Amazon Reports Q4 Earnings: Is Amazon Really a Money Laundering Operation?

I’m kidding of course, but the numbers are breathtaking in how much money comes in the top of the business that does not come out the bottom.

Follow me here for 2022.

* $513 billion in net sales.

* Negative $2.7 billion in operating income.

If I saw these numbers on the screen during an episode of the TV show Breaking Bad, I would say “Another great business model setup by Saul Goodman!”

Witness a few of these disturbing trends:

* Amazon pretty much refused to forecast anything beyond Q1 2023, making investors nervous.

* AWS getting less profitable as investments continue, server utilization drops as customers rationalize their IT spend.

* Revenue from Amazon Sellers grew 24%! However Amazon’s net sales grew only 2%. That’s not a trend that can continue very long…. Fees sellers are paying growing 20x faster than net sales growth.

Aye carumba.

* Subscription Services (Prime) grew 17% year over year on a quarterly basis. This sounds good until you realize they increased prices earlier this year by ….. (drumroll) 17% last year.

* Eliminated HR teams, Stores + Devices, over 18k people.

* CFO says Amazon is looking to “regain” it’s pre-pandemic cost structure. No clear timeline given other than it could take all of 2023 and into 2024. [Personal note: I really need to use that line with my family: “I’m not spending too much, I’m just regaining my cost structure.”]

An important question I have is did Prime membership do a lot of running in place last year? Lord of the Rings and NFL Thursday Night not sounding terribly sticky at least to this outsider. They don’t release Prime subscriber numbers often, but I can’t imagine things are looking great for 2022.

* Not planning to expand Amazon Fresh significantly in 2023 because they have not yet found product/market fit at the right economics. (this came from Andy Jassy himself).

And a couple of highlights:

* Biggest Cyber Week ever. Really there is not much else to write home about. Launch of Buy With Prime.

* Advertising grew 23% year over year on a quarterly basis.

* Increased same day speed in major cities.

* 3P sales 59% of total units in Q4.

* AWS customer pipeline projected strong. Meaning as economy recovers next year, this could reaccelerate growth. 90% global IT spend still on-premises.

As far as the numerical results:

In Q4 2022, Net sales increased 9% y/y, with North America coming in at 14%, weighed down by an international drop of 8% y/y. AWS operating income down 10% y/y from $5.3B to $5.2B.

Full year 2022, Net sales increased 9%, led by North America at 13% growth. AWS segment sales increased 29% y/y.