Riding a huge wave of consumer holiday spending and harvesting its October Prime Big Deal Day season, Amazon delivered its highest operating income ever late Thursday (Feb. 1) as it released its quarterly and full-year earnings.
“2023 was a really good year,” Amazon CEO Andy Jassy told analysts during its earnings call. “Yet, I think every one of us believes this is just the start of what’s possible. We have a long way to go in every one of our businesses before we exhaust how we can make customers lives better and easier. And there is considerable upside in each of the businesses in which we’re investing.”
Those investments Jassy mentioned are paying big dividends. By the numbers, net sales increased 14% to $170 billion in the fourth quarter of 2023, compared to $149.2 billion a year prior.
North America segment sales increased 13% year-over-year to $105.5 billion. International segment sales increased 17% year-over-year to $40.2 billion. AWS segment sales — which had drawn the concern of many Wall Street analysts as corporations cut back their cloud migration spend — increased 13% year over year to $24.2 billion.
The quarter kicked off for Amazon with its Prime Days in October, and it continued to profit from the holiday season. During its Black Friday and Cyber Monday shopping events, customers worldwide purchased more than 1 billion items and saved nearly 70% more over the same period in 2022.
In the U.S., customers ordered more than 500 million items from independent sellers, but the company stopped short of numbering the customers it added to its Prime roster, saying only that it was in the “millions.”
Amazon’s latest earnings also illustrated the effectiveness of its investments in delivery and last-mile logistics.
The company claimed it delivered goods to Prime members at the fastest speeds ever globally, with more than 7 billion units arriving the same or next day, including more than 4 billion in the U.S. and more than 2 billion in Europe.
Amazon now offers Same-Day Delivery in more than 110 U.S. metro areas and operates more than 55 dedicated Same-Day sites across the U.S. The company increased the number of items delivered through these sites the same day or overnight by more than 65% year-over-year in the fourth quarter and marked the delivery of its billionth package from a Same-Day site in December.
Amazon also focused on artificial intelligence (AI). The company announced a slew of AI initiatives, from a new Automated Vehicle Inspection technology, to a generative AI shopping assistant called Rufus, to new AI-generated advertising solutions.
Jassy appeared to be looking to AI as way to improve customer experience while generating profit, predicting that the company would eventually make billions on its generative AI products.
“Gen AI is and will continue to be an area that pervasive focus and investment across Amazon primarily because there are few initiatives that give us the chance to reinvent so many of our customer experiences and processes,” he said. “And we believe it’ll ultimately drive tens of billions of dollars of revenue for Amazon over the next several years.”
However, the CEO wasn’t as definitive on healthcare and pharma.
Prime members in the U.S. can now add health care from One Medical to their Prime membership for $9 a month (or $99 a year) and include up to five additional family members for $6 per month each. The company did not report any enrollment statistics Thursday, with Jassy focusing instead on the customer experience in healthcare and “one-stop shop” model of having primary care and pharmacy capabilities within the same app.
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“If you think about what we do on the retail side, adding a pharmacy capability is a pretty natural extension,” he said. “It’s something that customers had asked us for over many years, and it’s got more complexity to it than the rest of our retail business … It’s growing really quickly,” adding that customer experience has “substantially improved.”
Looking forward, the company expects to continue its momentum into Q1. Net sales are expected to be between $138 billion and $143.5 billion, or to grow between 8% and 13% year over year. Operating income is expected to be between $8 billion and $12 billion, compared with $4.8 billion in Q1 2023.
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