Amazon stocks soar as the company reports robust growth in cloud, ad sales
The company says it is increasing the fee for the Prime membership in United States
Amazon reported better-than-expected earnings for the fourth quarter of 2021 on Thursday, posting a profit gain of almost $12 billion thanks to its investment in Rivian, an electric car company.
The company's stock increased more than 14 per cent to a closing price of $2,777, after Amazon announced its quarterly and full year results [pdf].
Amazon's net sales rose by 9 per cent to $137.4 billion in Q4 2021, narrowly missing the $137.6 billion estimate, according to a Refinitiv survey of analysts.
Growth in sectors like Amazon Web Services (AWS) and advertising boosted the company's results, although e-commerce revenues fell from 2020 when the pandemic fuelled a massive surge in sales.
Amazon subscription services revenue (which includes Prime memberships) increased 16 per cent to $8.12 billion in the fourth quarter.
Ad sales growth was 33 per cent YoY at $9.7 billion.
This is the first time Amazon has revealed income from its rapidly expanding advertising division. Previously, the firm included advertising revenue in its 'other' business segment.
AWS continued to show robust growth, with revenue climbing 40 per cent to $17.8 billion, surpassing analysts' expectations.
For the full year, Amazon said its sales increased by 22 per cent to $469.8 billion, sending profits to $33.4 billion.
Amazon had a workforce of 1,608 million at the end of Q4, up 24 per cent from the fourth quarter in 2020.
Prime price increase
The company also announced on Thursday that it was increasing the price of its Prime service from $12.99 to $14.99 in the United States. It cited the rise in wages and transportation costs as the main reason for the hike that will see the monthly fee for the Prime membership in the US increasing from $12.99 to $14.99, while the annual membership will go up from $119 to $139.
For new members, the price hike will go into effect on 18 February, while current members will start paying increased fee after 25 March. The company said it had no announcements to make about other countries at the moment.
More than 200 million users pay for the service worldwide, with the majority of them in the United States.
For the first quarter of 2022, Amazon forecasts sales of between $112.0 billion and $117.0 billion, or a growth of 3 per cent to 8 per cent over the first quarter of 2021.
Despite weaker e-commerce revenues and disappointing guidance, Amazon has been able to instil enough confidence in investors that growth will pick up. The market had a totally different reaction to Meta's quarterly results on Wednesday, when the company announced that Facebook lost about 1 million daily active users worldwide in Q4'21, sending its stocks to their worst ever drop.
Andy Jassy, who became Amazon CEO last year, said the pandemic continues to pose challenges for the company.
"As expected over the holidays, we saw higher costs driven by labour supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron," Jassy said.
"Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic," he added.