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Amazon's Prime dominance sparks another record quarter

The e-commerce giant reported its third consecutive best-ever quarterly profit, thanks to Prime and its AWS cloud service.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
3 min read
JOHN MACDOUGALL/AFP/Getty Images

Amazon Prime has an estimated 60 million members in the US, reaches 11 countries and even has its own fake holiday. For CEO Jeff Bezos, that's not nearly enough.

The world's largest e-commerce company has been busy finding new ways to evolve and expand the $99-a-year Prime loyalty program. This week, Prime launched in India, the second most-populous country in the world, and arrived in Belgium in February. Prime Video can now be purchased as a standalone service in the US, making it a more direct competitor to Netflix, and Prime can be bought on a monthly -- instead of just annual -- basis, making it more affordable for more people.

There now are rumors Prime Music will also become a standalone service, to go up against Spotify and Apple Music.

Amazon is working on all these efforts because Prime -- along with the cloud-computing business Amazon Web Services -- has become a critical moneymaker for the company. Prime customers are estimated to spend roughly twice as much with Amazon than non-Prime shoppers.

In a sign of just how powerful Prime is, Amazon threw its second-ever Prime Day shopping event this month and posted its biggest sales day ever, even though the discounts were only available to Prime members.

After years of investing in Prime and AWS, resulting in years of thin profits or losses for Amazon, both businesses finally appear to be paying off handsomely.

On Thursday, Amazon delivered its third consecutive best-ever quarterly profit and fifth-straight profitable quarter. The company posted income of $857 million, up from just $92 million a year ago, easily outpacing Wall Street expectations. Sales jumped 31 percent to $30.4 billion, also ahead of estimates. (Prime Day doesn't count toward this quarter.)

"The flywheel of Prime is definitely working. It's as simple as that," Amazon finance chief Brian Olsavsky said on a call with analysts Thursday.

Shares, at an all-time high, inched up 1.7 percent to $765.65 in after-hours trading.

Amazon, though, is facing more heated competition. Walmart, the world's biggest retailer by revenue, continues borrowing pages from Amazon's playbook. Walmart has been expanding its $49-a-year ShippingPass unlimited delivery program and, like Amazon, is researching delivery drones to speed up shipments.

Planning to stay one step ahead, Amazon will keep working on Prime. Since the program launched in the US in 2005 as an unlimited shipping service, it's grown to include streaming video and music, the Prime Now rapid-delivery service and cloud storage for photos.

"Just so we're clear: We are not done," Greg Greeley, the vice president of Amazon Prime worldwide, said in an interview this month. "There's more that we can do for Prime."

Olsavsky bolstered this view Thursday, saying Amazon is "aggressively" looking into different "flavors" of Prime -- like existing student or family accounts -- in hopes of creating the "perfect Prime for everybody."

Amazon, long known for spending freely in the interest of growth, posted a steep 28 percent rise in operating expenses in its latest results, though sales grew even faster. The company also predicted better-than-expected sales for the current quarter.