Amazon Retail

It's easy to criticise Amazon's online retail business for its razor-thin margins. From revenues of $143 billion, Amazon "only" made profits of $10 billion in the latest quarter. Most of the group's profits came from other businesses like AWS, Amazon Prime and the advertising unit.

Keep in mind though that Prime and advertising only exist because of the massive customer base served by the online retail business. Advertising revenue came in at $12 billion for the quarter and that number has doubled in the last 2 years. If you assume similar margins to Meta, the advertising business would have brought in nearly $8 billion of operating income. That is more than AWS, which brought in $7 billion.

Amazon could flick a switch and turn their online retail business into a highly profitable unit if they decided to raise prices and stop expanding. But successful sideshows like advertising allow them to think long term, which is a luxury that many listed businesses do not have. In time, the full picture will emerge and the margins will be much better.