[Amazon Q4 2022 Earnings] Seller Services and Advertising Drive Revenue As Ecommerce Sales Slow Down
Amazon just came out with its Q4 2022 earnings report, revealing that North America has accounted for a bigger chunk of its retail sales than last year, while its third-party seller services and advertising businesses continue to drive revenue growth.
Overall Revenue Up, But Ecommerce Sales Down
In the aggregate, Amazon finished the year strong with a $149.2 billion revenue in Q4 2022, which is 9% higher year-over-year. That being said, its ecommerce growth slowed down significantly, dropping to only $64.5 billion, which is 2% lower than the same quarter in the preceding year ($66 billion). This is despite the ecommerce giant holding a “second Prime day” as one last push for the holiday season and making its Buy with Prime feature available to all sellers in the US.
| Source | Q4 2021 Revenue | Q4 2022 Revenue |
|---|---|---|
| Online Stores (ecommerce) | $66.075B | $64.531B (down 2% Y/Y) |
| Physical stores | $4.688B | $4.957B (up 6% Y/Y) |
| Third-party seller services | $30.320B | $36.339B (up 20% Y/Y) |
| Subscription services | $8.123B | $9.189B (up 13% Y/Y) |
| Advertising Services | $9.716B | $11.557B (up 19% Y/Y) |
| AWS | $17.78B | $21.378B (up 20% Y/Y) |
| Other | $710M | $1.25B (up 77% Y/Y) |
Its biggest revenue drivers still include Amazon Web Services (AWS), which grew 19% year-over-year, and Advertising, which grew roughly 20% year-over-year. Adding to the list, though, is its Third-party seller services, which grew to $36.3 billion from $30.3 billion last year (up 20% year-over-year)—this segment includes Amazon FBA and the plethora of other opt-in programs for sellers on Amazon.
Amazon Advertising Is Booming
Despite some of its tech competitors struggling to step up their ad revenues, Amazon’s advertising business continues to be a huge revenue driver for the ecommerce giant since it broke the advertising segment off of the “Other” category a few quarters back. Most of its ad revenue comes from advertising related to its ecommerce business, particularly advertising paid for by the millions of third-party sellers on its marketplace.
It posted ad revenues of $11.6 billion in Q4 of 2022, up 23% year-over-year, outpacing other advertising giants like Google and Facebook.
Related Reading: [Ultimate Guide] Amazon PPC Strategies and Tips
North America Made Up for More Sales Than Last Year
Amazon’s retail sales in North America grew by 13% year-over-year, while its international segment decreased by 8% (or increased by 5% excluding changes in foreign exchange rates).
| Q4 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | |
|---|---|---|---|---|---|
| Net Retail Sales (North America) | $82.36B | $69.244B | $74.43B | $78.84B | $98.37B |
| Year-Over-Year Growth (excluding F/X) | 9% | 8% | 10% | 20% | 13% |
| Net Retail Sales (International) | $37.27 | $28.759B | $27.065B | $27.72B | $34.46B |
| Year-Over-Year Growth (excluding F/X) | 3% | 0% | (1)% | 12% | 5% (down 8% raw Y/Y change) |
This is somewhat unsurprising, considering the cost-cutting measures that the company implemented throughout 2022, particularly in the latter half of the year.
Big Losses of the Year
Amazon posted a net loss of $2.7 billion in 2022 compared to its humongous net income of $33.4 billion in 2021, which is largely attributed to blistering pace of ecommerce during the pandemic.
Its expenses for the last quarter of 2022 also included $640 million worth of severance costs, as it let go of more than 18,000 employees in November. It also imposed a hiring freeze on corporate ranks and even paused a number of warehouse projects in order to curb “uncertain and difficult” economic outlook.
Lastly, Amazon is expecting a much slower growth rate post-COVID to previous years, forecasting net sales to be between $121-126 billion in the first quarter of 2023, or somewhere around a 4% to 8% increase year-over-year, reflecting the $125.1 billion figure forecasted by market analysts.
Full details on Amazon's Q4 2022 performance are available on its Quarterly Results page.
