Amazon Delivers Dazzling Profits

Amazon.com Inc more than doubled its profit on Thursday and predicted strong spring results as the world’s biggest online retailer raised the price for US Prime subscribers, added US football games and touted its cloud services for business.

The forecast beat expectations on Wall Street, sending shares up 7% to a new record high in after-hours trade and adding $8 billion to the net worth of Jeff Bezos, Amazon’s chief executive and largest shareholder, reported Reuters.

Seattle-based Amazon is winning business from older, big box rivals by delivering virtually any product to customers at a low cost, and at times faster than it takes to buy goods from a physical store. It is expanding across industries, too, striking a $130 million deal to stream Thursday night games for the US National Football League online and working to ship groceries to doorsteps from Whole Foods stores nationwide.

Sales jumped 43% to $51.0 billion in the quarter, topping estimates of $49.8 billion, according to Thomson Reuters I/B/E/S.

Prime, Amazon’s loyalty club that includes fast shipping, video streaming and other benefits, has been key to Amazon’s strategy. Its more than 100 million members globally spend above average on Amazon.

 Windfall

The company announced Thursday it will increase the yearly price of Prime to $119 from $99 for US members this spring. The fee hike is expected to add a windfall to Amazon’s subscription revenue, already up 60% in the first quarter at $3.1 billion.

Despite the surge in shopping, Amazon’s chief financial officer Brian Olsavsky gave credit for Amazon’s $1.6 billion profit last quarter to two younger businesses: advertising and Amazon Web Services.

Revenue from third-party sellers paying to promote their products on Amazon.com was an unusually large bright spot during the quarter, with sales in the category, which includes some other items, growing 139% to $2.03 billion. This included $560 million from an accounting change.

Amazon Web Services, which handles data and computing for large enterprises in the cloud, won new business and saw its profit margin expand. It posted a 49% rise in sales from a year earlier to $5.44 billion, beating estimates.

The company plans to increase its video content spending this year, Amazon’s Olsavsky said, with a prequel to “The Lord of the Rings” in the works. The third quarter will also see extra spending to prepare for the busy holiday season.