For the last couple of years, each quarter I’ve been posting a quick analysis of Amazon’s quarterly business results in a Twitter thread. I don’t use Twitter much any more, and Mastodon doesn’t make it easy to post threads, so the blog it is. Summary: Amazon’s retail business loses money (as usual) but the AWS and Advertising businesses are huge, throw off lots of cash, and continue to grow fast. They subsidize the money-losing retail operation in a way that seems deeply unfair to me.

Source: Q4 2022 Earnings Release.

Looking at Amazon as a whole, quarterly sales are up 9% year-over-year to $149.2B, annual sales also 9% to $514B. The company as a whole had a GAAP profit of $0.3B in Q4 and loss of $2.7B for the whole year; operating incomes were $2.7B and $12.2B respectively.

“Profit” is an accounting abstraction, what concerns me more would be the negative free cash flow of $19.8B over the course of 2022. Perhaps someone more finance-literate could offer a good reason why this shouldn’t be a worry?

AWS · What a story: Quarterly revenue growth of 20% year-over-year to $21.4B, annual revenue growth of 29% to $80.1B. The quarterly operating income was $5.2B, $22.8B annually. That income increased hardly at all, and annually was “only” up from $18.5B in 2021, so the margins, while excellent, are falling a bit.

AWS is now considerably bigger than IBM and much more profitable.

Every time I report these AWS numbers I stop and shake my head; a combination of top-line total, continuing growth, and sustainable margin at this scale is mind-boggling.

Other stuff · Advertising quarterly revenue is up to $11.5B, that’s 23% year-over-year. Note that they don’t report income, but my bet (without any inside information) is that the margin is even higher than AWS’s.

The internal structure of the retail operation is broken out, highlighting that third-party seller services is a monster business, running over $36B in the most recent quarter, growing at 24%.

Owning the store everyone shops at is a good business.

Take-away · Amazon as a whole isn’t really very profitable. Its retail sector loses money, and that loss is made up by the tens of billions of gravy coming in from AWS and Advertising.

Why is this business structure considered rational? And why is it legal for Amazon to be the prime competitor of the economy’s whole retail sector while not having to make a profit?

Obviously, foregoing profit for the sake of growth is a tried-and-true business strategy, and laudable within limits. But it seems obvious to me that Amazon is way, way past those limits.

As I’ve said since the moment I walked out Amazon’s door in May 2020, AWS should be spun off. The best time to do that was three years ago. The second best time is now.