Bezos to Step Down as Amazon CEO

The surprise announcement came as Amazon capped off its pandemic-fueled 2020 financial performance with record quarterly sales driven by a surge in online holiday shopping with people stuck at home.

The e-commerce giant posted fourth-quarter sales of $125.5 billion and net income of $7.2 billion. It marked the first time Amazon reported more than $100 billion in quarterly revenue, days after Apple Inc. hit that financial milestone. Amazon’s results beat Wall Street’s expectation of around $119.7 billion in quarterly revenue and net income of $3.7 billion.

Few companies have seen growth take off like Amazon during the global health crisis. The explosion in online shopping vaulted the company’s sales to record figures as the e-commerce sector grew by around 50% throughout last year, according to some analysts. Roughly 40% of online shopping in the U.S. happens at Amazon, according to research firm eMarketer, helping drive a 76% increase in the company’s share price last year and raising its market valuation to more than $1.6 trillion.

Sales in the December quarter received an added boost from Amazon’s annual “Prime Day” shopping event, moved from its usual summer schedule to October due to the pandemic. Amazon makes billions of dollars from the two-day event.

Amazon sales for all of 2020 rose 37% year-over-year to $380.06 billion and are expected to advance again this year. Amazon said sales for the current quarter should come in at between $100 billion and $106 billion. Wall Street has forecast sales of around $95.8 billion.

The online shopping boom has been broad based. United Parcel Service Inc. Tuesday said sales in the December quarter rose 21%. The package delivery giant said Amazon accounted for 13.3% of its total 2020 sales.

Although the pandemic turned into a sales bonanza for Amazon, the Seattle-based company initially struggled to handle the surge in demand. The company recovered in part by rapidly scaling up. It added more than 400,000 employees, lifting its global workforce to more than 1.1 million staff and increased its fulfillment and logistics square footage by about 50% last year.

The efforts appeared to pay off. “There was a flight to reliability from consumers throughout the year, and that was especially true during the holiday seasons when there were shipping concerns,” said Andrew Lipsman, an eMarketer analyst. “That advantaged Amazon.”

Amazon’s other major business, the cloud-computing services Mr. Jassy has overseen, where the company rents server capacity and software tools, also saw strong demand during the pandemic with companies broadly accelerating their digital investments.

Amazon Web Services has been the company’s main profit driver. The pace of growth in that segment has slowed, though, as its scale has increased and rivals such as Microsoft Corp. and Alphabet Inc.’s Google have pushed to steal market share. AWS, as the cloud business is known, saw fourth-quarter sales rise 37% from the year earlier period to $3.56 billion.

Amazon also has been building up its advertisement business where it competes with companies such as Facebook Inc. and Google. The company doesn’t break out those sales that analysts say are becoming a larger contributor to total sales.

Amazon’s results are expected to add to a strong earnings season for Big Tech, underscoring how the pandemic has lifted those companies’ fortunes while devastating other sectors of the economy. Microsoft last week posted record quarterly sales driven by increased demand for videogames and accelerated adoption of its cloud-computing services. Apple and Facebook finished their fiscal years with their most profitable quarters ever.

Amazon’s success has come while the company confronts regulatory and labor battles. The Federal Trade Commission Tuesday said Amazon would make a $61.7 million payment over its failure in the past to pay some Amazon Flex drivers the full amount of tips they received from customers. Amazon, the FTC said, ended the practice in 2019 only once it became aware of the federal investigation of its practices.

Drivers under Amazon’s Flex program use their own vehicle to deliver packages for the e-commerce giant. The FTC said Amazon changed the terms for driver payments without disclosing the adjustment.

“While we disagree that the historical way we reported pay to drivers was unclear, we added additional clarity in 2019 and are pleased to put this matter behind us,” an Amazon spokeswoman said.

Rep. Ken Buck (R., Colo.), who has criticized other Amazon practices, tweeted “This is a drop in the bucket for Amazon” and added “We must do more to curb their anticompetitive behavior.”

Employees at one of its warehouses in Alabama also are voting on whether to unionize in a move that could reshape the relationship between the company and its workers. And federal regulators in Washington, D.C., have continued to probe the retailer’s business practices as part of a broad investigation into the market powers of large tech companies. In addition, Connecticut is investigating how Amazon sells and distributes digital books, and California is looking into how Amazon treats sellers in its online marketplace.

The company also is facing questions about rising costs and other issues with some of its businesses. Amazon said it spent roughly $10 billion on coronavirus safety measures last year, including regularly testing workers for Covid-19. Physical store revenue, which includes that from Whole Foods Market, has decreased recently as the pandemic has changed shopping patterns.

Corrections & Amplifications
Amazon.com is making a repayment of driver tips it withheld to the Federal Trade Commission. An earlier version of this article incorrectly called the repayment a fine. (Corrected on Feb. 2)

Write to Sebastian Herrera at [email protected]