Amazon announced its second quarter earnings on Thursday, beating analyst expectations in terms of revenue but falling short below the line. The Seattle-based e-commerce behemoth reported total sales of $37.96 billion for the three months ending June 30, up from $30.4 billion in Q2 2016. Net profit dropped by nearly 80 percent to $197 million, continuing Amazon's long history of putting long-term growth over short-term profits.
As our chart illustrates, Amazon’s profit (or what is left of it) is mainly driven by its highly profitable cloud business these days. Amazon Web Services (AWS), the market leader in the highly competitive market for cloud infrastructure, accounted for more than 100 percent of the company’s operating profit in the past quarter because the rest of Amazon's business actually ran a deficit. The fact that AWS accounted for little more than 10 percent of the company’s revenue at the same time, illustrates how high the operating margin is in the cloud segment compared to Amazon notoriously low-margin e-commerce business.
For many years, Amazon has reinvested nearly every dollar it earns into its own growth. Now that the cloud segment is making so much money, it seems like even Jeff Bezos is running out of ideas to reinvest all of it.
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