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.
Shares rose more than 6 percent in extended trading, after previously closing down 4 percent on the Nasdaq.
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 attract high-spending Prime members. Amazon said price cuts at Whole Foods Market Inc., which it acquired for $13.7 billion last year, are helping it win grocery sales, too.
The world’s largest online retailer said net income more than doubled to $1.86 billion, or $3.75 per share in the fourth quarter ending Dec. 31. Its profit received a provisional $789 million boost from the U.S. Republican tax bill passed in December. Analysts on average were expecting just $1.85 per share.
“This was another blowout 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 estimates.
The company’s fast delivery, like its two-hour Prime Now service, has helped win over holiday shoppers eager to avoid the crowds of big box retailers. 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.
Brian Olsavsky, Amazon’s chief financial officer, said on a call with analysts that advertising was “a key contributor” to the company’s growing profit margin. Alphabet Inc.’s Google on Thursday reported ad revenue of $27.2 billion by comparison.
Perhaps the surprise star of the past quarter was Amazon’s voice aide Alexa, embedded in the company’s Echo speakers and Fire TV players, as well as some cars and house gadgets. Millions of Amazon customers ordered goods by voice with Alexa in the past year, said Olsavsky on a separate call with reporters.
“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 — expect us to double down.”
Amazon’s stock has outperformed the S&P 500, rising almost 50 percent since the start of the fourth quarter to Thursday’s close, compared with the S&P’s 12 percent rise.
Its shares trade at a premium to those of many peers. The stock’s price-to-earnings ratio is nearly 12 times that of cloud computing rival Microsoft Corp., for instance.
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