If there is one thing that Amazon’s founder and CEO Jeff Bezos is famous for, it’s his relentless focus on long-term growth. Having ignored critics for years, Bezos’ willingness to sacrifice short-term profits for long-term success appears to be bearing fruit.
Not only has Amazon cemented its position as the leading online retailer in large parts of the world, it has also built an industry-leading cloud computing business, established itself as a major player in music and video streaming and built an impressive lead in the booming smart speaker market.
The company has achieved all that by constantly re-investing most of the money it earns. In the past twelve months, Amazon's net income amounted to $3.03 billion. While that is its biggest annual profit by far, it still looks miniscule compared to the company's revenue of nearly $180 billion. Our chart below illustrates Amazon’s strategy by contrasting the company’s explosive long-term revenue growth to its relatively modest profit growth.
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Amazon, so long light on profits, reported a whopping $1.86 billion in net income in the fourth quarter of 2017.
For a sense of scale, it took Amazon more than 14 years—58 quarters after its May 1997 initial public offering—to make, cumulatively, as much profit as it produced in Q4 of last year.
Keep in mind that Amazon consistently lost money for its first several years as a public company. It first reported a quarterly profit in the fourth quarter of 2001 and, at $5 million, it barely counted. Amazon CEO Jeff Bezos has long maintained that investing in future growth is more important than hitting quarterly earnings targets, much to Wall Street’s chagrin.
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