By Sebastian Herrera
Amazon.com Inc. capped off its pandemic-fueled 2020 financial performance with record quarterly sales driven by a surge in online holiday shopping, as founder and Chief Executive Jeff Bezos said he would step down and hand over the CEO role to a new leader.
The e-commerce giant posted fourth-quarter sales of $125.5 billion and net income of $7.2 billion. It marked the first time Amazon reported more than $100 billion in quarterly revenue, days after Apple Inc. hit that financial milestone.
Few companies have seen growth take off like Amazon during the global health crisis. The explosion in online shopping vaulted the company’s sales to record figures as the e-commerce sector grew by around 50% throughout last year, according to some analysts.
Sales in the December quarter received an added boost from Amazon‘s annual, two-day “Prime Day” shopping event — from which the company typically makes billions of dollars — after it was moved from its usual summer schedule to October because of the pandemic.
Amazon sales for all of 2020 rose 38% year-over-year to $386.1 billion and are expected to advance again this year. Amazon said sales for the current quarter should come in at between $100 billion and $106 billion. Wall Street has forecast sales of around $95.8 billion. Shares in Amazon rose more than 1.6% in after-hours trading.
The online shopping boom has been broad-based. United Parcel Service Inc. Tuesday said sales in the December quarter rose 21%. The package delivery giant said Amazon accounted for 13.3% of its total 2020 sales.
Although the pandemic turned into a sales bonanza for Amazon, the Seattle-based company initially struggled to handle surging demand. The company recovered in part by scaling up rapidly. It added more than 500,000 employees, lifting its global workforce to more than 1.3 million staff and increased its fulfillment and logistics square footage by about 50% last year. It also incurred around $11.5 billion in Covid-related costs last year, Chief Financial Officer Brian Olsavsky told analysts on a call Tuesday. Amazon also spent around $44 billion to expand, he said, including on its transportation network.
The efforts appeared to pay off. “There was a flight to reliability from consumers throughout the year, and that was especially true during the holiday seasons when there were shipping concerns,” said Andrew Lipsman, an analyst with research firm eMarketer. “That advantaged Amazon.”
Amazon‘s other major business, the cloud-computing services in which the company rents server capacity and software tools, also saw strong demand during the pandemic with companies broadly accelerating their digital investments.
While Amazon Web Services has been the company’s main profit driver, growth in that segment has slowed as its scale has increased and rivals such as Microsoft Corp. and Alphabet Inc.’s Google have pushed to steal market share. AWS generated a little over 10% of Amazon total sales in the December quarter but accounted for more than half of the company’s operating income. In the period, AWS sales rose 28% from the year-earlier period to $12.7 billion. Amazon is the world’s largest cloud provider. Both it and No. 2 Microsoft have seen growth in cloud services accelerate in recent months as companies speed up adoption of digital tools.
AWS chief Andy Jassy is set to succeed Mr. Bezos as Amazon‘s CEO in the third quarter of 2021, the company said Tuesday.
Spending plans for this year, Mr. Olsavsky said, are still in flux, though the company is likely to make further investments, in part to ensure Amazon‘s cloud-computing services can keep pace with demand. “We definitely do not want to run out of capacity,” he said.
Amazon also has been building up its advertisement business where it competes with companies such as Facebook Inc. and Google. Amazon said sales in the segment that includes advertising revenue rose 66% from the previous year to roughly $8 billion.
The company’s results are expected to add to a strong earnings season for Big Tech, underscoring how the pandemic has lifted those companies’ fortunes while devastating other sectors of the economy. Microsoft last week posted record quarterly sales driven by increased demand for videogames and accelerated adoption of its cloud-computing services. Apple and Facebook finished their fiscal years with their most profitable quarters ever.
Amazon‘s success has come while the company confronts regulatory and labor battles. The Federal Trade Commission said earlier Tuesday that Amazon would pay $61.7 million over its past failure to pay some Amazon Flex drivers the full amount of tips they received from customers. The FTC said Amazon addressed the matter in 2019 only after learning of a federal investigation into its practices.
“While we disagree that the historical way we reported pay to drivers was unclear, we added additional clarity in 2019 and are pleased to put this matter behind us,” an Amazon spokeswoman said.
Employees at one of its warehouses in Alabama also are voting on whether to unionize in a move that could reshape the relationship between the company and its workers. And federal regulators in Washington, D.C., have continued to probe the retailer’s business practices as part of a broad investigation into the market powers of large tech companies. In addition, Connecticut is investigating how Amazon sells and distributes digital books, and California is looking into how Amazon treats sellers in its online marketplace.
The company also is facing questions about rising costs and other issues with some of its businesses. Physical store revenue, which includes that from Whole Foods Market, has decreased and fell 8% in the most recent quarter as the pandemic has changed shopping patterns.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com
(END) Dow Jones Newswires
February 02, 2021 19:27 ET (00:27 GMT)
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