A Look Inside the Q4 Earnings Call from Amazon

This time of year is undoubtedly represents one of the most important earnings report times for eCommerce and related companies as they cover the important holiday season sales.

For some companies these are Q4 results, which means they also provide some full year numbers and guidance.

Our new format summarizes the most important financial metrics which we believe are most interesting to our readers. We focus more on operational details in the earning reports press releases and key comments from the earnings calls with executives that may impact small businesses using these businesses.

Amazon had a much stronger quarter than most analysts predicted and the company spent a lot of time talking about Alexa and its future. However, not as much was said about Whole Foods Market, but with this being a holiday season report, that may be understandable.

U.S. product sales are profitable, but international operations continue to lose money.

It would be interesting to know if there are other countries that are in black and if it expansion costs that keep that number in the red. But Amazon doesn’t break out individual country financial details.

One interesting point is that subscription services income, often believed to be dominated by Prime Subscriptions sales, rose 49 percent for 2017 over 2016.

And Amazon had a 62 percent increase YoY in “Other Income,” which the company acknowledges is mostly advertising sales and we wrote about Amazon becoming a significant force in digital marketing before.

The company highlighted a lot of achievements over the last year that have been covered and are not included in the bullet points here.

Amazon Q4 – The Numbers

Net Revenue: $60.453 billion (2016: $43.741 billion)
Net Income (Non-GAAP): $1.856 billion (2016: $749 million)
Earnings per Share: $3.75 (2016: $1.54)

Highlights from their Q4 Earnings Call Transcript and Press Release

  • 2017 Net Total Net Sales are $177.866 billion.
  • 2017 Breakout of Sales are 60% North America, 30% International, 10% AWS.
  • Q4 Net Sales for North America were $37.302 billion with an operating income of $1.682 billion.
  • Q4 Net Sales for International were $18.038 billion with an operating loss of $919 million.
  • Q4 AWS Net Sales were $5.113 billion with an operating income of $1.354 billion.
  • In 2017, more than five billion items shipped with Prime worldwide.
  • More new paid members joined Prime in 2017 than any previous year — both worldwide and in the U.S.
  • Alexa Voice Service (AVS) adoption among device makers continues to grow. Brands announced new AVS products at the 2018 Consumer Electronics Show, including: new integrations for Alexa on PCs from HP, Acer, ASUS, and Lenovo; a new automotive integration with Toyota; and new devices from Polk Audio, Anker, Jabra, and more.
  • Amazon hired nearly 130,000 employees globally in 2017, excluding acquisitions. Additionally, Amazon now employs more than 17,500 veterans and military spouses across the U.S., and plans to hire over 10,000 more by 2021.
  • NFL Thursday Night Football on Amazon Prime Video saw a total of 18.4 million views in 11 games. Prime members in more than 200 countries and territories streamed games on living room devices, including smart TVs and Fire TVs, as well as the Prime Video mobile app and the web.
  • Amazon introduced all-new Alexa experiences built from the ground up for customers in Japan, India, Canada, Australia, and New Zealand. Additionally, Amazon expanded Alexa, Echo, and Amazon Music Unlimited to 30 new countries, offering customers access to tens of millions of songs, thousands of hand-curated playlists and stations, and
    enabling customers who purchase Echo devices the ability to experience Amazon Music Unlimited with natural voice controls powered by Alexa.
  • AWS introduced four Artificial Intelligence (AI) services that allow developers to build applications that emulate human-like cognition: Amazon Transcribe for converting speech to text; Amazon Translate for translating text between languages; Amazon Comprehend for understanding relationships and finding insights within text; and Amazon Rekognition Video, a deep-learning powered video analysis service that tracks people, detects activities, and recognizes objects, celebrities, and inappropriate content.
  • AWS launched AWS DeepLens, a deep-learning enabled wireless video camera that pairs an HD camera developer kit with a set of sample projects to help developers learn machine learning concepts, including computer vision and deep learning.
  • The technical work continues to make Prime the Whole Foods customer rewards program and Amazon expects to have more on that later in the year.
  • More Prime members joined India’s Prime program in the first year than Amazon has seen in any other country in the history of the world, Amazon’s world.
  • Amazon will continue to build logistics capability all the way to end delivery. The company has seen an increase service levels in many cases by delivering themselves.
  • Amazon made no changes post Whole Foods acquisition that would have impacted anything related to inventory, except perhaps the fact that the price decreases have brought up demand. The company says there’s an amount of rebalancing related to that.
  • Amazon private label offerings are still in its infancy and they are concentrating to expand fashion lines and work with Whole Foods to bring more product to the platform.
  • Amazon retail operation is an internal customer of Amazon AWS and the company has no plans to break apart these two divisions into separate corporate structures.
  • The company is seeing strong growth from advertising revenues as part of the other revenue line item. They will keep building more and new tools based on what they are learning from their customers to better serve them in the future.

“We are very happy with the results of Alexa. It’s a very positive surprise for us both… We had record device sales with very high levels of customer engagement, including increased levels of voice shopping, growth in functionality, growth in our partner, partners we work with, skills that we’ve increased rapidly, we’re over 30,000 skills for Alexa.

We’ve got 4,000 plus smart home devices from 1,200 unique brands. Obviously Echo, Echo Show and the Echo family all directly tied to Alexa, but also Fire TV and tablets and we’re seeing more and more engagement. Alexa usage on Fire TV is up 9x year-over-year.”

Brian Olsavsky – Senior VP & CFO

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down.”

Jeff Bezos, Amazon founder and CEO

If you have any thoughts on Amazon’s earnings report, please share them with us in the comments section below.

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