Is Amazon's Business Structure Sustainable? Analyzing Q4 2021 Profits
Amazon, the e-commerce giant, just released its quarterly figures for the fourth quarter of 2021 and the annual figures for the same year, and the numbers are rather staggering. Quarterly sales for Amazon as a whole were up 9% year-over-year to $149.2B and annual sales were up 9% to $514B. The company as a whole had a GAAP profit of $0.3B in Q4 and a loss of $2.7B for the whole year.
But while Amazon’s overall figures are impressive, the real story lies in the company’s two golden geese - AWS and Advertising. AWS’s quarterly revenue grew 20% year-over-year to $21.4B and the annual growth was a staggering 29% to $80.1B. Advertising’s quarterly revenue was up to $11.5B, 23% year-over-year.
These two business segments are essentially subsidising Amazon’s retail arm, which has negative free cash flow of $19.8B over the course of 2022. This business structure raises some interesting questions around Amazon’s profitability and the legalities of the company being the prime competitor of the economy’s whole retail sector while not having to make a profit. For more details, be sure to read the full article.