Amazon Finally Coming Out

This was a good quarter for Amazon (Nasdaq: AMZN) and its investors. While it was surprising that Amazon reported a strong operating profit, what was even more surprising was the increased transparency displayed by the company on some of its business segments.

Amazon’s Financials

Driven by the holiday season, Amazon’s fourth quarter revenues grew 15% over the year to $29.33 billion, falling short of the market’s expected revenues of $29.65 billion. EPS of $0.45 per share was significantly ahead of the Street’s forecast of $0.18 per share. Amazon reported an operating income of $591 million, which surged past market expectations of $193 million.

By segment, revenues from products grew 10% over the year to $23.1 billion, and revenues from services improved 38% to $6.23 billion.

Amazon ended the year with revenues growing 20% to $88.99 billion and a net loss of $0.52 per share compared with an EPS of $0.59 reported last year.

For the current quarter, Amazon projected revenues of $20.9 billion-$22.9 billion and an operating income ranging from a loss of $450 million to a profit of $50 million. The Street had forecast revenues of $23 billion with an operating income of $130 million.

Amazon’s Hidden Numbers

In a surprising move, Amazon shed some light on its operating metrics. However, they were still clouded in a lot of secrecy. For instance, while they mention details about Prime’s growth, they fail to talk about total member base and only say that the service has “tens of millions of members”.

Amazon celebrated the tenth year of their Prime membership offering and revealed that the paid subscription’s membership improved 53% over the year with 50% growth reported in the US and an even higher percentage in its international operations. The increase in membership is impressive considering that Amazon raised the membership price from $79 to $99 during the year.

They also gave some information about their Amazon Web Services (AWS) offering. At the end of the quarter, Amazon revealed that there were over one million worldwide active Amazon Web Services customers for their cloud and data services. The service has seen usage growth of 90% over the year. Amazon has said that they will give out more details about AWS numbers in the next quarter. Analysts estimate that AWS is operating at a $5 billion annualized revenue run-rate. Compare that to cloud revenue run-rates of Microsoft’s $5.5 billion and IBM’s $3.5 billion.

Amazon’s Additional Offerings

Meanwhile, Amazon continued to offer new services during the quarter. During the last quarter, Amazon had released Prime Now, a new service offering that provides members with access to paid one-hour and free two-hour delivery on several essential items using a mobile app. The service has currently been made available in Manhattan and is expected to expand to other cities this year.

They also expanded Prime with a Prime Photos service that provides free unlimited photo storage on the Amazon Cloud Drive. Amazon remains focused on adding content to the Prime Video service. Original content is part of this plan and they are looking to release 12 new series and movies this year. Some of these names include Cocked, Mad Dogs, The Man in the High Castle, Point of Honor, Down Dog, Salem Rogers, and The New Yorker Presents. Recently, the Prime-exclusive series Transparent was awarded two Golden Globes, making it the first series from a streaming video service to win a Golden Globe for best series. They have also signed up with Oscar-winning Woody Allen for the production of new series to be debuted exclusively on Prime Instant Video in the US, UK, and Germany this year.

They have also expanded AmazonFresh to Manhattan and Philadelphia, and now Prime members in eligible zip codes can also shop for grocery along with other products. Customers can order from a selection of more than 500,000 grocery items for same-day and early-morning delivery.

As part of their product expansion, Amazon introduced Fire TV Stick, which plugs into the HDMI port on an HDTV and provides the user instant access to movies, TV shows, music, photos, apps, and games. They have released Echo, a new device that focuses on voice recognition. The hands-free, always-on device lets users ask for information, music, news, and weather from across the room. In return, Echo answers the user’s queries instantly. Echo lets users say commands to the device to control iTunes, Pandora radio, or Spotify on their mobile devices.

As part of their international expansion plans, Amazon launched the Kindle Store in the Netherlands. The store offers more than 3 million titles in multiple languages of which nearly 700,000 are Kindle exclusive titles and over 20,000 titles are in Dutch. Their investments in India are also delivering strong results. During the year, Amazon.in became India’s largest online store – this was the second year of operations for Amazon in India. They launched 24 new departments, listed over 19 million products, and expanded seller base to over 16,000 sellers.

For China, they have launched an Amazon Global Store on the Chinese site that offers nearly 200,000 products that have been selected from the US website. Thus Amazon China’s users will be able to get the same quality product at the same price as US customers.

As part of the AWS expansion, Amazon launched several new services including Amazon Aurora, a MySQL-compatible database engine; AWS Lambda, a service that runs developers’ code in response to events and manages the compute resources on its own; AWS Key Management Service, AWS Config, and AWS Service Catalog for improved security management; AWS CodeDeploy, a fully managed, high-scale deployment service; Amazon EC2 Container Service, a scalable container management service; and Amazon WorkMail, a cloud-based business email and calendaring service with strong security controls and support for popular email clients.

Amazon is clearly listening to what the investors want and delivered a strong quarter this time. It is also refreshing to see them gradually open their business metrics to public scrutiny. Their stock is trading at $364.75 with a market capitalization of $169.38 billion. It touched a 52-week high of $383.11 in March 2014.