The Hidden Power of Membership Revenue

Why tiny fees quietly carry giant profits — with Costco, Amazon, and Apple

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Introduction

When people talk about revenue monsters like Costco, Amazon, and Apple, they usually picture carts piled high, next-day boxes, or shiny new iPhones. But the real engine humming under the hood is much quieter: memberships and subscriptions.

Those small, repeat payments — a yearly Costco card, Amazon Prime, an iCloud plan — don’t look exciting. Yet they’re predictable, sticky, and high-margin. In rough markets, they act like a built-in shock absorber for earnings. In good times, they amplify growth.

In this post, we’ll keep the finance jargon light and the takeaways practical. First, why this type of revenue is special. Then, a data-driven look at Costco, Amazon, Apple over the most recent five fiscal years (FY2020–FY2024). Finally, what investors should watch.

Quick note on comparability: figures are in USD millions and by each company’s fiscal year (Costco & Apple end in September, Amazon in December).

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Part 1 — Why membership revenue is different from sales

• It’s predictable. Subscriptions renew on a schedule. You don’t have to “re-sell” them every day like a carton of eggs or a gadget.
• It’s high-margin. The cost to deliver an extra month of storage or a membership card is tiny compared to the price you pay. That means more of each dollar falls to profit.
• It changes behavior. Once you’ve paid, you tend to use the thing — buying more at Costco, choosing Prime shipping, or storing more photos in iCloud. That “I should make it worth it” mindset is gold.

Think of memberships as mini-bonds inside a business: small, regular payments that make the whole company steadier.

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Part 2 — Case studies with five-year data (FY2020–FY2024)

Costco: a $65 card that pays the bills

You go to Costco for huge ketchup bottles. Costco goes to you for renewals. And that’s the magic.

5-year snapshot (USD millions)

Year	Membership Revenue	Net Income	Membership / Net Income
2020	3,541	4,002	88.5%
2021	3,877	5,007	77.4%
2022	4,224	5,844	72.3%
2023	4,580	6,292	72.8%
2024	4,828	7,367	65.5%

Plain-English takeaway: For five straight years, Costco’s membership fees covered ~65%–90% of its net income. That’s not a side hustle — it’s the core cushion. In 2024, profit grew faster than fees, so the ratio dipped to ~66%, but the pattern holds: the card pays the bills.

Two more notes you can use in a sentence:

• Renewal rates are rock-solid (U.S./Canada ~92.9%, worldwide ~90.5%).
• Fees rose on Sep 1, 2024 (from $60→$65; Executive $120→$130), and the impact trickles in over the next year.

Why it matters: Costco can keep shelf prices razor-thin and still deliver strong profits, because the predictable, high-margin membership stream underwrites the whole show.

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Amazon: Prime is the habit that pays for itself

Amazon reports Prime and other content subscriptions under “Subscription services.” It’s big — and it grew steadily through 2024.

5-year snapshot (USD millions)

Year	Subscription Services Revenue	Net Income	Subscriptions / Net Income
2020	25,207	21,331	118.2%
2021	31,768	33,364	95.2%
2022	35,218	−2,722	(loss)
2023	40,209	30,425	132.2%
2024	44,374	59,248	74.9%

Plain-English takeaway: Subscription revenue went from $25.2B → $44.4B in five years. In 2020 and 2023, it was actually larger than Amazon’s net income. In 2024, company-wide profits jumped, so the ratio dropped — but the subscription base stayed sturdy.

What’s in “subscriptions”? Prime fees plus digital content like video, audiobooks, music, and e-reading. Amazon doesn’t slice out Prime’s exact profit because it treats faster shipping and streaming as habit-forming perks that make you shop more. That’s the point: Prime changes behavior, and behavior drives the rest of Amazon’s flywheel.

Why it matters: Even if Prime’s direct margin isn’t front-and-center, the subscription river widens each year — and it pulls retail demand along with it.

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Apple: services turn devices into tollbooths

Apple’s “Services” (App Store, iCloud, Music, TV+, AppleCare, etc.) has become a second growth engine — and a very profitable one.

5-year snapshot (USD millions)

Year	Services Revenue	Net Income	Services / Net Income
2020	53,768	57,411	93.7%
2021	68,425	94,680	72.3%
2022	78,129	99,803	78.3%
2023	85,200	96,995	87.8%
2024	96,169	93,736	103.0%

Plain-English takeaway: Services rose from $53.8B → $96.2B across five years — steady, compounding growth. In 2024, Apple’s net income was held back by a one-time tax item, so Services actually exceeded net income.

The kicker: Services carry very high gross margins (around 73.9% in 2024 vs 37.2% for products). Translation: each extra dollar of Services is extra powerful for profit. And every iPhone becomes a tollbooth: after the device sale, the small monthly charges (storage, music, shows) keep flowing.

Why it matters: Even if hardware cycles slow, the subscription spine gives Apple resilience — and a reason the market often values it as more than “just” a device maker.

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Part 3 — Why Wall Street loves this model (and what to watch)

1. Earnings quality goes up Recurring revenue smooths the ride. Markets will forgive a soft quarter of gadget sales if subscriptions are climbing.

2. Valuation can go higher Investors usually pay a premium for predictability and margin. A dollar of sticky, high-margin subscription is worth more than a one-off product sale.

3. Downturn defense When budgets tighten, people might delay a TV purchase but keep the $10 cloud plan or the $65 card. That loyalty buffer stabilizes profits.

Signals to track (simple, but powerful):

• Renewal & churn: Are customers sticking around? (Costco’s ~90%+ renewals are the north star.)
• ARPU (average revenue per user): Tiny price changes ripple through millions of subscriptions.
• Mix & margin: Are high-margin services growing as a share of revenue? (Apple’s Services story.)
• Ecosystem pull: Do memberships change behavior? (Prime’s “I already paid — might as well order it here.”)

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Conclusion

Memberships and subscriptions are the quiet heroes of modern business models.

• Costco shows how a $65 card can underwrite most of a retailer’s profits.
• Amazon shows how a membership can reshape behavior, lifting the entire shopping flywheel.
• Apple shows how subscriptions can turn devices into recurring, high-margin revenue streams.

For investors (and curious readers), the big idea is simple: don’t just watch what a company sells — watch what it renews. That’s the cash flow that keeps the lights bright in tough times and pushes valuations higher in good ones.

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