+16% AH on this afterhours.
Amazon Profits Show Resilience Even as Labor, Supply Crunch Weigh on Results
E-commerce giant’s pandemic-induced gains slowed, but cloud-computing and advertising units continued to grow
Amazon, the second-largest private employer in the U.S., has fared better than many other companies during the pandemic, despite higher costs and a labor crunch.PHOTO: JEREMY M. LANGE FOR THE WALL STREET JOURNAL
By
Sebastian Herrera Follow
Updated Feb. 3, 2022 4:22 pm ET
Amazon.com Inc. AMZN -7.81% said profits nearly doubled in the critical holiday period, as the company managed to control labor and supply costs better than expected and saw gains in its cloud-computing and advertising businesses.
The tech and e-commerce giant reported $137.4 billion in quarterly revenue, up from $125.6 billion in the same period a year ago. Profits rose to $14.3 billion, from $7.2 billion a year ago. The financial results were a surprise to some analysts who expected earnings to be more subdued as Amazon dealt with rising costs on a variety of fronts.
Amazon shares rose by more than 14% in after-hours trading Thursday.
The company fared better than many others during the Covid-19 pandemic, recording record earnings as consumers embraced and accelerated a shift to online shopping. But lately that tremendous growth has slowed, and Amazon has been hit by global supply-chain disruptions and labor challenges.
The e-commerce market received a huge windfall related to the pandemic, and no company benefited more than Amazon, which accounts for 41% of all sales online, according to the research firm Insider Intelligence. During the past two years Amazon has seen its most profitable quarters in its history.
How Companies Are Overhauling Supply Chains to Ease Bottlenecks
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How Companies Are Overhauling Supply Chains to Ease Bottlenecks
The Covid pandemic has strained global supply chains, causing freight backlogs that have driven up costs. Now, some companies are looking for longer-term solutions to prepare for future supply-chain crises, even if those strategies come at a high cost. Photo Illustration: Jacob Reynolds
Recently, however, growth has slowed, and Amazon has confronted the largest global supply-chain impact in recent memory. In late 2021, the company warned of a challenging end to the year but said it would commit to reducing its costs in 2022.
Amazon’s stock has reflected investor uncertainty about the extent to which it can continue growing after a pandemic-induced surge and rising costs, especially for its sprawling workforce. The company is the second-largest private employer in the U.S. after Walmart Inc., with more than 950,000 employees in the country.
The Covid-19 “reopening is going on now, so that’s a headwind for Amazon and e-commerce overall,” analyst Andrew Boone of JMP Securities said. JMP said in a recent report that it expected the company to lose e-commerce market share in last year’s fourth quarter given increased competition in the market.
Amazon executives said the company would spend roughly $4 billion in the fourth quarter to deal with higher freight and shipping costs, labor shortages and global supply-chain challenges. Amazon has boosted its pay for workers to an average of $18 an hour and offered sign-on bonuses of as much as $3,000 in some areas.
Despite higher pay, the company continues to deal with unionization campaigns. Union organizers have pledged to push Amazon to alter its working standards for hourly warehouse associates in areas such as work-pace requirements and breaks. Amazon has said it is trying to listen to its workers better and has added to benefits and safety training.
Amazon workers at a facility in Bessemer, Ala., this week will start to vote by mail in a union-election revote, and the company is confronting possible votes in New York.
Amazon has leaned ever more on its highly profitable cloud-computing business and fast-growing advertisement segment. Amazon Web Services, which rents computing, storage and networking capability to users, has continued to generate a significant portion of Amazon’s profits. Meanwhile, its advertisement division has surged as a result of new ad opportunities across Amazon’s array of businesses.
Amazon’s earnings come on the heels of blockbuster showings by its big tech peers. Google’s parent company, Alphabet Inc., on Tuesday announced another quarter of strong sales and profits as a leading beneficiary of digital advertising. Microsoft Corp. , an Amazon cloud rival, last week reported earnings growth from demand for its cloud services.
Amazon is starting the new year with an eye on continued expansion in its business segments, particularly in entertainment. The company this year will begin to have exclusive video rights to “Thursday Night Football,” and it is waiting to close its acquisition of the Hollywood studio MGM, which is expected to bring an array of notable titles under the company’s name. Amazon agreed to pay $9 billion for MGM, including debt. The Federal Trade Commission is reviewing the deal.
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