Amazon stock soars 17%: Q4 results, outlook miss expectations, raising Prime price
Amazon this afternoon reported Q4 revenue that missed analysts' expectations, and an outlook for this quarter's revenue lower as well, and said it will raise the North American price for Prime membership.
Amazon said it will increase the price of a Prime membership in the US, with the monthly fee going from $12.99 to $14.99, and the annual membership from $119 to $139. It is the first Prime price increase since 2018, the company said.
The report sent Amazon shares soaring by 17% in late trading.
CEO Andy Jassy offered "A big thank you to employees across Amazon who overcame another quarter of COVID-related challenges and delivered for customers this holiday season.
Jassy said the company was grappling with higher costs:
As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron. Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.
Nevertheless, Jassy was upbeat about the company's prospects,
When you combine how we're staffing and scaling our fulfillment network to bring even faster delivery to more customers, the extraordinary growth of AWS with 40% year-over-year growth (and now a $71 billion revenue run rate), the addition of marquee new entertainment like The Lord of the Rings: The Rings of Power and Thursday Night Football, and a plethora of new capabilities that we're building in areas like Alexa, Ring, Grocery, Pharmacy, Amazon Care, Kuiper, and Zoox, there's a lot to look forward to in the months and years ahead."
Revenue in the three months ended in December rose 9%, year over year, to $137.4 billion, yielding a net profit of $27.75 a share, including a one-time "pre-tax valuation gain of $11.8 billion included in non-operating income from our common stock investment in Rivian Automotive, Inc., which completed an initial public offering in November."
Analysts had been modeling $137.68 billion and a net profit of $3.61 per share.
Revenue in the AWS cloud computing unit accelerated its growth, rising by 40%, year over year, to $17.78 billion. That is faster than the 39% growth in Q3 and the 29% growth in the year-earlier quarter.
AWS's operating income rose by 46%, year over year, excluding the postive effect of $83 million with of currency benefit from the rising dollar, the company said. Profit was 29.8% of revenue, down slightly from 30.3% in Q3.
For the current quarter, the company sees revenue of $112 billion to $117 billion, below consensus for $120.94 billion.
Regarding the Prime price increase, Amazon explained it is making substantial investments:
Amazon also continues to invest heavily in Prime. In the last few years, Amazon has added more product selection available with fast, free, unlimited Prime shipping; more exclusive deals and discounts; and more high-quality digital entertainment, including TV, movies, music, and books. Since 2018, Prime Video has tripled the number of Amazon Originals, rolling out new series and movies like The Boys, The Wheel of Time, Tom Clancy's Jack Ryan, The Underground Railroad, Sound of Metal, Coming 2 America, The Tomorrow War, and Being the Ricardos. This September, Prime Video will release the highly anticipated The Lord of the Rings: The Rings of Power and become the exclusive home of Thursday Night Football as part of a historic 11-year agreement with the National Football League (NFL). Since 2018 in the U.S., availability of Free Same-Day Delivery has expanded from 48 metropolitan areas to more than 90, items available for Prime free shipping have increased over 50%, and members have saved billions of dollars shopping Prime Day. This is all on top of new program benefits like prescription savings and fast, free delivery from Amazon Pharmacy and the continually growing Amazon Music for Prime members, Prime Reading, and Prime Gaming. With the continued expansion of Prime member benefits as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the U.S., with the monthly fee going from $12.99 to $14.99, and the annual membership from $119 to $139. This is the first time Amazon has raised the price of Prime since 2018. For new Prime members, the price change will go into effect on February 18, 2022, and for current Prime members, the new price will apply after March 25, 2022, on the date of their next renewal.