Amazon (AMZN) Q4 2021 Earnings Call Transcript

Amazon (AMZN -1.95%)
Q4 2021 Earnings Call
Feb 03, 2022, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q4 2021 financial results teleconference. [Operator instructions] After the presentation, we will conduct a question-and-answer session. Today's call is being recorded.

For opening remarks, I will be turning the call over to the director of investor relations, Dave Fildes. Please go ahead.

Dave Fildes -- Director of Investor Relations

Hello, and welcome to our Q4 2021 financial results conference call. Joining us today to answer your questions is Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2020.

Our comments and responses to your questions reflect management's views as of today, February 3, 2022, only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures in our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website.

You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including uncertainty regarding the impacts of the COVID-19 pandemic, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, labor market and global supply chain constraints, world events, the rate of growth of the internet, online commerce and cloud services, and the various factors detailed in our filings with the SEC. This guidance also reflects our estimates to date regarding the impacts of the COVID-19 pandemic on our operations, including those discussed in our filings with the SEC.

Our guidance also assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now, I'll turn the call over to Brian.

Brian Olsavsky -- Chief Financial Officer

Thank you for joining us today. Let me start by once again acknowledging and thanking our employees around the world for their efforts. This was the second holiday season during this pandemic, and it required exceptional collaboration and coordination among our employees and business partners to prioritize both safety and customer experience. The team did a great job at delivering for customers this holiday.

Now, let's discuss our fourth quarter financial results. For the fourth quarter, net sales were $137.4 billion, an increase of 10% year over year, excluding the impact of foreign exchange. We continue to focus on offering the best experience for our customers across our businesses. On the consumer side, we welcomed millions of new Prime members in both the United States and international during the quarter.

We're continuing to see consistently high member renewal rates across geographies. Our third-party sellers, in particular, benefited from strong customer demand this holiday season. 3P sellers provided 56% of all unit sales in the quarter, the highest fourth quarter mix ever. And AWS saw a continuation of the strong usage and revenue growth we've seen throughout 2021.

AWS added more revenue year over year than any quarter in its history. It is now a $71 billion annualized run rate business, up from $51 billion run rate one year ago. Even on a large base, revenue increased 40% year over year. As I've mentioned in prior calls, we also encourage you to look at the multiyear compounded annual revenue growth rate since the onset of the pandemic to better put this revenue growth in perspective.

Despite lapping 2020's extraordinary sales growth, we continue to see an increase in customer demand and sales during the remainder of 2021, even as the economy opened back up. For Q4, Amazon's two-year annual compounded growth rate was 25%, excluding impacts from foreign exchange, consistent with our rate in the third quarter. We've invested significantly to keep pace with this demand, including nearly doubling our operations capacity in the past two years, expanding our fulfillment center footprint, or adding significant transportation assets to ensure fast, on-time delivery. There are now 1.6 million Amazon employees worldwide, also doubling in the two-year period.

Our fourth quarter operating income was $3.5 billion. As we mentioned in the last earnings call, we did see more than $4 billion in costs from inflationary pressures and lost productivity and disruption in our operations. The inflation primarily relates to wage increases and incentives in our operations, as well as higher pricing from third-party carriers supporting our fulfillment network. Lost productivity and network disruptions were driven primarily by labor capacity constraints due to challenges in staffing up our facilities for peak.

This is driven by the very tight labor market in the second half of 2021, and more recently, by the emergence of the omicron variant. We do expect these cost challenges to persist in the Q1, albeit adjusted for lower seasonal volumes relative to the fourth quarter. Our results also include approximately $1 billion year-over-year negative impact from lower fixed cost leverage in our fulfillment network. Recall that we saw very high unit volumes for most of 2020 and the first half of 2021.

And our fulfillment network was running a close to 100% capacity during this time. Now, with more normal fulfillment capacity, our operating leverage decreases versus the comparable prior-year periods. We expect to continue to see some negative year-over-year impact from this in Q1 of 2022. While we navigate these near-term headwinds, the fundamentals of our retail business are strong, and we're optimistic about a number of growth businesses and a strong innovation pipeline.

