This has been addressed several times already. Amazon is effectively making profits on several on its key businesses but is effectively reinvesting most of its profits into new infrastructure, distribution centers and new services. The day Amazon decreases that investment ratio, profits will significantly increase. In other words, Amazon is far from being in the red. They are just massively investing.
But everyone is getting tired of AMZN's lack of transparency. Increasingly, buying AMZN is akin to buying the "Bezos is the next Jobs" meme on faith.
http://seekingalpha.com/article/2343265-amazon-com-bezos-ser...
Yes they do. Imagine I have a business which has steady gross margin of 100 dollars per year, but to keep it going so far I have been investing 50 dollars per year (capex). Assume my capex is depreciated over 5 years. So, in a single year, my profit is 50 dollars:
- 100 dollars gross margin - Less 50 dollars depreciation (1/5th of my last 5 years' capex: 1/5 * (50 * 5))
Now, let's say I decide to decrease investment. My next profit will be 60 dollars:
- 100 dollars gross margin - Less 1/5 * (50*4)
So, by decreasing investment I have increased profit.