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Five Takeaways From Amazon Earnings As Jeff Bezos To Step Down As CEO

As coronavirus drove record online shopping and widened the divide between the industry haves and have-nots, e-commerce giant Amazon
on Tuesday reported holiday fourth-quarter sales jumped 44% to a record $125.6 billion. 

The company also said founder Jeff Bezos will step down as CEO in the third quarter to become executive chair of its board. Andy Jassy, a company veteran who leads Amazon’s profit crown jewel AWS cloud service, will take over as CEO, Amazon said. 

However, don’t expect this to signal Bezos won’t have any big say at Amazon. He said in an email to employees Tuesday that stepping down as CEO will free him to focus on “important Amazon initiatives.” He pointed to Amazon’s “invention” of things such as “insanely fast shipping” eligible for its Prime loyalty members and Alexa voice assistant that have become the new normal

“Jeff is not leaving,” Amazon’s Chief Financial Officer Brian Olsavsky said on a conference call with analysts, adding Bezos will be involved with “a lot of one-way door” decisions such as Amazon’s grocery initiative and acquisitions. “It’s a super important role.”

Here are other takeaways from the company’s earnings:

Amazon’s fourth-quarter profit more than doubled in a sea of struggling retailers. As major U.S. chains announced record store closings and 60-plus bankruptcies in 2020, Amazon’s net income more than doubled to $7.2 billion after operating profit in North America, 60% of its sales, jumped 55% while overseas markets, 30% of its total, swung to a profit from a year-earlier loss.

That’s despite the fact that Amazon’s worldwide shipping costs ballooned by 67% to $21.5 billion.

AWS remains Amazon’s profit crown jewel. AWS cloud service increased sales by 28% to $12.7 billion, as it won new commitments or migrations from customers including JPMorgan Chase
and  Zalando, Europe’s top online fashion retailer. While only 10% of company sales, AWS profit jumped 37% to $3.56 billion to represent more than half of the company’s operating income.

Still, rivals are eyeing its share. AWS’s sales growth rate was the slowest in at least five quarters as rival Microsoft
recently reported a 50% jump in its Azure cloud service. 

AWS cloud service held about a 32% share of the market, making it the No. 1 in the market, as of the third quarter, followed by Microsoft with a 19% share, as global cloud pie jumped 33% to $36.5 billion, according to research firm Canalys. 

Advertising will gain a bigger spotlight:  Amazon’s “other” business segment, made up primarily of its advertising business, jumped 64% to $7.95 billion in sales during the quarter, the fastest growing segment. The size of the business last quarter for the first time beat even Amazon’s Prime membership and other subscription service segment revenue. “There’s been a recovery in advertising spend,” said finance chief Olsavsky, adding the timing shift of Prime Day to October from July in the past also had a positive impact. 

Amazon isn’t the only one eyeing the digital advertising market dominated by Google
and Facebook. Its top retail rival Walmart
last week said it’s changed the name of its media business to Walmart Connect to attract advertisers that want to target its 150 million weekly customers. 

Whole Foods
is still a laggard
. Even as Amazon’s online store sales jumped 43%, its physical stores, led by its acquired Whole Foods, saw sales decline for a third straight quarter as consumers cut brick-and-mortar store visits. Still, that doesn’t dampen Amazon’s grocery ambition. After opening its first Amazon Fresh
grocery store in the third quarter that features its own smart shopping carts that allow customers to skip the checkout line, the company opened seven more last quarter in cities from Irvine, Calif. to Naperville, IL.

Related on Forbes: Coronavirus has sent consumers to large CPG brands

Related on Forbes: In a sea of struggling retailers, Boot Barn is bucking the trend

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