NEW YORK — It was a Prime quarter for Amazon.
Amazon surprised investors on Thursday with a fourth-quarter profit that soundly beat expectations, despite a continued increase in spending and a slight sales miss, partly linked to the strong dollar. Investors drove shares up more than 11 percent in aftermarket trading.
Amazon’s strategy always has been to spend a big chunk of the money it makes to grow and expand into new areas like cloud computing, streaming video and hardware. That has affected profitability, sometimes to investors’ chagrin. But the latest results seem to indicate that at least some areas in which Amazon has invested heavily, such as its $99 annual Prime loyalty program and its Amazon Web Services cloud computing offerings for businesses, are finally helping out its bottom line.
CEO Jeff Bezos said Prime membership grew 53 percent during the year, even though it raised prices. (The Seattle company doesn’t give out total figures.) Prime memberships help Amazon get people to engage more often with the company’s products — making them likely to spend more, says Morningstar analyst R.J. Hottovy.
After raising Prime’s price to $99 from $89 last year, Amazon beefed up offerings, added a grocery delivery services and music streaming for Prime members. It also launched original TV shows such as the Golden Globe-winning “Transparent,” starring Jeffrey Tambor. The video-streaming service in particular seems to be a hit with Prime members. In a call with analysts, executives said that video content customers who sign up to its Prime service for a free trial are converting at higher rates than other ways of signing up.