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Amazon.com Inc on Thursday reported a profit near $ 2 billion, the largest in its history, as the online retailer drew millions of new customers to its Prime fast-shipping club for the holiday season and as changes to U.S. tax law added to its bottom line.
Seattle-based Amazon is using fast shipping, television shows exclusive to its website and forays into new technology, such as its voice-controlled Alexa devices, to win and keep high-spending Prime members.
“This was another blow-out quarter for Amazon,” said GBH Insights analyst Daniel Ives. “The retail strength was eye-popping as the company had a banner holiday season and looked to capture roughly 50 percent of all e-commerce holiday season sales.”
As expected, the period running from before the U.S. Thanksgiving holiday through New Years was Amazon’s biggest-ever by revenue. Sales rose 38 percent to $ 60.5 billion in the quarter, beating expectations.
Prime saw more than 4 million sign-ups in one week alone last quarter, and revenue from subscription fees grew 49 percent to $ 3.2 billion, Amazon said.
That figure is expected to rise this quarter in part because the company recently raised the fee for month-to-month Prime plans, affecting some 30 percent of subscribers, according to analysts at Cowen & Co. Some 60 million, or close to half of all U.S. households, are estimated to have Prime subscriptions.
Advertising and other revenue rose 62 percent to $ 1.74 billion.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” added Jeff Bezos, Amazon’s founder and chief executive, in a statement. “We don’t see positive surprises of this magnitude very often. I expect us to double down.”
Amazon Web Services (AWS), which is dueling with Microsoft to handle data and computing for large enterprises, saw its profit margin expand from the third quarter.
AWS posted a 45 percent rise in sales to $ 5.1 billion.
Amazon said it expects operating profit in the current quarter of between $ 300 million and $ 1 billion.
Olsavsky, Amazon’s CFO, told reporters, “We’re still in heavy investment mode.”
The company has become notorious for running on a low profit margin.
Yet its big bets on new services and entry into new industries have reaped shareholders rewards over the past decade, including its founder Bezos, now the richest man in the world. Amazon continues to spend on a wide array of areas.
Analysts estimate Amazon spent $ 4.5 billion or more in 2017.
“Revenue and margins vastly exceeded expectations, and cost control was impressive, so that’s what people are focused on,” said Wedbush.
Securities analyst Michael Pachter, adding, “It’s clear that they will spend a lot more in 2018.”