Amazon has been profitable for many years now. YCharts showing profitability by quarter: http://j.mp/13zx97Z for the last 5 years.
Also, note that Amazon's initial business plan was such that it would not turn profitable for quite a few years, instead focusing on sales-growth. IIRC, they turned profitable around 2002.
> Keep in mind that Amazon consistently lost money for its first several years as a public company. It first reported a quarterly profit in the fourth quarter of 2001 [...]
> Profitability isn't the end-all metric for a company. Amazon famously circles around the profitable/not-profitable line frequently and few people have doubts about Amazon's viability as a company.
This is basically accounting fiction. Amazon is profitable; they just reinvest their profits so aggressively that they’re writing off tomorrow’s expenses against today’s revenues.
> Amazon e-commerce is not all that profitable. Most of Amazon's value comes from AWS.
AWS represents 43% of net profit, per the most recently posted quarter. It used to be on the order of 75%, but pandemic-related demand for physical products changed all that.
Amazon makes TONS of money. They aren't currently returning any of it to shareholders as profits, they're continuously reinvesting it in the company.
The difference between gross profit and net profit is how much Amazon is spending on building new businesses that after a few years start grossing $10b a year in sales like AWS. That got funded out of the gross profits from regular Amazon retail operations.
"Any company can theoretically choose to not be profitable, by reinvesting all of its profits, and investors typically don’t care if their value is returned via growth or dividends. " - the Amazon model for its first 20 years :).
No, you are wrong about this. Or several years out of date at least. The idea that Amazon isn't profitable save for AWS is almost a meme for some reason in parts of the tech community, but it isn't true and never really has been when you account for re-investment.
Retail on its own has been profitable for several years now, and its margins are improving. Some of those numbers are public and some are not, but even with just the public numbers it is easy enough to infer the above. What's more, Amazon retail would be pretty wildly profitable, relative to the typical margins of retail, if Amazon stopped dumping billions of dollars every quarter into continuous expansion of its logistics capabilities. They're able to dump those billions while still pulling a slight profit. In general though, they optimize for free cash flow, not profit.
"> Amazon, has returned less in profits in its 17-year life as a public company than cloud competitors ... earn in a single quarter."
Another way of writing this is, "Amazon has focussed on continual growth over the last 17 years, and had demonstrated that is willing to put all of it's assets, revenue, and cash to chasing that growth. It's public cloud competitors, hamstrung by the expectations of wall-street, are unable to provide that same level of focus, and must instead return profits to shareholders in the form of share buybacks, and dividends - restrictions that Amazon has so far been able to avoid."
Amazon is a ruthless, relentless company. They certainly aren't taking those profits and sending them to their employees/executives in the form of perks and boondoggles. Everything they do is to pursue growth, at any costs.
I'll just repeat my usual comment when it comes to Amazons profitability: They had 7 (!) loss making quarters since 2009, mostly in Q3 (as always, duu to the inventory build-up for Q4) and was profitable at a yearly basis.
Probably because management can deliberately reduce profit, and realize shareholder gains in other ways. Amazon famously had very small profits over a long period of time because it reinvested all of its revenues back into its business:
The first half of their existence was spent as an unprofitable business. If 2014 ends up the way it looks like it will, the net losses will outweigh the net income for the life of the business (it nearly does now).
The first ten years of their operating life were spent being famous for bleeding prodigious amounts of red ink. That's why the tag: Amazon.toast - it was assumed they would bleed to death without the easy money of the public market and a massive valuation.
Here's their net income statement going back to '97:
They've never been quite profitable. Only one year, 2004, did they show even a modest level of profitability (in part due to one-time gains). The rest of the positive years the margin was between 1% and 4% typically.
The key thing to remember is that they expanded aggressively. People who didn’t do their homework - like most pundits and media stock analyst/entertainers - would dismiss them as another unprofitable .com without recognizing that they were becoming profitable in each new market a few years after entry and could halt expansion if they had a cash squeeze. The other point was being comfortable with low margins: that disappointed people who wanted a rapidly climbing stock price but that wasn’t the company they were trying to build and they’ve left quite a few once-hot companies in the rubble.
Yeah, the 2008 number is wrong, but the meme comes from earlier. Its first profitable quarter was Q4 2001, three years after IPO, and it's first profitable year was 2003, six years after IPO.[0] This seems like a long time, especially for the late nineties/early 2000s. (Though tbh, IPO three years after founding feels early to me too.)
Additionally, I seem to recall that they talked this up. Not "we're working on becoming profitable" but instead "We plan to continue losing money for several years. Deal with it."
I believe that prior to 2016, any profitable years were pretty much entirely thanks to Q4, and they were pretty small for its size[1]. A profitable year is good, but three quarters of losses each year will stand out. Sure, they're retail, but they're also tech. Sky high margins are expected year-round.
This has been addressed several times already. Amazon is effectively making profits on several on its key businesses but is effectively reinvesting most of its profits into new infrastructure, distribution centers and new services. The day Amazon decreases that investment ratio, profits will significantly increase. In other words, Amazon is far from being in the red. They are just massively investing.
Amazon has been profitable for many years now. YCharts showing profitability by quarter: http://j.mp/13zx97Z for the last 5 years.
Also, note that Amazon's initial business plan was such that it would not turn profitable for quite a few years, instead focusing on sales-growth. IIRC, they turned profitable around 2002.
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