Business Standard

Amazon shares surge on strong earnings update

Image

AFP San Francisco

Amazon shares shot higher Thursday after the internet colossus released quarterly earnings figures for the holiday quarter that trounced market expectations.

Profit in the final three months of last year rose eight percent from 2018 to $3.3 billion, as revenue grew 21 percent to $87.4 billion, according to the Seattle-based firm.

Click here to connect with us on WhatsApp

A record number of people signed up in the last quarter for Amazon Prime, a service that provides perks from one-day delivery to streaming television and music, according to Amazon chief executive Jeff Bezos.

"We now have over 150 million paid Prime members around the world," said Bezos.

 

Amazon has expanded from its original mission as an online retailer and now is a major force in cloud computing, and its AI-powered digital assistant Alexa has been incorporated into thousands of consumer products.

It also operates one of the largest streaming video services and recently announced that its streaming music service has gained more than 55 million subscribers, closing in on Apple Music.

Amazon has also been spending big on original content for its Prime service, which faces Netflix, Disney+, Apple TV+ and other rivals in an increasingly competitive streaming television market.

Shares in Amazon surged 10 percent in after-hours trade after the better-than-expected report, a jump likely to lift the value of the tech giant to over $1 trillion. "Amazon blew all expectations out of the water during the holiday quarter," said Andrew Lipsman of the research firm eMarketer, noting that the rollout of next-day Prime delivery helped momentum.

Patrick Moorhead of Moor Insights & Strategy was also upbeat on the results, pointing to the 34 percent revenue growth for the cloud computing unit AWS: "It generated nearly $10 billion in quarterly revenue and 67 percent of the entire company's operating income."

The strong earnings report defied investor concerns about Amazon pouring money into shortening Prime delivery times to a single day, as well as the momentum of its money-making cloud services slowing down after being denied a major contract with the US government.

Amazon Web Services, its cloud division, took in nearly $10 billion in revenue in the quarter, up from $7.4 billion in the same period a year earlier.

"We think that we start with a very big lead in this space because of our many years of investment, not only in capacity but also in services and features that we provide to customers," chief financial officer Brian Olsavsky said during an earnings call.

The company has been expanding globally, and Bezos promised to invest at least $1 billion in India in a high-profile visit to the country earlier this month.

The three-day visit by Bezos, the world's richest person whose worth has been estimated at more than $110 billion, sparked protests in New Delhi and other cities by traders who accuse Amazon and its main US-owned rival Flipkart of killing off India's army of street traders.

Amazon has a goal of bringing more than 10 million "micro" and small businesses in India online by the year 2025, according to director of investor relations Dave Fildes. "This billion dollar investment will help to enable $10 billion in cumulative Indian exports by 2025," Fildes said during an earnings call.

"We're also focused on job growth and job creation over there." Amazon's earnings update showed it had 798,000 full-time employees worldwide, up 23 percent from a year ago amid continued global expansion and a ramping up of its logistics networks for speedy deliveries.

Disclaimer: No Business Standard Journalist was involved in creation of this content

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jan 31 2020 | 11:30 AM IST

Explore News