AWS delivered another strong quarter of growth, as enterprises and developers continued to look to AWS for critical, innovative cloud solutions. Now, the $71 billion annualized revenue run rate, AWS revenue grew 40% every year in Q4, our fourth consecutive quarter of revenue growth rate acceleration. We hosted our 10th re:Invent conference in the quarter, welcoming 26,000 in-person attendees and hundreds of thousands who attended virtually. re:Invent remains a highlight of the year for us because it's a great opportunity to introduce new services while engaging with customers and partners to better inform where we should be focusing next.

We announced more than 115 new services and features during the event, as businesses spanning all major industries continue to choose AWS as their technology provider to speed up innovation in their organizations. In the past quarter alone, Nasdaq announced a multiyear partnership to migrate its North America markets to AWS, including their matching engine. Best Buy selected AWS as its preferred cloud provider for cloud infrastructure services. Meta, the parent company of Facebook, Instagram, and WhatsApp, selected AWS as its long-term strategic cloud provider to accelerate artificial intelligence research and development.

And Stellantis, the parent company of Chrysler, Dodge, Fiat, Jeep, and Ram, selected AWS as its preferred global cloud provider for vehicle platforms to accelerate new digital products and upskill its global workforce. You can find more examples in our earnings release of how the world's largest companies, such as Adidas, Goldman Sachs, Pfizer, Rivian, and more are using AWS to transform their businesses. Overall, net income was $14.4 billion in the fourth quarter. While we normally focus our comments on operating income, I'd point out that this net income includes a pre-tax valuation gain of $11.8 billion related to our common stock investment in Rivian Automotive, which completed its initial public offering in November.

Before we move to Q&A, there are three additional items I'll mention related to our disclosures. First, we are now separating advertising services revenue from other revenue as part of our revenue disclosures by groups of similar products and services. This updated presentation is provided in the supplemental financial information included in our earnings release. We decided to continue innovating areas like sponsored ads, streaming video, and measurement.

Of course, advertising only works if we make it useful for Amazon customers. And when we create great customer experiences, we deliver better outcomes for brands. Second, we're prospectively updating the useful life of our servers and networking equipment beginning in January. As a practice, we monitor and review the useful lives of our depreciable assets on a regular basis to make sure that our financial statements reflect our best estimate of how long the assets are going to be used in operations.

We are increasing the useful life for servers from four years to five years and network equipment from five years to six years. As a result, our first quarter guidance includes an approximate $1 billion of lower depreciation expense. We expect the quarterly impact of this change to decrease throughout the year. Although we're calling out an accounting change here, this really reflects a tremendous team effort by AWS to make our server and network equipment last longer.

We've been operating at scale for over 15 years, but we continue to refine our software to run more efficiently on the hardware. This then lowers stress on the hardware and extends the useful life both for the assets that we use to support AWS' external customers, as well as those used to support our own internal Amazon businesses. And finally, we will increase the price of Prime in the United States in Q1. We continue to make Prime better.

In recent years, we've added more product selection available with fast, free, unlimited shipping, more exclusive deals and discounts, and more high-quality entertainment, including TV, movies, music, and books. Since 2018, Prime Video has tripled the number of Amazon Originals. And this September, Prime Video will also release the highly anticipated The Lord of the Rings: The Rings of Power and become the exclusive home of Thursday Night Football as part of an historic 11-year agreement with the National Football League. Since 2018 in the U.S., availability of same-day delivery has expanded from 48 metropolitan areas to more than 90.

Items available for Prime free shipping have increased over 50%, and members have saved billions of dollars shopping on Prime Days. This is all on top of new program benefits like prescription savings and fast, free delivery from Amazon Pharmacy and the continually growing Amazon Music catalog for Prime members, as well as Prime Reading and Prime Gaming. With the continued expansion of Prime-member benefits and the increased memory usage that we've seen, as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the United States, with the monthly price going from $12.99 to $14.99 and the annual membership going from $119 to $139. This is our first price increase since 2018.

For new Prime members, the price change will go into effect on February 18. For current Prime members, the new price will apply after March 25, on the date of their next renewal. With that, let's move on to Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is coming from Eric Sheridan with Goldman Sachs. Please proceed with your question.

Eric Sheridan -- Goldman Sachs -- Analyst

Thanks so much for taking the question. I want to come back to the comments in the release by Andy on same-day delivery. Can you talk a little bit about how many of those investments might be behind you versus ahead of you with respect to same-day delivery and how that sets the company up with respect to either consumption behavior by consumers versus the competitive dynamic you're seeing against elements of like omnichannel and last-mile delivery competitors? Thanks so much.

