Business

Amazon stuns analysts with report of exponential revenue growth

Amazon.com Inc. released its first quarterly report of 2018 and disclosed that it now has $51 billion in revenue and a $1.6 billion net income. These results left many stunned. Analysts predicted the company’s revenue would shrink, but instead, it nearly tripled last year’s same quarterly results and more than doubled net income.

Wall Street reacted positively to these results. By the closing of the stock market on April 26, Amazon’s shares went up by more
than 7 percent.

The report also unearthed that the company’s digital advertising increased by 139 percent from last year, CNBC reported. Amazon is now the third-highest in digital advertising after Facebook and Google. Digital sales grew by 46 percent in America and by 34 percent internationally.

Amazon’s continuing innovations and investments have played a crucial role in its positive results. One important innovation is its cloud computing system that has outperformed expectations in the past few months.

Microsoft Corp., Apple Inc. and Alphabet Inc. have shown that cloud services are a key factor for some tech companies’ results and while they all offer cloud services, Amazon is outperforming all of these tech giants.

The increasing number of Amazon Prime subscriptions, which has reached more than 100 million according to the company’s founder and CEO Jeff Bezos, has also played an important role in producing the successful results.

A Prime subscription attracts many customers, due to the fast shipping it offers, as well as video and music streaming.

Amazon has also increased the annual Prime membership price this year by 20 percent, from $99 to $119. The membership price has not seen an increase in four years and when it was last enacted, the price also increased by 20 percent. Bezos said in a letter that this increase was necessary to keep offering the fast shipping services, as the company added more products under the Prime membership network.

The company’s acquisition of Whole Foods Market Inc., its introduction of electronic personal assistant Alexa, the opening of a self-checkout grocery store and its in-home and truck package delivery are some of the other new innovations that have reflected positively on the company and its reported profit.

While the company’s success has left many investors happy, it has also forced a lot of critics to question how much is too much, and whether Amazon is becoming a monopoly. President Donald Trump himself has tweeted criticism regarding the company not paying the U.S Postal Service enough for its delivery services, not collecting taxes from third-party sellers and hurting a lot of small businesses.

While Amazon’s immense and rapid growth is starting to be questioned by many who believe the company should be regulated, it is also not something the majority of the public opposes because of the benefits Amazon brings, CNN Money reported. Regulating something that is beneficial to the consumer will be extremely difficult because the low prices attract many to its services.

Lina Khan, a lawyer who has done a lot of research on the way big tech companies earn such consumer power, argued that Amazon has done what is called “predatory pricing.” Khan described this technique as, “when a company prices a good below cost in order to drive out competitors,” according to her interview with CNN. This strategy is used to get as many users as possible in its early stages. After businesses get loyal customers to whom they could offer low and convenient prices, it will be very hard for these customers to stop using services from these
companies.

Amazon has other competitors, which include Walmart Inc., eBay Inc. and Target Corp. but their profits are not as big as Amazon’s and they have fewer services compared to Amazon. As for now, Amazon will continuing amassing customers and dominating the market, becoming harder and harder to compete with.

May 7, 2018

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Yesenia Barrios


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