Amazon’s Huge Q4 Profit Has Nothing To Do With Its Core Online Retail Business

Amazon reported a surprising $14 billion profit for the fourth quarter of 2021, largely thanks to its stake in electric truck maker Rivian.

Attendees visit the Amazon booth where a Rivian electric truck with Amazon Alexa integration is displayed, January 7, 2020, at the 2020 Consumer Electronics Show (CES) in Las Vegas, Nevada. ROBYN BECK/AFP via Getty Images

Amazon just delivered some great news to its investors and not-so-great news to its loyal customers. The e-commerce giant on Thursday reported a surprising fourth-quarter profit of $14.3 billion, or $27.75 per share, far exceeding Wall Street analysts’ expectation of $3.61 per share and therefore sending stock to soar as much as 14 percent Friday morning.

During the holiday season quarter, Amazon plowed in a record revenue of $137.4 billion, a 9.4 percent jump from a year before. However, Amazon didn’t actually make much money from its core online retail business. The bulk of the fourth-quarter profit, nearly $12 billion, came from the company’s investment in electric vehicle startup Rivian Automotive, which went public during the quarter.

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Rivian’s listing on Nasdaq in November was the largest IPO of 2021 and the sixth largest in the U.S. history. The startup, which hasn’t begun mass production, was valued at a whopping $66 billion at market debut.

Without Rivian, Amazon’s fourth-quarter earnings report would have looked very different. At the end of the third quarter of 2021, Amazon forecast a “break-even” fourth quarter with possible zero profit—despite record sales outlook—due to labor shortage, cost inflation and supply chain issues.

Those worrying factors all turned out to be true. “As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to omicron,” CEO Andy Jassy, who succeeded Jeff Bezos last year, said in a statement Thursday.

Hence bad news to Amazon customers: Starting February 18 for new subscriptions and March 24 for renewals, the price of Amazon’s Prime membership will jump to $139 a year, or $14.99 a month, from the current $119 a year, or $12.99 a month.

During Thursday’s earnings call, Amazon CFO Brian Olsavsky cited inflation and rising costs as main reasons for the price increase, the first in nearly four years. He added that he believes Amazon Prime still offers the best value for consumers with free two-day shipping, the expansion of same-day delivery and a host of streaming services, including Amazon Prime Video, Audible and Amazon Music.

On a monthly basis, Amazon Prime is cheaper than a Netflix Standard subscription and HBO Max. The downside, though, is that Amazon sells Prime membership annually, while the other two streaming services let you change your mind from month to month.

Olsavsky said, with the price increase, Prime members can expect new perks in 2022. Amazon’s Huge Q4 Profit Has Nothing To Do With Its Core Online Retail Business