Amazon raises Prime membership prices in the U.S.
Amazon.com Inc on Thursday said it would increase the cost for its monthly U.S. Prime subscriptions by 17%.
Generally, it is an attempt to reduce the cost of transportation and wages, which they expect to continue to increase in the coming year.
Shares jumped as high as 17% during extended trading as Amazon also surpassed expectations for profit for the festive season.
If the shares go up on Friday by that amount, this would represent the most significant percentage gain for the stock since the beginning of October and boost the founder Jeff Bezos’ wealth by around $20 billion.
In the quarter that ended in December, Amazon earned $14.3 billion, more than double its net earnings from a year ago.
MORE: Zuckerberg and Bezos lost Billions of dollars as Meta’s stock fell 26%.
This included a pre-tax profit of $11.8 billion for its ownership stake of electric vehicle producer Rivian Automotive.
In the wake of the benefits of more home-based shopping during the epidemic, Amazon has poured cash into its operations to handle interruptions.
It includes the Omicron version of COVID-19. It has promoted bonuses for signing to lure thousands of employees in a competitive labor market and has also charged more for shipping since it could not get the items to the proper warehouses.
In the meantime, as analysts were expecting, Amazon is raising the cost of Prime. U.S. monthly fees for the quick-shipping service and media are rising by $14.99 from $12.99.
The annual memberships are increasing to $139, up from $119. This change will take effect in February. 18.18 for all new customers, reflected in more benefits, including discounts on prescription medications and quicker shipping, Amazon said.
Chief Financial Officer Brian Olsavsky told reporters that Amazon was expecting some members to quit on an interview.
Still, the loss of retention “hasn’t been large in the past.” The annual fees were last in the same direction in the past four years and before this.
The revenue per prime member “did grow significantly during the pandemic,” Olsavsky said.
With over 200 million Prime members across the globe, Prime is an incentive for customers to send more of their purchases to Amazon. So, they can make more money from their memberships.
During the fourth quarter, revenues from such fees grew by 15 percent, up to $8.1 billion.
The company has not announced any changes regarding Prime members outside the United States.
Inefficiencies, productivity loss, and pressures from inflation accounted for over $4 billion in expenses during the holiday season, Olsavsky said.
However, the labor-related issues will continue to be a problem, to a lesser extent, this quarter.
The analyst said that the company’s capital investment in infrastructure would rise by 2022.
Despite softer trends in e-commerce, the cloud’s primary service Amazon Web Services (AWS), was more successful than anticipated.
“The one clear, bright spot for the core business was the continued acceleration in AWS to help bolster a bottom line that was otherwise squeezed, if not for the boost it got from the Rivian investment,” Insider Intelligence analyst Andrew Lipsman said.
As demand for remote and gaming during the epidemic, AWS posted a 40 percent rise in revenue to $17.8 billion.
Analysts had anticipated higher than $17.3 billion, based on IBES information from Refinitiv.
The company also has a significant customer announcement on Thursday of an expanded partnership with the retailer Best Buy Co Inc. AWS has been seeking rivals for a long time as marquee clients like Netflix Inc, to show that it is a reliable partner and not stealing competitor’s data.
Microsoft Corp and Alphabet Inc’s Google recently predicted a positive outlook or even better results for their cloud-based businesses, too, even though research firm Canalys stated that AWS was ahead.
It accounted for 33 percent of cloud infrastructure expenditure globally during the fourth quarter of 2018, in contrast to 22 percent of Microsoft and 9 percent for Google.
Amazon has also released its advertising revenue at first in its history, reporting an increase of 32%, to $9.7 billion in its fourth quarter. This is more than the ad revenue Alphabet’s YouTube wrote during the same time.
An Amazon official has told reporters that the capability of brands to connect with customers through its advertising properties was “largely unchanged” after Apple Inc.’s privacy adjustments to its operating system.
The modifications made it more difficult for companies to create and evaluate advertisements for Instagram and Facebook.
For instance, the parent company Meta Platforms Inc anticipated about a ten billion-dollar increase this year, and the company’s shares to fall 26% on Thursday.
However, Amazon forecast first-quarter sales lower than Wall Street estimates, projecting between $112 billion to $117 billion. This is or increases between 3 and 8%.
Analysts expected around $120 billion, based on information from IBES from Refinitiv.
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