Amazon smashed fourth quarter earnings expectations despite revenue coming in roughly in line with forecasts. The retail platform giant unveiled revenues of $137.4 billion in the festive three months to 31 December, versus $137.8 billion forecast, but smashed it on underlying profits.
Earnings per share came in at $27.75 per share. Consensus was pitched at $3.71.
Amazon stock fell nearly 8% ahead of the results on Thursday, yet pre-market trading suggests a near 11% rally when Wall Street opens later today, implying $3,078.
Sales for the full year showed 22% growth to just shy of $470 billion although operating income was up just 9% to $25 billion as Amazon shouldered hefty costs rises to get goods to consumers during the pandemic.
Amazon’s Q4 2021 operating profit came in at $3.5 billion, despite the fact it paid $4 billion in higher wages, employee incentives, and shipping costs.
TAKEAWAY ONE - Prime subscriptions rise
This really caught analyst’s attention with Morningstar calling it the ‘highlight of the quarter’. Amazon plans to raise prices in the US on Prime, its one-day delivery and streaming TV package, to $139 a year from $119 starting on 18 February for new members, a move that underscores its pricing power and highlighting Prime as big revenue driver.
The US-only Prime subscription price hike will be the first since 2018 and will hand Amazon a tailwind this year, Morningstar analysts said.
TAKEAWAY TWO - Ads business as big as YouTube
Amazon stripped out its sprawling online advertising business for the first time in Q4 2021, revealing a unit larger than Google’s YouTube. Amazon reported ad revenue of $9.7 billion for Q4, up 32% from last year, and $31 billion for the year. YouTube posted $28.8 billion ad revenue for 2021.
Analyst Benedict Evans on Twitter said that made Amazon’s ad revenue similar in size to the entire global newspaper industry, and Statista put global newspaper annual ad spending at $29.5 billion. Pinterest posted Q4 ad revenue of $846.7 million, Snap $1.3 billion.
TAKEAWAY THREE - AWS breaks revenue record
Amazon's profits remain tied to its cloud computing arm so it will come as a relief to read that AWS racked up its fourth straight quarter of sales growth, a streak analysts called impressive.
This is strong evidence that rapid growth by Microsoft’s Azure and Google Cloud rivals are not eating into AWS’s market share - all three added about one percentage point apiece in Q4, showing that the trio continue to grow at the expense of smaller vendors.
AWS operating profits topped $5 billion in Q4, more than Amazon’s overall $3.5 billion because other parts of the Amazon empire run at a loss.
