Amazon Shows Sales and Operating Profit Increase Despite Risks in Supply Chain, Demonstrating "Resilience"

Cloud Computing and Advertising Business - Rivian Investment Returns Increase
Stock Price Rises 14.5% in After-Hours Trading... "Largest Gain Since 2009"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Despite global supply chain and labor shortages, Amazon posted a 9% increase in sales and a doubling of operating profit in the fourth quarter of last year, which included the holiday season. Although costs were expected to rise significantly, the company managed to contain them and benefited from cloud computing, advertising business, and its investment in Rivian. As expectations for a performance recovery grew, Amazon's stock price rose more than 14% in after-hours trading.

According to the Wall Street Journal (WSJ) and others on the 3rd (local time), Amazon announced in its earnings report that its fourth-quarter sales last year reached $137.4 billion (approximately 165.5 trillion KRW), and net profit was $14.3 billion, up 9.4% and 98.6% respectively compared to the same period last year.

CNBC reported that this is the first time since 2017 that Amazon's quarterly sales have increased in single digits. CNBC added, "Even though sales fell short of market expectations ($137.6 billion), Amazon gave investors enough confidence that growth will recover." Some analysts evaluated that Amazon showed resilience by reducing costs.

Amazon disclosed its advertising revenue for the first time this quarter. Advertising service revenue in the fourth quarter of last year was $9.7 billion, a 32% increase compared to the same period last year. The AWS division, which provides computing, storage, and networking services to users, recorded $17.8 billion in sales in the fourth quarter, a 40% increase year-over-year.

Additionally, CNBC explained that Amazon earned $12 billion in profits from its investment in electric vehicle manufacturer Rivian. Amazon invested $1.3 billion in Rivian and currently holds 22.4% of Class A shares.

Amazon forecasted sales of $112 billion to $117 billion for the first quarter of this year. This is below the $120 billion forecast by market research firm Refinitiv. Operating profit is expected to be between $3 billion and $6 billion.

Andy Jassy, Amazon's CEO, said, "At the end of the year and the beginning of this year, labor shortages and inflationary pressures caused cost increases, and these issues are continuing into the first quarter due to the spread of the Omicron variant. Despite these short-term issues, we are optimistic that we will emerge from COVID-19."

The market is showing expectations for cost reduction and performance recovery despite the forecast falling short of expectations. Amazon's stock price rose 14.5% in after-hours trading immediately after the earnings announcement. CNBC explained, "This will be the largest increase since 2009."

Meanwhile, Amazon announced a price increase for its Prime membership to mark the new year. This is the first price increase in four years since the annual Prime membership price was raised from $99 to $119 in 2018. The annual Prime membership price will increase from $119 to $139. The monthly Prime membership price will rise from $12.99 to $14.99. The new prices will apply to new customers starting on the 18th and to existing customers from the 25th of next month.

This content was produced with the assistance of AI translation services.