Brian Olsavsky -- Chief Financial Officer

Hi, Eric. Sure thing. So, you know, on same-day, again, there's multiple levels of fast shipping here from ultra fast, which is essentially our Grocery business in one to two hours, to same-day and less, and then one-day and two-day Prime. You know, we feel good about where we are.

We're continuing to build capacity that enables us to hit those cutoffs. I think his comments were more around getting us back to our pre-pandemic levels for one-day delivery and improving upon that and then getting same-day to more and more metropolitan areas. We're doing that globally as well, but we really think that that combination of speed for different product levels or product lines, excuse me, really resonates with customers. And, you know, there's a lot of new offers for free or, excuse me, generally, free shipping on a fast basis.

But we know how hard this is, and, you know, our goal is to do it and do it at a price that we can make money on as well, and our cost structure is commensurate with that. So, that's where the difficult work comes in. But we like the progress we've made developing our Amazon logistics capability over the last few years. And we've been adding -- as we've mentioned, we've doubled the capacity in the network over the last two years.

That is not all just to handle today's volume, it's also to handle getting closer to the customer and being able to ship faster. So, we like where we stand. We know there's work to do on improving our customer service. We like the progress we're making lately, but we think that future is bright on that dimension.

Operator

Our next question is from Brian Nowak with Morgan Stanley. Please proceed with your question.

Brian Nowak -- Morgan Stanley -- Analyst

Thanks for taking my questions. I have two. Brian, the first one -- and then there's a lot that's changed within the retail business sort of pre-pandemic, post-pandemic, you know, more same-day, more Grocery, more last-mile investments and an ad business. I'd be curious to hear as you sort of if you think about the long-term profitability of the retail segment, has your view about how you think about long-term profitability or cash flow of retail falling at all post-pandemic because of the higher required investments? That's the first one.

Then the second one, like the new disclosure. I'd be curious for any other disclosure about, you know, the number of engineers or the size of the teams you have working on a lot of the innovation that you talked about and that are sort of more around early stage nonrevenue generating projects so we can better understand that investment in Amazon. Thanks.

Brian Olsavsky -- Chief Financial Officer

Sure. You know, on the second one, you know, we have a history of making long-term bets for customers, and some of those fall into very small, short-term revenue businesses. They'll generally roll up into other revenue, which you see is very small after we've separated out advertising. So, you know, I think that -- you do see it in our revenue disclosure generally.

But, you know, a lot of our profitability is shown at the segment level, and we'll continue to do that with the revenue disclosure. You asked about the business model, I think it's a good question. And we are -- you know, as we reflect over the last two years, we are encouraged by a lot of things. You took them off there, the adoption of digital benefits, the use of Grocery, and how valuable that's become to customers.

Not to mention the acceleration of companies going to the cloud. The ability to double our fulfillment capacity over that time period, including making major strides in our Amazon logistics, sets us up well for the future. And -- but, you know, we've been also dealing with a lot of disruption during this time period. So, the early with disruption was handling volume without the capacity to handle it and then quickly playing catch up.

And as that was starting to improve, labor took a turn in the United States, especially labor availability, and we've really had to, you know, scramble to add workers. We've been successful at it. We added over 273,000 employees in the last half of last year. But I think if you look at the prior year, it was over 400,000.

So, you know, there's a lot of expansion that's been going on the network, and we feel good about the basic contributors of profitability. There's -- you know, if you step back, there's, you know, procurement margin and working with vendors and sellers as well. There's, you know, fees, in some cases, for 3P services and Prime. As we just mentioned, it's going up.

Advertising has certainly added a layer of contribution over the last few years. But again, that only works and it's only successful if we make it a good customer experience. So, we're really working hard to do that. And that becomes a part of our ability to offer lower prices, better selection, and more convenience.

So, if you take those as -- those are all, you know, stable and strengthening areas. It's, really, the onus on us is to get our operational efficiency back in all of our areas of costs. We have, again, built a lot of capacity. We've hired a lot of people.

Some of those people are still -- our teams are all battling omicron right now. But we do see the sun coming out and getting better here over the next number of quarters. And, you know, that's going to be where we're going to put a lot of our effort.

Operator

Our next question is from Doug Anmuth with J.P. Morgan. Please proceed with your question.

