Amazon.com Inc has reported corporate profits of almost $2 billion, which are the biggest in its history to date. The online retailing giant won millions of additional customers to its rapid-shipment and entertainment Prime scheme just in time for Christmas, and it benefited from new US tax laws.
Share Price Spike
On the announcement of the results, the company’s shares jumped by over 6pc.
Amazon is investing heavily in its Prime service which it sees as a key revenue driver for the Seattle-based giant. Prime offers customers a highly-rated internet TV service and rapid shipping for an annual fee.
At the same time, developments of new technologies, such as Alexa, is helping to win new higher-spenders amongst its Prime community. Further gains were enjoyed in its grocery sales division too, after Whole Foods Market – bought last year for $13.7 billion – cut online grocery prices for customers.
Amazon Price Chart
Net Income Growth
Amazon’s net income grew to $1.86 billion, over double, equating to $3.75 per share in Q4 of 2017. The new Republican tax bill in the US last year also allowed it to enjoy a provisional boost of $789 million. According to Reuters, analysts had expected an EPS of $1.85.
Retail strength over the holiday period was incredibly strong – so much so that the company managed to gain around 50pc of all e-commerce sales over the festive period. In the US, this runs from November’s Thanksgiving holiday through to the new year. During this quarter, sales rocketed by 38pc to $60.5 billion. Many of these holiday shoppers were won over by the record delivery options on offer, including a two-hour service within Prime Now.
Prime Revenue
Prime revenues are expected to rise further in the coming quarter because Amazon has raised subscription fees for monthly rolling Prime plans, which will affect around 20 million subscribers in the US alone. Nearly half of all US households currently have a Prime membership.
Alexa’s performance was also stronger than expected, and Amazon’s CEO and founder, Jeff Bezos said that it was unusual to see positive results of such a magnitude, telling the market to anticipate a ‘doubling down’ for further strong gains.
Whilst the S&P rose by 12pc in Q4, Amazon rose by nearly 50pc. It now has a P/E ratio of almost 12 times more than Microsoft, its main rival for computing services.