pachter, an Amazon analyst with Los Angeles-based Wedbush.