Doug Anmuth -- J.P. Morgan -- Analyst

Thanks for taking the question. Brian, you doubled your fulfillment network and also your headcount over the past two years. I believe you're about two and a half years into this investment cycle. Where is Amazon in terms of emerging from this investment cycle? Can you see a slowdown in that big investment spending this year?

Brian Olsavsky -- Chief Financial Officer

Yeah, let me -- let's talk a little bit about capital expenditures, and I'm going to do this with inclusion of equipment finance leases, which is the residual that we sometimes lease on our infrastructure assets. We're doing less of it now, but we still do some and have done it historically. So, when you look at those numbers and how they've grown over the last few years, I'll give you the proportions, which I'm not sure we've initially shown before. It's about 40% -- just under 40% of that capex is going into infrastructure, most of it feeding AWS.

But also, certainly, Amazon is a large customer of that as well as we build infrastructure for ourselves directly or through AWS. About just under 30% is fulfillment capacity, building warehouses -- warehouse only, not transportation. And then just under 25% is transportation capacity and building on our NACL network, principally globally. The remaining 5% or so is small things like offices and stores and other capital areas.

But those are the three main areas. If I look to the future -- we're still working through some of our plans for 2022, but it's coming into focus a bit. You know, we see the capex for infrastructure going up. We still have a very fast-growing business that's growing globally, and we're adding regions and capacity to handle, you know, usage that still exceeds revenue growth in that business.

So, we feel good about making those investments. On the fulfillment center side, that's the -- about 30% of the spend in the last two years. We see that moderating, and that will probably now match growth of our, you know, underlying businesses. I think there's always things that can kick up that growth rate.

Things like expansion of our FBA business, expansion of Cube that maybe not be different than the square footage. So, you know, there's -- we want to have capacity to have a healthy retail and FBA business because that fuels Prime and one-day delivery and two-day delivery and same-day delivery. So, that's very important. But we see the FC piece likely moderating this year.

And then the third piece is transportation. We still see additional levels of investment in that in 2022. So, if you wrap that up, you know, we expect capex, including equipment finance leases, to increase year over year. I can't give you the exact percentage, but, you know, hopefully, it gives you a little more dynamic on what -- how we approach it.

Operator

Our next question is from Mark Mahaney with Evercore ISI. Please proceed with your question.

Mark Mahaney -- Evercore ISI -- Analyst

OK, thanks. You know, you'd lay out all of these costs that you were expecting to see in the December quarter. Just talk to whether there were any real surprises to you. So, it looked like you had a little bit greater leverage than you may have thought.

And then use that to help us think about what the -- I think you said the sun's coming out financially. Does that mean that we're going to have a kind of nice improvement in operating margins as we go through the year as some of those temporary costs, you know, get temporized and you get to absorb some of the more fixed costs? So, just talk about where the surprise was in terms of those costs that you laid out for the December quarter, the 6 billion, and how should we should think about those playing out, you know, as we go forward? Thanks a lot.

Brian Olsavsky -- Chief Financial Officer

OK, Mark. Just remember that I'm sitting in Seattle, so my view of the sun coming out is a little different than perhaps where you are. But no, we do see things improving. We do -- let's step back to Q4.

We had said that we would have about $4 billion of additional costs due to labor shortages and the inefficiencies of that cost, as well as increased labor rates and shift differentials of premiums and external transportation costs. We came in just slightly over that 4 billion. I think things went as expected. I would say that the hiring was strong, but we could have done better.

We could have had more people. So, we had to cover a lot. There was additional overtime. The -- there were some higher costs on third-party transportation.

But, you know, all in all, the challenge in Q4 was to staff or, excuse me, increase the staffing. And we said we wanted to add 150,000 people or more. We added net-net about 140,000 in the quarter, 230 -- 273,000 second half of the year. So, as you turn the page into 2022, we feel good -- better about labor, except omicron has kicked up.

And now, you have a different type of labor issue where there's a lot of people who are on leave of absences and short term as they work to have a positive test on COVID and can get back into the workforce and protect their fellow workers. So, you know, there's instances where you're paying, you know, twice or three times for the same labor hour. If someone is on leave, you're paying them and you're also paying, potentially, for someone who's covering the shift on overtime. So, you know, there's cost pressure in Q1.

