Amazon Q4 profit nearly doubles; hikes Prime membership fee

Amazon posted blockbuster earnings in the fourth quarter, largely driven by a big gain on its stake in electric vehicle maker Rivian Automotive. But its operating income tumbled amid higher costs.

The company also announced that it’s raising the price of its Prime membership, citing the “continued expansion of Prime member benefits as well as the rise in wages and transportation costs.” The monthly fee for membership in the United States will increase from $12.99 to $14.99, with the annual membership going from $119 to $139. It is the first time Amazon has raised the price of Prime since 2018.  The new price will apply to renewals that take place after March 25, and new subscriptions as of Feb. 18.

Amazon’s net income increased to $14.3 billion, or $27.75 per share, in the quarter ended Dec. 31, compared to $7.2 billion, or $14.09 per share, in the year-ago quarter. Included in the company’s fourth-quarter non-operating income was a pre-tax valuation gain of $11.8 billion from its common stock investment in Rivian Automotive, which completed an initial public offering in November. Analysts had expected earnings per share of $3.61.

The company’s operating income, however, decreased to $3.5 billion from $6.9 billion last year. Andy Jassy, who took the reins as Amazon CEO in July, had previously warned that the holiday quarter would bring “several billion dollars of additional costs” in the company’s consumer business, due to increased labor and shipping costs.

“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” he stated. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Net sales increased 9% to $137.4 billion, up from $125.6 billion a year ago. Excluding the $1.3 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 10% compared with fourth quarter 2020.

Amazon Web Services (AWS), the company cloud-computing division, remained the biggest profit driver for Amazon. Amazon reported AWS operating profit of $5.29 billion. Revenue soared 40%, to $17.78 billion

“Given the extraordinary growth we saw in 2020 when customers predominantly stayed home, and the fact that we’ve continued to grow on top of that in 2021, our retail teammates have effectively operated in peak mode for almost two years. It’s been a tremendous effort, and I’m appreciative and proud of how hard our teams have worked to serve customers,” Jassy said.