Amazon was another big-tech company to report earnings last week. Unfortunately, its results weren't as well received as Apple's. Like Microsoft, the market was disappointed by the growth of the cloud computing division. Of Amazon's $1 trillion valuation, about 80-90% is ascribed to AWS, and the balance to the better-known online store.
Over the last three months, AWS made a profit of $5.4 billion, but the online store lost $2.9 billion. Probably the most valuable part of Amazon.com is the advertising that gets sold on the website. In the quarter, Amazon sold $9.6 billion in advertising, a healthy 25% increase compared to last year.
Amazon has been caught wrong-footed coming into 2022 after the online boom of 2020. They have been forced to cut back on expansion and relook some cost structures. Generally, tech companies have enjoyed the luxury of spending freely due to very healthy profit margins and high growth rates. This year has forced them to be more disciplined in how they spend money, which is a good thing for the company's long-term health.
Amazon is in the same boat as the other big tech firms. The share price performance this year has been horrible as investors reset their expectations. When things stabilise, we expect these global tech companies to come out the other side stronger.