Profit is how much of those total sales in a given quarter Amazon actually gets to keep, after it accounts for the cost of selling those items: the items themselves, shipping, package thefts, marketing, keeping the lights on. Amazon collects that money but doesn’t keep most of it. This includes sales of products and services, including when Amazon ships goods for third parties. Think of revenue as Amazon’s cut of third-party sales or the total of your Amazon shopping cart, if you’re purchasing Amazon products. You forgot free cash flow that’s much more important than revenue and profit. When I make the same chart every quarter that shows seemingly lackluster profits, I generally get the same responses every quarter from readers. Its business model, once reviled on Wall Street, has spurred numerous other companies like Uber and WeWork to emulate Amazon and forgo profits for the sake of growth - though many of these companies haven’t really proved that they could ever be profitable. In fact, as my colleague Jason Del Rey reports in an episode of Land of the Giants, his podcast about the rise of Amazon, these small profit margins are one of the secrets to the company’s success.Īmazon intentionally posts low profits because it takes the vast majority of the money it earns and invests it right back into the company so that it will profit all the more in the future. But the idea that Amazon’s relatively low profits mean it’s failing at business is not strictly true - at least not anymore.
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