I think the good news is that the labor where -- the labor challenge is not as great in Q1 as it is in Q4 -- in Q3 and Q4, so we're hopeful on that. We have to work to now make our operations more efficient as we get staffing levels up, and we're going to plow a lot of our effort into increasing our transportation speeds and beating our pre-pandemic levels. So, there's a lot of different challenges going on right now. The team is, you know, been working, you know, heads down for over two years now.

So, they need -- you know, we've got a great team, and we have confidence that we will -- things will improve as we get through the year. So, hopefully, that answers your question.

Operator

Our next question is from Colin Sebastian with Baird. Please proceed with your question.

Colin Sebastian -- Baird -- Analyst

Thanks, and hey, Brian and Dave. I wanted to ask about AWS and nice acceleration and revenues there. Wondering if you could talk about maybe more specifically the drivers of that acceleration. Is the application layer maybe now large enough where you're seeing that contribute incrementally to growth? And I think in the release, you also highlighted infrastructure expansion globally.

I think it might be interesting to add some context around the scale or distribution of the AWS business internationally, outside of North America, if you could put some context around that. Thank you.

Brian Olsavsky -- Chief Financial Officer

Sure, Colin, thanks for your questions. On the growth rate, you know, I think it's a combination of things. We've been adding resources in sales and marketing over the last few years, and that is starting to pay off. There was some cutback in spending in the early parts of 2020 that were lapping as people -- different companies had different COVID experience.

Some, their volumes went through the roof. Some, their volumes went through the floor. So, as things have stabilized, I think the lasting thing is that a lot of people made the commitment to go to the cloud, better understood the benefits of that, and probably accelerated their internal timelines for that. And we're there to help, and we're working very hard to make that journey a successful one.

And we have a strong team of sales and marketing professionals to help, as well as technical advisors. So, you know, that is what we're seeing, and we're pleased with the acceleration in the business the last four quarters. The -- you know, we will see -- we're also pleased with the efficiency of the infrastructure investment. As I mentioned, the expansion of useful life is not done on an accounting basis unless you have proof that it's actually -- we're seeing it in real life.

So, very positive indicators in AWS.

Dave Fildes -- Director of Investor Relations

Hey, Colin. It's -- and it's Dave, just following up on the, you know, the international point, what we're seeing outside of the U.S. I mean, we are -- as part of that overall strong growth, we are continuing to see considerable momentum really around the world. It's, you know, customers moving their workloads over to AWS at different phases.

And so, as you look at the release, some of the other announcements, there's a good, diverse list of companies. Adidas in Germany migrated its SAP environment to AWS. In the Netherlands, Stellantis selected AWS as their preferred cloud provider. There's a number of really great companies examples, you know, doing different big things at different stages of that migration.

What's been important to us, among many things, is continued to expand our global infrastructure footprint really to support this momentum we're seeing. So, just this last fourth quarter -- in the fourth quarter, we opened the Asia-Pacific region over in Jakarta. And we've got announcements for plans to launch in Canada, in the Calgary region, next year or perhaps 2023 or 2024. So, a lot of work and a lot of momentum, but those are just a few examples.

But, you know, where we sit now, it's -- AWS has 84 availability zones and 26 regions around the world right now. And just in terms of the forward-looking roadmap, we have announced to launch 24 more zones and eight more regions. And those will be here in the next couple of years.

Operator

Our next question is from Jason Helfstein with Oppenheimer. Please proceed with your question.

Jason Helfstein -- Oppenheimer and Company

Thanks. So, I just want to dig a little bit into the third-party seller services. The growth slowed there even on a two-year stack. So, maybe if you could talk about some of the factors that you think could be weighing on that? And then just on AWS, you kind of laid out some color there.

Is there any bottlenecks to growth that you're still seeing? I mean, you talked about why this was a very good quarter and having to do with some of the comps, but any bottlenecks to growth, either supply chain or employee-related? Thank you.

Brian Olsavsky -- Chief Financial Officer

Sorry, Jason, was your second question on AWS?

Jason Helfstein -- Oppenheimer and Company

Yeah, on AWS.

Brian Olsavsky -- Chief Financial Officer

OK. Let me start with that. Yeah, sorry. Let me start with that.

No, we don't see bottlenecks on the capacity side or -- you know, it's probably the limiter in that business is our ability to work with customers to accelerate their timelines. So, we're investing and working hard to do that. So -- but operationally, you know, we continue to add capacity, as I mentioned in the capital section a couple of discussion, and we expect that to increase year over year in 2022. On 3P, the -- you know, I think what you're seeing is a decreasing growth rate, much like the rest of the business.

