Amazon's Profit Rebounds as Cost-Cutting Measures Pay Off

After a difficult 2022 that resulted in Amazon laying off thousand of employees and cutting costs where possible, the world’s largest online retailer bounced back strongly in 2023. On Thursday, the company reported its highest-ever operating profit for the past holiday quarter, as sales grew meaningfully in each of its operating segments. More importantly though, last year’s aggressive cost-cutting measures appeared to bear fruit, as Amazon’s operating margin surged from 1.8 percent in Q4 2022 to 7.8 percent in the past quarter.

"This Q4 was a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon," Amazon CEO Andy Jassy said in a statement. "While we made meaningful revenue, operating income, and free cash flow progress, what we’re most pleased with is the continued invention and customer experience improvements across our businesses." For the full year, net sales increased 12 percent to $574.8 billion, while net income surged back to $30.4 billion from a $2.7 billion loss in 2022.

One thing that stood our from the results was the growth of Amazon's advertising business. In the past quarter, the company's ad sales amounted to $14.7 billion, bringing the total for the year close to $50 billion. Considering that the company just launched ads on its Prime Video streaming service, we can expect that often overlooked side of Amazon's business to grow further in 2024 and beyond.