Amazon breaks a $100 billion quarter with record sales

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Jeff Bezos chose Amazon’s best ever sales quarter to announce he would be stepping down as CEO in six month’s time as the company turned in their first ever quarter to break the $100 billion quarter sales barrier. And they didn’t just break $100 billion quarter, they smashed it with sales of $125 billion and an expectation that Q1, typically lower than Q4, would also break the $100 billion threshold.

The split of the $125 billion net sales was $71 billion in product sales and $54 billion from services revenue.

It’s worth noting that this record quarter is in part due to rocketing online demand during the pandemic, but also Amazon delayed Prime Day until Q4 which would normally have taken place in the early summer.

Shipping costs are now immense having jumped 67% to almost $21.5 billion and 55% of all worldwide sales (by unit count) were from third party sellers.

Net income increased to $7.2 billion in the fourth quarter, or $14.09 per diluted share, compared with net income of $3.3 billion, or $6.47 per diluted share, in fourth quarter 2019.

Full year results and 2021 Q1 Guidance

For the full 2020 year, Amazon’s net sales increased 38% to $386.1 billion, compared with $280.5 billion in 2019. Operating income increased to $22.9 billion, compared with operating income of $14.5 billion in 2019. Net income increased to $21.3 billion, or $41.83 per diluted share, compared with net income of $11.6 billion, or $23.01 per diluted share, in 2019.

First Quarter 2021 Guidance

Net sales are expected to be between $100.0 billion and $106.0 billion, or to grow between 33% and 40% compared with first quarter 2020. Predicting another $100 billion quarter would make it two in a row and not just a blip in Amazon’s performance.

Operating income is expected to be between $3.0 billion and $6.5 billion, compared with $4.0 billion in first quarter 2020. This guidance assumes approximately $2.0 billion of costs related to COVID-19.

Small business performance

Amazon say that the 2020 holiday season was the best ever for independent businesses selling on Amazon – nearly all of which are small and medium-sized businesses – with worldwide sales growing over 50% compared to the same period in 2019. Sellers surpassed $4.8 billion in worldwide sales from Black Friday through Cyber Monday, growing about 60% from the previous year.

Since the start of the COVID-19 pandemic, Amazon has incurred more than $5 billion in operational costs on behalf of independent businesses selling in Amazon’s store, and expects to invest billions more through 2021. In 2020, Amazon increased square footage across its fulfillment and logistics network by 50%, dedicated 60% of fulfillment center capacity to seller products, and postponed most annual selling fee adjustments until June 2021.

Amazon Advertising sales through to Q4 2020

Amazon Advertising revenue jumped 64% in the past quarter compared to the same period last year, but that somewhat hides the reality of the growth. In monetary terms it was a jump of $2.554 billion to $7.952 which is by far and away the biggest quarterly increase ever (double the previous record rise of $1.196 billion in Q4 2019). Just 2½ years ago in mid 2018, Amazon had yet to turn in a £2.5 billion total advertising revenue quarter and now they’ve added that revenue in a single quarter

The appetite for Amazon Advertising appears never ending and if you’re not using it your competitors almost certainly are.