As I mentioned earlier, we're dealing with the very high growth period from Q3 of 2020 through Q1 of 2021. So -- but on a two-year basis, you're still seeing 31% compounded annual growth in the 3P seller services revenue. Granted that was in the -- it was 34% last quarter, but it's maintaining. I think the bigger point is that the sellers are definitely big winners in Q4.

The percentage of units up to 56% was a record for the -- for 3P. We continue to invest a lot to make sellers -- help sellers be successful on our site. They are big consumer of advertising as well because they use it to build their brands and add -- enable customers to see their selection and make purchases. So, we're very, very happy with the third-party seller services business.

And again, looking for ways to help sellers be successful.

Operator

Our next question is from Justin Post with Bank of America. Please proceed with your question.

Justin Post -- Bank of America Merrill Lynch -- Analyst

Great. Maybe we'll talk about advertising services, what -- maybe tell us why you decided to break it out if you haven't already. And then how much Prime Day might have been a factor in the deceleration? But bigger picture, you know, how much room does that line have to grow bigger than GMV growth? How do we think about where you are on penetration on that? Thank you.

Brian Olsavsky -- Chief Financial Officer

Yeah, let me start with why we broke it out. You know, we have -- we've looked at the proportion of other revenue that is advertising services, and we got to a point where -- I had been pretty much mentioning every quarter that for the majority of that line item was advertising revenue, and we felt at a certain size that we should break it out and then split the other off of that. So, that was really the impetus for the change. And we look at those things every year, and end of the year was a good time to do it as we start 2022.

So, hopefully, that's helpful for you to understand the growth rate without having to impute it from the other revenue. The growth rate in the quarter 33% is down from 66% in Q4 of last year. Q4 last year obviously had Prime Day in it for the first time, and Prime Day had carried a lot. I can't scale it for you, but you know, there's a lot of advertising tied to Prime Day, obviously, so -- and that moves quarters.

It generally has an impact on the run rates. We saw that a bit in Q2 of this year when we did have Prime Day and it was lapping -- Q2 2021 was lapping the 2020 period that didn't have a Prime Day in it. So, that'll move around a bit. But I think the bigger story here is the success we're having with sellers and vendors and making that a useful product for customers.

Dave Fildes -- Director of Investor Relations

And, Justin, just to add to that, I mean, it's -- the priorities with advertising are, you know, in a high level, it's improve the tool usability. We think there's, you know, great feedback loops with customers, as Brian mentioned, to keep building and making that better. You know, that results in building more relevancy and better engaging experiences. And again, you know, the more we can interact with the advertisers, the customers and learn and have more opportunities to hear from them and understand that we can build better analytic tools, provide better measurement, give them better insight to performance.

So, really focus on serving brands. And it's, you know, in the sponsored ad space, but, you know, we've talked about video advertising is certainly a great opportunity. And as we've got properties like, you know, Fire TV, IMDb TV, Twitch, live sports, a lot of exciting things that have been going on in live sports and certainly to come this year as well, both in the NFL here in the U.S., but overseas in a number of properties. Really excited to, you know, kind of work with folks.

And again, this is about delivering good recommendations to customers and helpful when they're making their purchase decisions and giving them information around that. That, in turn, of course, helps the advertisers as well and have a great results. I think that's one area that we're excited about. You know, longer term, you know, demand-side platform opportunities with Amazon's DSP is something that we're continuing to work on and refine and, you know, again, focus on the customer as we always do.

Operator

Our next question is from John Blackledge with Cowen. Please proceed with your question.

John Blackledge -- Cowen and Company -- Analyst

Great, thanks. I have two questions. First, could you discuss how supply -- the supply chain affected the business in 4Q and how we should think about perhaps impacts from supply chain issues in 1Q '22 and for the year? And then the second question would be, do you expect to increase Prime pricing in non-U.S. markets? Thank you.

Brian Olsavsky -- Chief Financial Officer

Hi, John, thank you for your questions. First, on Prime question, we evaluate each country differently. We look at the relative price of the customer versus our cost to supply that and the usage and the value that we're creating for customers. We felt, especially after not raising the price in the United States since 2018, that the time was right to raise it.

