Amazon raises Prime fee $20 to $139, its first jump since 2018

Amazon.com Inc. is raising the annual fee for its Prime subscription service in the U.S. by $20 to $139, the first such increase since 2018. The company reported profit that topped expectations, led by its cloud-computing division, calming investor concerns about slowing online sales growth and rising fulfillment costs. For new Prime members, the price change will go into effect on Feb. 18 and will apply to current subscribers who renew after March 25, the company said Thursday in a statement as it reported fourth-quarter results. Amazon also raised its Prime monthly subscription to $14.99 from $12.99. The increases were widely expected because the Seattle-based company has incurred billions in margin-eating costs to ensure packages get to customers amid supply-chain bottlenecks and an acute labor shortage. Fourth-quarter sales increased 9.4% to $137.4 billion, the Seattle-based company said Thursday in a statement. Profit was $27.75 a share, aided largely by a pretax gain from the company’s investment in Rivian Automotive Inc. which went public in November. Analysts, on average, projected revenue of $137.8 billion and earnings of $3.77 a share, according to data compiled by Bloomberg. Amazon in October had warned investors it would spend big in the holiday period to deliver for customers in the face of global supply chain bottlenecks and staffing shortages tied to the pandemic. It offered hiring bonuses and overtime at many warehouses to keep them adequately staffed and secured space on any ship it could find to bring in inventory and meet demand. Fulfillment expenses were $22.4 billion, just less than estimates. “As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to omicron,” CEO Andy Jassy said in the statement. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.” Subscribe to Ad Age now for award-winning news and insight. Shares rose to a high of $3,300 in extended trading after closing at $2,776.91 The stock has dropped about 17% this year, underperforming the dip of 6% in the S&P 500 Index. Amazon’s results landed amid a gripping week for Big Tech earnings. Apple Inc. Microsoft Corp. and Alphabet Inc. all reported strong results. But Meta Platforms Inc. suffered the worst single-day share plunge in its history Thursday after reporting slowing user growth in its signature Facebook app. Amazon’s most profitable unit, the Amazon Web Services cloud-computing division, generated sales of $17.8 billion, a 40% increase, and operating profit of $5.29 billion, topping estimates. Advertising revenue was $9.7 billion, a 32% increase from a year earlier. It was the first time the company disclosed advertising as a separate line item. Previously it was part of the “other” revenue category. Revenue will be $112 billion to $117 billion in the period ending in March, Amazon said. Operating profit will be as much as $6 billion. Analysts, on average, estimated $6.06 billion in profit on sales of $120.5 billion. Prime, which offers subscribers shipping discounts, video streaming and other perks, helps Amazon convert occasional shoppers into loyal customers. Prime subscribers typically spend more on Amazon than non-members. Amazon signed up a combined 60 million U.S. Prime members in 2020 and 2021, according to Consumer Intelligence Research Partners, bringing the total number to 172 million. The research firm attributes the surge in sign-ups to consumers’ stampede online during the pandemic. Subscribe to Ad Age now for award-winning news and insight. —Bloomberg News

Amazon raises Prime fee $20 to $139, its first jump since 2018

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