To say that COVID-19 worked out well for the world’s largest online retailer and its founder would be an understatement of Amazonian proportions. While the pandemic’s lockdowns and travel restrictions certainly presented their share of logistical challenges, the sheer fact that more people than ever bought more stuff than ever from Amazon this holiday season cannot be overlooked.
How much stuff?
On average, 40 analysts who cover the company are expecting the Seattle-based giant to report a record $120 billion in revenues when it releases its Q4 and full-year results after the close of trading on Tuesday (Feb. 2). That works out to just over $1.3 billion per day for the final three months of 2020, or $55 million each and every hour of the day. It also will mark about 35 percent year-on-year growth, and will smash the previous high-water sales mark set in Q3.
On the profit front, Amazon is expected to earn about $7.20 per share, which would put another $4 billion in profits on top of the record $14 billion of income it has already booked through the first nine months of 2020. Said another way, 2020 was already a record year for Amazon when it closed the books on Sept. 30th. Everything it’s earned since then is simply extending that record.
AWS: The Not-So-Little Engine That Could
Looking at Amazon’s Q3 results, Amazon Web Services (AWS) earned $3.5 billion on about $11.6 billion in revenue, delivering a fat 30 percent profit margin. By comparison, Amazon’s North American retailing businesses made about $2.2 billion on $59 billion in revenue, which is about a 3.7 percent margin. That means while AWS accounted for only about 12 percent of total revenues, it delivered 55 percent of the total Q3 net income.
While Amazon is first and foremost seen as the world’s most dominant online retailer, it would be a mistake to overlook the importance of its huge, powerful and profitable cloud platform.
Just to make things fun and interesting, Google parent Alphabet also reports its earnings on Tuesday (Feb. 2), and will for the first time reveal the cost and operating profit of its Google Cloud business, which is trying to break the grip and slow the growth of AWS.
Hiring And Wages
Also on the radar will be questions surrounding Amazon’s international expansion plans, as well as the progress of its bi-coastal transition to its new second headquarters in Virginia, just outside Washington, D.C.
In addition, the company has made a big deal about its $15 minimum wage policy that it began in 2018, even going as far as calling out other large employers to do the same, while commending Target and Best Buy for adopting similar pay policies.
Despite its $1.7 trillion market value, which currently makes it the third-largest U.S. public company behind Apple ($2.2 trillion) and Microsoft ($1.7 trillion), Amazon is still hiring rapidly, having pledged to add 100,000 new employees scattered across the country. Because of its size and growth, analysts will be looking closely into any information it has concerning labor disputes, as well as efforts to unionize in certain markets.
Other Issues To Watch
Other updates that Amazon is expected to provide on Tuesday include how it is faring in terms of maintaining its share of overall consumer spending during the pandemic. PYMNTS’ research last quarter showed that both Amazon and Walmart saw their share of total U.S. spending shrink, despite their phenomenal growth.
For instance, the report found that Walmart’s total share of U.S. retail spending fell to 8.7 percent in Q3 from 10.2 percent in Q2. Meanwhile, its piece of total U.S. consumer spend eased to 2.9 percent from a previous 3.4 percent. Meanwhile, Amazon’s share of overall U.S. retail spending pulled back to 8.7 percent during Q3 vs. 9 percent in Q2.
“It was a quarter that any retailer besides Amazon and Walmart would be happy to take in the U.S.,” the report noted. “But it’s clear from the data and anecdotal evidence that the ‘Amazon effect’ and the ‘Walmart effect’ might be losing their power.”
Amazon is also expected to update its streaming media subscriber base for its Prime Video and Prime Gaming services, as well as provide details on any content acquisition or original production plans following its high-profile Borat film last quarter.
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