Amazon Q4 earnings reveal Kentucky cargo hub is just the beginning

3 Feb 2017

Still from ‘Introducing Amazon One – Behind the Scenes’. Image: About Amazon/YouTube

Amazon has revealed its Q4 earnings for 2016, and it has become clear that the company is attempting to cut out the postal middleman entirely – and soon.

Despite making a 22pc increase in revenue to $43.74bn for its Q4 earnings in 2016, Amazon has managed to fall beneath the expectations of market analysts who had predicted that the company would earn $44.68bn for the quarter.

On the other hand, profits for the e-commerce giant rose by 36pc to $749m, bringing each share to a value of $1.54, actually surpassing market expectations, according to TechCrunch.

Investors react negatively

Looking into the first quarter of 2017, Amazon estimated that that the first post-holidays quarter will see revenues of between $33.25bn and $35.75bn.

By missing out on analyst expectations, Amazon’s stock quickly fell by 4pc in after-hours trading on Wall Street. This followed the previous quarterly earnings report that saw an unexpected dip in share value by $0.26.

Prior to the Q4 report being launched however, Amazon appeared to be enjoying a comeback with a rise in stock by 8.7pc last month.

By far, the company’s biggest earner is its Amazon Web Services cloud business that saw growth of just under 50pc, resulting in revenues of $3.53bn.

Amazon Echo flying off the shelves

Within its larger e-commerce business with overheads, Amazon reported that its Amazon Echo home assistant device saw sales increase by a factor of nine over the same time last year.

In the coming years, the company plans to expand both its Alexa AI platform and Skills app platform, the latter of which has seen 4,000 Skills released since last June.

This number is slightly marred by the fact that a recent report showed the vast majority of Skills on the Echo device are either used once and forgotten, or never used at all.

Threat to UPS et al

Meanwhile, Amazon has been rapidly expanding its new delivery infrastructure to the point that it is now a serious challenger to existing postal services.

On Wednesday (1 February), the company revealed it will build an enormous $1.5bn cargo hub in Kentucky, creating 2,000 jobs. These new roles will support a growing fleet of up to 40 aircraft that will deliver its goods across the country.

This followed another announcement that it was planning to create 100,000 jobs across its US warehouses in order to meet e-commerce demands.

Despite Amazon refuting suggestions that it plans to go solo in terms of package delivery, a logistics expert speaking with SFGate said these moves could seriously threaten package delivery companies like UPS and FedEx.

Colm Gorey was a senior journalist with Silicon Republic