Amazon reported its Q4 earnings yesterday evening, and although the outlook was already sunny for investors, the company managed to completely outperform expectations with a 26% revenue increase year-over-year, reaching $75.5 billion from January to March 2020.
Most brick-and-mortar retailers have been forced to shut their doors to slow the spread of COVID-19, leaving Amazon and other masters of e-commerce poised to fill their gaps. Online marketplaces have seen demand skyrocket now that shopping online is the safest (sometimes only) option, but that doesn’t necessarily mean the company has been making money hand-over-fist.
In fact, profits fell 29% from a year earlier due to company reinvestments. Worldwide shipping costs were $10.9 billion in the first quarter, a 49% increase from last year at the same time. On top of that, Amazon said it spent $600 million in Q1 on coronavirus-related costs like employee testing and increased wages, and it anticipates spending $4 billion more as the pandemic continues to play out.
In an uncharacteristically long statement, CEO Jeff Bezos cautioned shareholders not to get too excited about Amazon’s profitability in the company’s official press release:
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”
Bezos’ comments echo a sentiment that the global economy is facing at large: we are only just beginning to see the financial impact of the Coronavirus outbreak. However, this statement isn’t coming completely out of left field. Amazon is known to favor reinvestments over profitability, continuously feeding the flywheel to reinvigorate the company.
Still, Amazon seems uniquely positioned to stay afloat even amidst the uncertainty of the economy overall. Alongside his disclaimer about profits, Bezos also offered some good news: “more people joined Prime this quarter than ever before,” he said, including that Prime members are shopping more often and increasing the size of orders. Yesterday’s call updates Amazon’s official record to 150 million paid Prime members around the world, replacing a previous “official” number of 100 million.
Amazon’s advertising business also reported sales in the latest quarter, rising 43.8% from a year earlier to $3.9 billion. This staggering growth illustrates how the value of Amazon’s properties extends to advertising partners who want to capitalize on their loyal audience, highly valuable data set, and suite of properties.