The publication of Amazon’s latest quarterly data coincided with a series of interesting announcements by the American company, which is preparing to expand its drone air deliveries to the European market in the second half of 2024.
Let’s take a look at how the last period went for the e-commerce giant, which contribution sellers made to achieving corporate objectives, and what might change soon for international sellers.
Revenue Grows by 14%: The Role of E-commerce
Starting with the top line of Amazon’s income statement, we see that quarterly net sales grew by 14% year-over-year to $170 billion, well exceeding Wall Street analysts’ projection of $166.2 billion. Even excluding favorable exchange rate effects, the increase in net sales was still 13% year-over-year.
Of course, not all of Amazon’s mega revenue comes from the marketplace and sellers’ activity, although this is the predominant part. The e-commerce division indeed generated $105.5 billion in revenue, up 13% from the previous year in the North American market alone, and $40.2 billion in the rest of the world (also +13%).
Amazon Web Services
The group’s cloud service, accounted for $24.2 billion, growing by 13% year-over-year and in line with Wall Street’s forecasts. This represents a slight increase compared to the previous quarter, where sales had grown by 12%, but a slowdown compared to the same period last year, when sales had increased by 20%.
This slowdown isn’t entirely surprising: over the last year, AWS’s growth has decelerated as companies have cut back on cloud spending. However, the company has announced it is seeing a decrease in cost optimizations and that new workloads are increasing.
It’s also important to remember that this period reflects the results of the holiday shopping season and the October Prime Day event, both of which joyfully exceeded the sellers’ expectations. “This fourth quarter represented a record holiday shopping season and wrapped up a solid 2023 for Amazon,” said CEO Andy Jassy in a statement.
Operating Profit
The news gets even better when we delve a little deeper into the reclassified income statement and reach the operating profit, which increased nearly fivefold from the previous year to $13.2 billion. This result not only exceeded Wall Street analysts’ estimates but also Amazon’s own forecasts, which had projected quarterly operating income at $7-11 billion.
E-commerce division
However, perhaps the most interesting point is the shift in perception regarding e-commerce. Until now, e-commerce was seen as a titan capable of generating huge turnovers but with slim or no margins. Now, things are changing: the e-commerce division has indeed generated increasing profit, with $6.5 billion in the North American market alone, compared to a loss of $200 million the previous year. Internationally, there’s still a loss of $400 million, but it’s significantly reduced from the $2.2 billion loss in 2022.
Amazon Web Services also continued to show good capability in generating positive margins, with an operating income of $7.2 billion during the fourth quarter of 2023, up 38%.
Net income
Net income rose to $10.6 billion, or $1.00 per share, compared to $278 million, or 3 cents per share, the previous year. This clearly demonstrates the successful efforts of CEO Andy Jassy, who has endeavored to reduce costs to improve intermediate margins and the final net result.
Among these decreasing costs, we notably include the layoff of 27,000 employees between the end of 2022 and mid-2023, as well as the termination of some of its less proven wagers. The company has also continued to look for ways to reduce expenses in other areas, such as fulfillment activity, and in January it announced cuts to Prime Video, MGM Studios, and Twitch.
Amazon’s advertising unit, on the other hand, saw sales grow 27% year-over-year, reaching $14.7 billion. Last month, the company began showing advertisements on Prime Video content, a decision analysts believe should generate substantial new revenue for the company.
What Changes for Resellers
Brian Olsavsky, Amazon’s CFO, stated that the company would continue to adopt a cautious approach to new investments. “We will continue to invest in new things, new areas, and in things that resonate with customers,” Olsavsky said, clarifying that wherever efficiencies can be found “and do more with less, we will also do that.”
Amazon Air
Thus, we can expect new developments in the European market, starting with perhaps the most interesting announcement: the launch of Amazon Air, the service that plans to deliver products purchased by customers within one hour from the order confirmation via drone.
Drones will not be able to reach every location (confirmations on the reachable perimeter in the European market are pending) nor carry every product (parcel weight will be limited to within 2.5 kg), but it is clear that this is an innovation that will revolutionize marketplace transportation in Europe.
Artificial Intelligence
Other innovations have involved the applications of artificial intelligence, with the integration of generative AI in many business solutions. Among the most significant, the company founded by Jeff Bezos mentions a partnership with the biotech pharmaceutical company Amgen, which will use Amazon SageMaker for research, development, and the increase in production of drugs in the near future.
In relation to artificial intelligence applications, Amazon has announced Rufus, an e-commerce virtual assistant that will work exclusively in AI, already being tested for selected user groups in the United States. However, tests on the European market should not be long-delayed either.
Finally, in a conference call with analysts, Jassy stated that generative AI services remain a “relatively small” activity, but the company believes they can generate “tens of billions of dollars” in revenue in the coming years.
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