The 2017 holiday season was fruitful for retail, and the industry leader certainly got its share of the wealth: Amazon more than doubled its net income in Q4 2017 to $1.9 billion, with net sales increasing 38.2% to $60.5 billion and operating income increasing 69% to $2.1 billion. Whole Foods figures were included in the quarterly report for the first time since the chain’s acquisition in mid-2017.
In a call with analysts, Amazon CFO Brian Olsavsky credited record order volume and improved warehouse efficiency during the holiday shopping season for the successful quarter. Amazon’s total operating expenses in Q4 increased 37.3% to $58.3 billion, as the company continues to invest in its warehouse and delivery capabilities, expand Prime and create original video content. Given that subscription revenue from Prime increased 46%, it’s clear Amazon believes the service is paying dividends and is worth the significant financial support.
Amazon’s cloud services business continues to pay many of the company’s bills. AWS revenue jumped 44.6% to $5.11 billion in the quarter, beating estimates of $5 billion. AWS also generated $1.3 billion in operating income, accounting for 64% of Amazon’s total Q4 operating income. Olsavsky pointed to the continued expansion of AWS and added that the advertising business was a “key contributor” in North American revenue growth.
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Turning Up The Volume On Alexa
Although Amazon was vague about results driven specifically by Alexa, Founder and CEO Jeff Bezos was thrilled about the technology’s growth in 2017.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” said Bezos in a statement. “We don’t see positive surprises of this magnitude very often — expect us to double down.”
Bezos noted that the Alexa Skills store offers more than 30,000 skills, including tools for gamers, and that customers can use Alexa to control more than 4,000 smart home devices. AWS has launched Alexa for Business, enabling employees to link it into their corporate systems for tasks such as finding an open conference room, making phone calls or managing to-do lists.
The jury is still out on how many retailers will implement the Alexa technology in 2018, but the continued growth of the voice assistant technology is likely to entice retailers seeking new channels of communication. Best Buy is selling limited categories of products through Alexa, enabling shoppers to learn about and purchase Deal of the Day products. Calvin Klein integrated Amazon Echo devices into its CALVIN KLEIN X Amazon Fashion pop-up stores.
Amazon’s five most popular electronic devices by sales are all products powered by Alexa.
For the full year, Amazon had $177.9 billion in sales, up 31% from the previous year’s $136 billion. But in line with Amazon’s mission, the company still continued to heavily invest in the business, resulting in a 2% drop in operating profit to $4.1 billion. Q4 marks the 11th straight profitable quarter for Amazon.