And we think it's a much more valuable program today than it was in 2020, let alone 2018. So, other countries, we'll continue to evaluate every year, and nothing else to announce right now. On supply chain, you know, there's the specific things that I think we all see in the supply chain where we're waiting for products. But as far as Amazon is concerned, you know, we did a lot to combat the supply chain issues we saw in Q4 or anticipated in Q4.

We bought our product ahead. We worked with vendors to secure inventory early, so -- in some cases, paid early, which had a working capital impact. We also worked very hard to open up channels of -- existing channels of input into the country, whether it was port capacity or vessel capacity. So, we did everything we knew how to as far as trying to get more capacity in a constrained market.

And we think it worked for our customers in Q4. As challenges remain in 20 -- I wouldn't say we're -- we've totally passed that, but we don't expect it to be a big issue in Q1.

Operator

Our final question is from Dan Salmon with BMO Capital Markets. Please proceed with your question.

Dan Salmon -- BMO Capital Markets -- Analyst

Good afternoon, good evening. Thanks for squeezing me in. First, I just wanted to follow up a little bit and see on the advertising numbers if there's any qualitative color that you could add, say, rough balance of performance advertising versus brand advertising, maybe U.S. versus the rest of the world.

Anything you add would -- could be great. And then just second, you know, Brian, you mentioned the exclusive broadcast of Thursday Night Football, and it's one of the reasons supporting a higher price increase for Prime. Dave, you mentioned it as a -- an element that is a dynamic new one for the advertising business. Maybe could we just return to that point as the sort of importance of live sports in the video space is incredibly important.

Is that one that you see kind of taking the business to a new level at this stage?

Brian Olsavsky -- Chief Financial Officer

Sure, let me start with that second question. So, I didn't want to leave you with the impression that we raised prices because of Thursday Night Football. I just use that as an example of great new content that we've been investing in for Prime members to make the Prime membership more valuable, as well as international sports. We had one of the highest-rated games in the Q4 with, I believe, it's Manchester United, and I'm going to mix up the team.

Sorry.

Dave Fildes -- Director of Investor Relations

Arsenal? I don't know.

Brian Olsavsky -- Chief Financial Officer

Yeah, I won't embarrass myself. But the -- so again, we've been working on getting sports properties that will be beneficial and valuable to Prime -- a Prime offering. We're still probably early on in that. We've had obviously success with Premier League soccer, other soccer leagues around the world, tennis properties, and also probably the marquee is the work with the NFL on Thursday Night Football.

Dave Fildes -- Director of Investor Relations

Dan, in terms of just breakout, you know, as we said before, on the advertising side, the sponsor products and brands, they make up the majority of the ad revenue today. We haven't given a split on a geographic basis. But suffice to say, a lot of these efforts that Brian talked about, whether it's on the video, advertising opportunities, or in those sponsored products or sponsor brands efforts, we've replicated a lot of the tools and features and services around the world and are, you know, kind of constantly learning and building out the brand in the presence with that so we can make better inroads with customers over the long term.

Brian Olsavsky -- Chief Financial Officer

And I don't want to leave you hanging, Dan, the Manchester United and Arsenal soccer game in December was the most-watched Premier League match ever on our service, with an estimated viewership of 4 million. So, I think that is actually pretty interesting because we've had a lot of increasingly good relationship with the Premier League. We've had Boxing Day games, and we continue to be a valuable partner for each other.

Dave Fildes -- Director of Investor Relations

With that, thanks for joining us on the call today and for your questions. A replay will be available on our IR website for at least three months. We appreciate your interest in Amazon and look forward to speaking with you again next quarter.

Duration: 43 minutes

Call participants:

Dave Fildes -- Director of Investor Relations

Brian Olsavsky -- Chief Financial Officer

Eric Sheridan -- Goldman Sachs -- Analyst

Brian Nowak -- Morgan Stanley -- Analyst

Doug Anmuth -- J.P. Morgan -- Analyst

Mark Mahaney -- Evercore ISI -- Analyst

Colin Sebastian -- Baird -- Analyst

Jason Helfstein -- Oppenheimer and Company

Justin Post -- Bank of America Merrill Lynch -- Analyst

John Blackledge -- Cowen and Company -- Analyst

Dan Salmon -- BMO Capital Markets -- Analyst

More AMZN analysis

All earnings call transcripts