Last week Amazon (NASDAQ: AMZN) posted its fourth quarter financials for 2016. Financial highlights included net sales of $43.7 billion, a 22 percent increase year-over-year; operating income of $1.3 billion, a 13 percent increase year-over-year; and net income of $749 million, or $1.54 per diluted share, compared to $482 million, or $1.00 per diluted share, for the same period last year.

For the full year 2016, Amazon reported net sales of $136.0 billion, a 27 percent increase year-over-year; operating income of $4.2 billion compared to $2.2 billion year-over-year; and net income of $2.4 billion, or $4.90 per diluted share, compared to $596 million, or $1.25 per diluted share for the same period last year.

Amazon founder and CEO Jeff Bezos commented on the results in a statement:

“Our Prime team’s customer obsession kept them busy in 2016. Prime members can now choose from over 50 million items with free two-day shipping – up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 new cities, which means millions more members now get one- and two-hour delivery,” said Bezos.

“New benefits were also added to the list, like Prime Reading, Audible Channels for Prime. Twitch Prime and more. And customers noticed – tens of millions of new paid members joined the program in just this past year,” Bezos added.

Other notable operational highlights for 2016 include:

• Amazon plans to create more than 100,000 new, full-time jobs in the United States over the next 18 months.
• Fulfillment by Amazon (FBA) delivered more than two billion units on behalf of sellers in 2016.
• Last year there were more than 100,000 sellers with sales over $100,000 selling on Amazon.
• Amazon opened Amazon Go in Seattle with Just Walk Out Shopping, where customers take the products they want without having to checkout.
• U.S. Prime added new benefits including Prime Reading, Twitch Prime, Audible Channels for Prime, and the Prime Photo Family Vault.
• In 2016, Prime members more than doubled their usage of video, music and reading compared to 2015.
• Amazon Studios released four movies into theaters in the U.S.: Manchester by the Sea, The Salesman, Paterson and Gimme Danger.
• Amazon Studios was nominated for 11 Golden Globes and won two.
• Amazon Music Unlimited, Amazon’s premium streaming music service, was launched in the fall.
• Amazon Prime Air began testing drones in the U.K. to deliver packages to customers in 30 minutes or less.
  

For the first quarter of 2017, Amazon provides the following guidance:

• Net sales between $33.25 billion and $35.75 billion for growth of 14 percent to 23 percent
• Operating income between $250 million and $900 million, significantly less than $1.1 billion for the first quarter of 2016

Despite the favorable financials, investors did not respond well to the news. On Wednesday, February 1, the day before the financials were announced, Amazon stock closed at $832.19 per share. Amazon announced its financials at 2:30 PM PST, after the close of trading, on Thursday, February 2. At 9:30 AM EST, Amazon stock was valued at $806.00 per share, and it closed at $810.20, a drop of $21.99. This is still up considerably from Amazon’s stock price a year ago – $502.13 on February 5, 2016.

Although Amazon beat estimates for earnings per share, it missed ambitious revenue projections and its guidance for the first quarter of 2017 was “weak,” says The Street. Jim Cramer advises investors to hang tight.

“I think they’re doing very well,” Cramer says. “I think that they have a long-term view.”

Insider Take:

Amazon has become the gold standard for subscription and membership companies. It provides a package of products and services that people want and at an affordable price. Amazon consistently offers value, innovation and great customer service, and the company is constantly adding more to the Prime membership without raising the price. It is also not afraid to experiment with new products like Amazon’s new STEM Toy Club subscription or services like drone delivery.

While Amazon hasn’t disclosed specific membership numbers, Bezos stated they have added tens of millions of new members. This may be due to their international expansion. We presume their retention is also excellent, because they hold true to one of their core beliefs of focusing on “customer obsession” rather than the competition. Sure, Amazon wants to be the best, but if it retains its customers and focuses on what they want and need, then they will stay ahead of the competition without even trying.