Amazon.com Inc on Thursday said its sales jumped during the holiday season and profit far exceeded expectations, as the world’s biggest online retailer shortened delivery times and drew more shoppers to its loyalty club Prime.
Shares were up more than 13% in after-hours trade, as the company also forecast operating income of up to $4.2 billion in the current quarter. That is a signal that its ongoing investments in shipping would not erase its e-commerce and cloud windfalls.
Jeff Bezos, Amazon’s chief executive, said in a statement that the company now has more than 150 million paid members in its loyalty club Prime, a 50% increase from the retailer’s last disclosure in 2018. Subscribers keep returning to Amazon to benefit from perks like fast delivery and television, and its purchase of U.S. grocer Whole Foods Market and popular suite of voice-controlled Echo speakers are prompting still more customers to transact with the Seattle-based company.
Now, Amazon is hoping that cutting delivery times to one day for Prime members will spark further demand, aiming to outmaneuver rivals such as Walmart Inc (WMT.N) that have marketed two-day shipping without subscription fees. Amazon made progress in the holiday season, reporting that it quadrupled one-day and same-day deliveries over the year-ago period.
Revenue from subscription fees grew 32% to $5.2 billion, Amazon said.
Total net sales rose 21% to $87.44 billion in the fourth quarter ended Dec. 31, beating estimates of $86.02 billion.
This has helped offset spending for Amazon, a company that has long been happy to forgo short-term results on a bold bet that could reap it future profit. Amazon’s total operating expenses rose 21.8% during the quarter to $83.56 billion.
More online shopping and the bet on faster delivery has meant a surge in hiring and related costs. The company has said it added more than 250,000 full and part-time seasonal positions to fulfill holiday orders, which brought its global headcount to 750,000.
Expenses similarly have grown as the company placed inventory closer to customers and built out its last-mile shipping network, now carrying the biggest share of U.S. Amazon-ordered packages. Its Amazon Logistics unit delivered more than 3.5 billion boxes globally in 2019.
Amazon Web Services (AWS), typically a bright spot, also has seen infrastructure and marketing costs rise. The unit responsible for selling data storage and computing power in the cloud lost out to Microsoft Corp (MSFT.O) in a high-profile deal last quarter to sell technology to the U.S. Department of Defense, in what could have netted the company $10 billion over a decade. Amazon is contesting the contract decision.
AWS increased revenue 34% to $9.95 billion, the third quarter in a row in which its rate of growth was under 40%.