Amazon exceeds own expectations by 500 million

Amazon set a new turnover record and its fourth quarter profit reached 2.1 billion dollars (1.7 billion euro), 69 % above expectations. Alexa speech technology and Amazon Web Services’ cloud services helped reach these new heights.

789 million dollar tax gift

It is more clear than ever before that Amazon will become rich from its technology, not from its retail operations. Amazon’s fourth quarter operational profit grew to 2.1 billion euro, compared to 1.3 billion dollar last year. That is higher than even its own estimations, because it had forecast a 1.65 billion dollar (1.3 billion euro) operational profit.

New American tax cuts also resulted in a 789 million dollar (650 million euro) tax benefit, a sizeable contribution to its net profit. Quarterly turnover grew 38 % to 60.5 billion dollars (49 billion euro).

Its full-year net turnover grew 31 % to 177.9 billion dollars (135 billion euro), but it did suffer a 2 % profit drop to 4.1 billion dollars (3.3 billion euro).

Alexa speech technology soars

CEO Jeff Bezos says its Amazon Echo and other Alexa-powered devices sold better than expected. Ars Technica believes that it is entirely possible that Amazon sold as many Alexa devices in a single year as it did Kindles in a decade. That is also why the company aims to double its speech technology investments.

“We had record device sales with very high levels of customer engagement, including increased levels of voice shopping, growth in functionality, growth in our partners we work with, skills that we’ve increased rapidly,” Chief Financial Officer Brian Olsavsky said in a call with analysts.

New artificial intelligence is profitable

Artificial intelligence and technology are extremely important to the Seattle-based giant, as its Amazon Web Services division’s results clearly show. Its cloud and technology services for other companies and retailers (including important multinationals like Unilever, Kellogg’s and rival Netflix) are worth 5.1 billion dollars in (4.1 billion euro) in turnover.

AWS generated a 45 % turnover growth and a one billion euro profit, partially thanks to new service launches, including several artificial intelligence applications. Amazon talks about Amazon Recognition Video, a video analysis tool and most likely applied in the cash register-free Amazon Go store. The high-tech supermarket opened its first location in Seattle last month to extremely positive early feedback.

Amazon moves from retailer to technology player

Amazon is also increasingly turning into a technology player, but it is still onerous when it comes to international retail. Its international net turnover, excluding AWS services, reached 54 bilion dollars (+ 23 %), but its operational losses also grew to 3 billion dollars (2.4 billion euro). North American net turnover grew 33 % to 106 billion dollars (85 billion euro), which resulted in a modest 2.8 billion dollar (2.2 billion euro) operational profit.

Retail still costs Amazon buckets full of money: shipment costs grew 33 % annually to 7.3 billion dollars (5.9 billion euro) in the fourth quarter. Online retail sales in that same quarter generated 35.3 billion dollars (28 billion euro) and achieved a 20 % annual increase. Its physical store network, including Whole Foods supermarkets, generated a 4.5 billion dollar (3.6 billion euro) turnover.