The Big Story
Does Amazon Still Not Care About Making Money?
Paul Alexander, CFA
For many years the narrative surrounding Amazon and its attitude toward making money has been that the company doesn’t seek to be profitable. That it values growth opportunity and market share over income. That it has been tirelessly conditioning the investment community to prioritize vision over the bottom line. NYU professor and notable tech pundit Scott Galloway even mused in a speaking engagement last year that every time Amazon reports a profitable quarter, CEO Jeff Bezos probably berates his deputies that they screwed up.
And yet, last week, Amazon reported that it generated $3 billion of net income in 2017. $1.9 billion of that came just in the fourth quarter. According to Galloway’s joke, there must have been a bloodbath in a certain conference room in Seattle.
Or was there? Maybe Amazon is finally warming up to the concept of making money. 2017’s $3 billion profit is up from $2.4 billion in 2016 and $0.6 billion in 2015. In contrast, over the prior three-year period, from 2012 through 2014, Amazon was roughly breakeven. To borrow a famous line by James Bond creator Ian Fleming, one year of profit growth is happenstance, two years is a coincidence, three is a trend. Amazon must have meant to do this, no? Is the company finally allowing itself to reap the rewards of its growth and dominance?