Amazon Hits 150M Prime Users And Commits Billions To One-Day Shipping

Back to the trillion-dollar club they go. Amazon’s stock price shot up in after-hours trading, as the eCommerce company blasted past expectations when it announced its Q4 earnings results. Its skyrocketing share price pushed its market cap over the $1 trillion mark.

Revenue was up 21 percent during the holiday quarter, growing to $87.44 billion, well ahead of analyst expectations of $86.02 billion. Those higher-than-expected sales were taken as a sign by analysts that despite the increased costs associated with one-day shipping, it has been an effective tool in stimulating sales. Amazon noted that it shipped record levels during the holiday season, and that it quadrupled both one-day and same-day deliveries during the same period.

On its earnings call, Amazon CFO Brian Olsavsky told investors that the costs of one-day shipping during Q4 had come in “slightly under” $1.5 billion, and noted that Amazon plans to spend $1 billion more on the initiative during Q1, and “again in [the second quarter].” He added that he fully expects that “we’ll start to lap this,” and costs will become more efficient as volume grows, new routes are put into place and additional delivery technology is added into the mix.

Despite Amazon’s growing investments, the company’s net income rebounded during Q4, with 8 percent year-over-year growth to $3.27 billion, which topped analyst expectations of $2 billion. That compares to last quarter when Amazon reported a net income drop of 26 percent year over year, as the firm absorbed the costs of adding one-day delivery. Amazon reported earnings per share of $6.47, ahead of the $4.03 forecast pre-release.

However, the big story out of the earnings report was the latest official figures attached to Amazon’s Prime membership program. As of the start of 2020, Amazon reported 150 million Prime subscribers — and counting. According to CEO Jeff Bezos, “more people joined Prime this quarter than ever before.” Amazon’s last official update was in April of 2018, when it reported more than 100 million members in the program.

In other retail news, revenue from subscription services — home to Prime membership fees, Music Unlimited and Prime Video Channels subscriptions — came in at $5.24 billion for the quarter, up 32 percent from the year-ago period. In the earnings release, Amazon said that Music Unlimited subscribers grew more than 50 percent in 2019, though it declined to attach more specific figures to that.

One of the few areas of reported decline in Amazon’s earnings included its physical store figures, which was mostly comprised of Whole Foods, with some contributions from Amazon Go locations. Physical store sales were down 1 percent year over year, bringing in revenue of $4.36 billion.

Outside of retail, Amazon Web Services (AWS) brought in $9.95 billion, ahead of the $9.81 billion forecast. That represents a 34 percent increase from the same time the year before, but a slight decrease from Q3, when AWS saw its revenue increase by 35 percent year over year. AWS operating income was $2.6 billion, up 19 percent from the year-ago period, and above consensus estimates of $2.45 billion.

Amazon’s “other” category — primarily made up of its advertising business — also saw some solid growth, with $4.8 billion in revenue during Q4, a 41 percent increase from the year-ago period.

As for what’s next, the company is forecasting a solid Q1, with revenue between $69 billion and $73 billion — ahead of consensus prediction. Olsavsky also noted that, as of yet, Amazon “doesn’t have any visibility” on whether the Wuhan coronavirus outbreak in China will impact its first quarter results.

Nonetheless, investors liked what they saw, and sent Amazon’s share price up 11 percent in after-hours trading.