How so? Amazon didn't jave that many unprofitable quarters, even less years, during its history. That Amazon was never profitable because they prioritized growth is a meme made up buy various start-ups to explain their lack of profits and/or positive cash flow.
I see three negative Q3s before the chart basically explodes in the last couple of years. All other quarters saw profits around 100 million. It is only the chart that looks break even...
And a couple of negative Q3 results are absolutely normal in commerce, especially eCommerece. All the stuff sold during Q4 needs to come from somewhere.
So no, Amazon was definitelway more than just break even with three negative quarters between 2004 (!) and end of 2021 (!). Then you have two tremendously negative quarters, Q1 and 2 2022, after equally tremendous profits in 2021. And those losses are driven by write offs on investments and aquisitions, so by no means operations driven.
That AWS is 10% or revenue and 90% of profits is not really impoetant as long as AWS is not spun off from Amazon's retail business. Which, by the way, generates most of Amazon's free cash flow.
So their profitability as a percentage of revenue was actually drastically declining. All during a period where investors were grumbling that they should start giving the money back to investors. But Amazon was intentionally keeping their profits very low because they thought they had better things to spend the money on. This was not a myth, this was a strategy. A long-running one. See, among many articles: https://www.nytimes.com/2013/10/22/technology/sales-are-colo...
Man, break even means zero profit but also no losses. If EBITDA goes down or not is a different, and unrelated, question. And a different financial metric all together.
Amazon was, in its entire history as a public company, profitable in every single quarter, except 5 (!). So no, they never spend all their money on growth (they did spend a lot so but never in unsustainable ways, which is the key here). Using Amazon as an example to spend everything on growth, and profits will come, is fundamentally wrong.
I totally believe that a lot of startups are misusing the Amazon example. I also believe many of those startups will be royally screwed now that an era of easy money is ending. And personally, I'll be popping plenty of popcorn when they get their comeuppance.
But that doesn't mean I'm going to uncritically accept your claim that "Amazon was never profitable because they prioritized growth is a meme". Because it was basically true for a very long time. It was something many Amazon investors complained about long and loud because they wanted the cash, not future growth potential that they were skeptical of.
No? Because if you need tons of capital to make a minuscule profit your company is worth nothing. (A company has to outperform at least the interest people can get on bonds plus some equity premium.)
Amazon could make a significant profit, if Bezos wanted. But that’s a different question.
I see you've edited and added more, so let me also reply to this bit:
> That AWS is 10% or revenue and 90% of profits is not really impoetant
It's important if we're examining your claim that "Amazon was never profitable because they prioritized growth is a meme", because we're looking at the extent to which they reinvested gross profits from their core business.
Sometimes I am really puzzled by the lack of financial literacy on a forum aimed at start-ups. I really am.
Also the goal post moving. I said Amazon basically never reported losses, which they didn't. You said they barely broke even, which they didn't, as the numbers behind the chart show. And that Amazon prioritizes growth is hardly news. That they do so at the expense of profitablility is just plain wrong so. And the chart you shared yourself tells as much.
Amazon typically isn't spending the lion share on user acquisition, it's plowing it into expansion and infra. Most recent issues/losses were due to a massive investment in physical fulfillment centers due to pandemic demand.
I agree with what you say, but your tone to me sounds contradictory, so I'm puzzled. Amazon "plowing it into expansion and infra" sounds exactly like "they prioritized growth", doesn't it?
tone more came from typing on a phone... but the parent, I read, a saying companies that are not turning a profit are mismanaging their money, which I was contradicting.
I randomly had lunch sitting next to a dude, while I was waiting for a movie to start, I was 24, maybe 1 year out of college. The service was slow because a waiter just had to leave. We both had been to the place and weren't concerned about the time. Started talking to him, we he was retiring. I was just starting. Dude was selling his company for $195M in 2001. Turns out he did compressed air/etc, and competed with praxair, who he was selling to. I asked him what his strategy was. "I invest in Me, not the market, it's the only thing I understand or trust". He kept expanding his business when he could, got tons of certs and trainings to do everything in the industry he could. He started from it from quitting as a sales guy for another company he disagreed with.
Anecdata yes, but You can't really grow a business without investing in that business and that means taking some profits and putting them back into the business.
The key point to takeaway might be that it is different to invest in things than it is to essentially dump your product to gain market share or customers. First is building datacentres, ware houses and so on. Later would be providing services like taxis below cost.
With infra, you still have the stuff next quarter and following quarters. With later it is already gone.
Or they are investing internally for the future. You can plow lots of money into internal improvements for little to no growth in revenue, but at their scale saving just 1% more is a large amount of money. Not to mention a possible strategic advantage.
Yes, but how do you get to breakeven? By reinvesting all your profits. High capex and no taxes because you don't have any income. And you can still raise money by issuing stock, which goes up in line with your FCF. You maximize growth at 0 profit and this also maximizes shareholder value.
So it sounds like you agree that they were "never profitable because they prioritized growth"? I'm not saying that's a bad thing; I think that ones of the things Bezos did right, and very much in contradiction to standard business dogma. I'
