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Comment by NiekvdMaas | Hacker News Reader

This article is of 2014. Note at the bottom:

> January 2021 > The essay above is now rather old, and amongst other things, it was written before Amazon started disclosing financials for AWS and for Marketplace. I wrote about that here, and have written a few other things about Amazon as well.

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I'll just repeat my usual comment when it comes to Amazons profitability: They had 7 (!) loss making quarters since 2009, mostly in Q3 (as always, duu to the inventory build-up for Q4) and was profitable at a yearly basis.

Source: https://www.statista.com/statistics/276418/amazons-quarterly...

This whole "Amazon was nevwr profitable" meme really has to die. Especially since they were cash positive all the time*...

Never profitable isn't literally correct, but when the net income is floating just above zero, the point is made. Walmart for example normally makes 10-15x the profit of Amazon (outside of covid). Amazon even has years of negative net income.

Amazon had, as far back as 2004, three negative years: 2012, 2014 and 2022. The last one due to some colossal write offs on a M&A if memory serves well.

What Amazon did was prioritizing growth over profits, and it worked marvelous. That focus is moving so, which makes sense as growth is limited.

If you look at a company and assume that you can shut the whole thing down except the sales team, usually it'll be profitable in theory. The problems only arise if someone tries that and then they'll discover that there needs to be a bit of a moat around the sales team to make the whole thing work.

Amazon's profits prior to 2017 were laughable. Even now their income is inferior to Walmart - and they have AWS as a business that is a bit of a cheat. Fair enough from a maney making perspective, but it makes it hard to do an apples-to-apples on how well they are running their retail arm.

Retail is a particularly brutal business to turn a profit in and while Amazon looks like it can do it, the proof isn't in yet. Walmart still consistently makes more money than Amazon.

"Oh we could make money at any time!" is one of those claims that is false until the proof is solidly in the rear view mirror. High revenue and 0% margins is a lot easier than middling revenues and a respectable margin.

Amazons retail business is doing just fine. Grew 20% YoY, give or take, for years. Is cash positive, basically all the time. And the last bit, positive cash flow, is so hard to achieve.

Cash flow is obviously important to you, but note that business profitability involves having positive cash flow and making a profit on it. It would be perfectly reasonable to discover in a few years that Amazon is structurally unable to make a profit without giving competitors an easy path to start cannibalising their business.

It is an uncertain scenario at the moment because it does look like Amazon will be one of the rare attempts that can find profits. But they haven't managed to outdo Walmart yet so there are obvious risks.

Positive Cash flow is what makes a company default alive, so it is important to everyone. Peofiability, EBITDA and ao on, live on a different axis. A company can easily be cash negative and profitable or cash positive and loosing money. The latter one is in a better position, a company that is both, profitable and cash positive, is in a great position (e.g. Amazon), one that is neither is actually dead.

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