The e-commerce giant's shares rose nearly 2% on a down day for tech stocks after Bezos stated in his annual letter to Amazon shareholders that Prime now has over 100 million subscribers globally. After skidding during the recent tech correction, Amazon shares are once more within 5% of a March high of $1,617.54.
Amazon hadn't previously shared a Prime subscriber figure. In January 2017, a Re/code analysis of the company's prior remarks about Prime growth suggested the service had at least 66 million global subs. And Cowen, for its part, previously estimated Amazon had 60 million U.S. Prime subs at the end of 2017.
There are plenty of other useful Amazon takeaways within Bezos's letter -- both about how the company is performing, as well as about how it runs and views itself. Among them:
1. Amazon appears to view Prime as untouchable.
Amazon originally launched Prime in 2005, but until now had refused to give a subscriber figure, apparently out of a wish not to provide rivals with data that they could leverage. And it was only last year that the company began sharing its total subscription service revenue.
Why the change of heart? It looks like Amazon is now more confident that no one can deliver a credible rival to Prime, given both the scale of its user and seller bases and the fulfillment infrastructure and content investments that underpin it.
Last year saw Walmart (WMT) and Alphabet/Google (GOOGL) each abandon their would-be Prime rivals. Just as AWS's dominant cloud infrastructure position (and profitability) may have motivated Amazon to start breaking out its AWS revenue back in 2015, Prime's dominance seems to have made Amazon more comfortable sharing stats about the service's size and reach.
2. Amazon gets a meaningful amount of subscription revenue from sources other than Prime.
While Prime subscriptions cost $99 per year or (following a recent price hike for monthly subscribers) $12.99 per month in the U.S., international subscriptions are cheaper outside of the U.K. On an annual basis, Prime costs $15 in India, $62 in Canada, $49 in Mexico ($24 for the first year), $85 in Germany, and $61 in several other European countries. In addition, Amazon offers discounted U.S. subscriptions to students and people on government-assistance programs.
Nonetheless, Amazon produced $9.7 billion in total subscription service revenue last year. If all that revenue came solely from Prime subscription fees, it would quite possibly spell annual fees per user of more than $100, given that Amazon may have only recently topped the 100 million subscriber threshold.
Clearly, Amazon is also getting a healthy amount of subscription revenue from non-Prime sources. A chunk of this revenue comes from Amazon's Music Unlimited service -- Prime members can get the full version for $79 per year, and a version that only works on Echo devices for $3.99 per month -- which Amazon recently disclosed had "tens of millions" of subscribers. Other contributors include Audible (audiobook) and Kindle Unlimited (e-book) subscriptions, and subscriptions obtained via the Prime Video Channels service.
3. Amazon's AI hiring binge is paying off.
While other tech giants are also aggressively hiring AI/machine learning researchers, Amazon's recruiting efforts appear (judging by how many job listings it has posted online) to be unmatched. Some of the numbers shared in Bezos's letter show how all that hiring is yielding a payoff.
While discussing Alexa's progress, Bezos claimed Alexa's understanding of spoken language has improved by over 25% during the last 12 months in the U.S., U.K. and Germany, and that its far-field speech recognition has improved by 15%. He also reiterated a recent disclosure that active users of AWS's machine learning services have grown by over 250% during the past year.
Of course, Amazon isn't the only tech company making significant AI progress. And when it comes to some popular consumer and cloud services, it still feels as if as if Google is ahead of the pack. But Amazon is quite intent on making up ground.
4. Amazon's big Indian investments are, too.
A little less than two years after Amazon promised to invest over $5 billion in India, Bezos said Amazon.in is India's fastest-growing marketplace, as well as the most-visited site on both PCs and mobile devices. He also claims (citing third-party data) that Amazon's Indian shopping app was the most downloaded shopping app in the country last year, and that Prime, which saw an Indian launch in July 2016, added more members in India during its first year of availability than in "any previous geography in Amazon's history."
None of this necessarily means that Amazon is now bigger in India than local marketplace Flipkart, which did $3 billion in revenue in fiscal 2017 and has seen its Android app downloaded over 100 million times via Google Play. In fact, third-party estimates suggest Flipkart remains bigger for now. But together with Amazon's trademark willingness to forego near-term profits for the sake of long-term growth, the company's Indian growth guarantees that Walmart will face a very tough fight against Bezos & Co. should it go ahead with its reported plans to take a controlling stake in Flipkart.
5. Amazon's workplace culture strives to prevent the company from getting complacent.
Towards the start of his letter, Bezos went into detail about Amazon's efforts to set high standards for its workers. Central to those efforts: Understanding that high standards are domain-specific (i.e. having them in one field doesn't mean one will have them in another); having a realistic understanding of how hard it is to achieve a high standard in a particular field; and making it possible to quickly recognize when a high standard has been achieved.
In Pirates of Silicon Valley, an old made-for-TV movie about the PC industry's early days, the Bill Gates character quips (in reference to IBM's (IBM) willingness to let Microsoft (MSFT) supply the OS for its PCs) that success is a menace, since it fools smart people into thinking that they can't lose. Bezos's remarks, as well as those made at times by other Amazon execs, suggest Amazon puts a lot of effort into making sure the company doesn't lose its edge on account of its success.
Jim Cramer and the AAP team hold positions in Amazon and Microsoft for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AMZN or MSFT? Learn more now.