Amazon Sales Grew 38% in 2020, Jeff Bezos to Step Down from CEO Role in Q3

Bezos to hand the reins over to AWS lead Andy Jassy.

This has been a big week for Amazon, first with the FTC’s settlement proposal, then quarterly and year-end financials, and finally a big announcement from founder and CEO Jeff Bezos. In the fourth quarter, Amazon reported net sales of $125.6 billion, a 44% increase year-over-year. The company had net sales for the full year of $386.1 billion, a 38% increase year-over-year. In addition to these significant sales increases, Amazon announced that founder Jeff Bezos will step away from his role as chief executive officer in the third quarter of 2021. Andy Jassy, who currently heads Amazon Web Services (AWS), will replace Bezos as CEO.

Bezos comments on the company’s legacy

Amazon Founder and CEO Jeff Bezos will step down in Q3 2021.
Amazon Founder and CEO Jeff Bezos will step down in Q3 2021. Image courtesy of Amazon.

“Amazon is what it is because of invention. We do crazy things together and then make them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more,” said Jeff Bezos, Amazon founder and CEO, in a February 2 news release. “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now, I see Amazon at its most inventive ever, making it an optimal time for this transition.”

Financial highlights

Amazon reported the following financial highlights for the fourth quarter and full year 2020.

  • During the fourth quarter, Amazon reported operating income of $6.9 billion, a $3 billion increase over Q4 2019.
  • Amazon’s fourth quarter net income was $7.2 billion, or $14.09 per diluted share, more than double the $3.3 billion, or $6.47 per diluted share, in net income made in the fourth quarter of 2019.
  • For the full year 2020, Amazon’s operating income was $22.9 billion, compared to $14.5 billion in 2019.
  • Net income for 2020 was $21.3 billion, or $41.83 per diluted share, compared to net income of $11.6 billion, or $23.01 per diluted share, in 2019.

Operational highlights

In its most recent earnings report, Amazon reported the following operational highlights:

  • In response to COVID, Amazon tests over 700 employees for COVID per hour, and its dedicated labs test more than 1 million tests globally. It is working to get its front-line employees vaccinated as soon as possible.
  • In the United Kingdom, Amazon delivered more than 6 million COVID-19 testing kits free, as part of the government’s testing program.
  • To support frontline workers and first responders during the pandemic, Amazon has donated over 65,000 Echo devices, Fire Tablets and other devices to keep patients, students and communities connected.
  • In 2020, Amazon paid its front-line employees $2.5 billion in additional pay. The company also pays minimum wage of $15 and provides full-time employees with healthcare coverage and full benefits on their first day.
  • Amazon has established a new Housing Equity Fund with a $2 billion commitment to help preserve and create 20,000 units of affordable housing in Puget Sound; Arlington, Virginia; and Nashville, Tennessee.
  • To help increase skills and career opportunities, Amazon will provide free cloud skills training to 29 million people around the world by 2025.
  • Thirty-one companies have signed The Climate Pledge, a joint effort between Amazon and Global Optimism to achieve net-zero carbon by 2040. Companies that have joined the program include JetBlue, Microsoft, Uber and Unilever.
  • Sales from Black Friday through Cyber Monday were over $4.8 million, representing 60% growth over the prior year.
  • Last year, thousands of independent authors earned more than $50,000 through Kindle Direct Publishing with more than 1,000 authors making more than $100,000 in royalties.
  • Amazon Pharmacy launched in November, allowing Prime members the opportunity to sign up and get their prescriptions delivered by mail order. Certain restrictions apply.
  • Amazon’s new Amazon Prime prescription savings benefit program was also launched, working with 50,000 participating pharmacies across the country to save customers money on medication.
  • Amazon launched its cloud-based gaming subscription service Amazon Luna.
  • Amazon Music agreed to acquire podcast publisher Wondery to expand its podcast catalog.
  • AWS expanded its services to new regions and through new partnerships with companies like JP Morgan Chase, Thomson Reuters, ViacomCBS, Twitter, Mercado Libre and The BMW Group.

First quarter 2021 guidance

For the first quarter of 2021, Amazon offered the following guidance:

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  • Net sales are estimated to range between $100 billion and $106 billion, representing growth between 33% and 40% year-over-year.
  • Operating income is estimated to range between $3 billion and $6.5 billion, compared to $4 billion in the first quarter of 2020.
  • Guidance assumes no material changes such as business acquisitions, investments, restructurings or legal settlements.

Insider Take

Last year was a momentous year for so many companies with both winners and losers. Amazon definitely came out in the winning column, though not without its hiccups. When the pandemic first hit, Amazon struggled to keep up with orders of groceries, household goods and other essentials. Amid safety concerns, Amazon ramped up its staff, hiring tens of thousands of new employees, and implemented new safety protocols to protect staff and customers alike. They became a critical “go to” retailer for delivering goods from A to B, starting with essentials and moving beyond that to wants when retail stores remained closed. As the pandemic wears on, Amazon will likely continue its success into 2021, though sales growth may slow a bit. As for Bezos stepping down, it is a great time for him to step down. He’s got solid, experienced leadership in place, and he’d want to end on a high note. Plus he has other high profile businesses to attend to including The Washington Post and Blue Origin.