FILE PHOTO: The logo of streaming service Amazon Prime Video is seen in this illustration picture taken March 5, 2021. REUTERS/Danish Siddiqui/Illustration/File Photo
February 3, 2022
By Jeffrey Dastin and Nivedita Balu
(Reuters) -Amazon.com Inc on Thursday said it was raising the price of its Prime subscriptions, as it looks to offset higher shipping costs and wages even after beating profit expectations for the holiday quarter.
Shares rose 17% in after-hours trade, after dropping nearly 8% before the market’s close as part of a broader technology stock sell-off. If shares rise on Friday by that much it would be the stock’s biggest percentage gain since October 2009.
For the holiday quarter, Amazon earned $14.3 billion, double its net income from a year earlier. That included a pre-tax gain of $11.8 billion from its stake in electric car maker Rivian Automotive.
On the heels of a windfall from greater at-home shopping in the pandemic, Amazon has poured money into its operations to manage disruptions, most recently the Omicron variant of COVID-19. It has marketed signing bonuses to attract hundreds of thousands of workers in a tight labor market, and it has paid more for shipping because it could not get products into the right warehouses.
Now, it is raising the U.S. monthly fee of Prime, its fast-shipping and media subscription, to $14.99 from $12.99, with annual membership increasing to $139 from $119. The change is effective Feb. 18 for new members, it said.
U.S. subscribers’ annual fees last went up four years ago to $119 from $99, and they went up four years prior from $79. Analysts have said it was time And it has more than 200 million paid subscribers to its loyalty club Prime to whom to appeal for an increase to cover the company’s increased costs.
With more than 200 million members globally, Prime is an incentive to consumers to direct more of their shopping to Amazon so they can make the most of their subscriptions. Such fees for the fourth quarter alone grew 15% to $8.1 billion.
Amazon Web Services (AWS) was a bright spot for Amazon, too. The cloud computing division has booked more sales with demand rising for gaming and remote work. It increased revenue 40% to $17.8 billion, ahead of estimates of more than $17.3 billion.
The unit even won a key customer, announcing Thursday an expanded partnership with retailer Best Buy Co Inc. AWS has long sought rivals as its marquee clients, such as Netflix Inc, to show it is a trustworthy partner and not scooping up competitors’ data. Microsoft Corp and Alphabet Inc’s Google recently forecast a positive outlook or results for their cloud businesses as well.
Still, Amazon forecast first-quarter sales below Wall Street estimates, projecting between $112 billion and $117 billion, or to grow between 3% and 8%.
Analysts were expecting $120.04 billion, according to IBES data from Refinitiv.
(Reporting by Jeffrey Dastin in San Francisco and Nivedita Balu in Bengaluru; Editing by Anil D’Silva and Lisa Shumaker)
Source: One America News Network
