While Google and Meta are experiencing slowdowns, Amazon’s advertising business grew 19% in the fourth quarter, despite accounting for only a tiny portion of total sales. Amazon outperformed Wall Street expectations with a stronger-than-expected Q4 earnings report amid “an uncertain economy,” according to CEO Andy Jassy.
With the holiday shopping season, the fourth quarter is traditionally Amazon’s strongest; this time, the company reported Q4 revenues of US$149.2 billion, up 9% year on year, exceeding the Street’s prediction of US$145.4 billion.
Costs, one-time charges, and a decline in the value of Amazon’s investment in electric vehicle maker Rivian impacted net income of US$278 million (or 3 cents/share), compared to US$14.3 billion a year earlier. Sales in the online store’s segment fell 2% yearly, owing primarily to the return to normalcy and physical stores.
Given the inflationary headwinds that big tech is facing, as well as recent slowdowns at Snap, Alphabet’s parent company, Meta, and Amazon’s mass layoff crisis, the results are better than expected. While slower advertising spends are hurting other tech behemoths, the e-commerce titan appears to be defying the trend, with Q4 ad revenues totaling US$11.6 billion, a 19% year-over-year increase.
Although advertising accounts for a small portion of Amazon’s total revenue, most of its ad revenues are related to e-commerce. The company currently sees it as an area of rapid growth with the potential to become a key player in the digital ad market. In a lengthy Q4 release, the company highlighted several of its entertainment releases, including extensive bet shows like Dr. Seuss Baking Challenge and My Policeman, starring Harry Styles.
Amazon praised Wednesday’s Netflix mega-hit produced by its MGM division for debuting at the top of Nielsen’s weekly streaming charts. CFO Brian Olsavsky stated during the earnings call with analysts that entertainment will become an essential part of the company’s future.
“We’ve seen Prime members respond to our expanding entertainment offerings, along with competitive pricing, broad selection, and faster delivery speed,” he said, mentioning NFL Thursday Night Football and Lord of the Rings.