MarketLine Blog

Amazon’s latest financials: Growth potential lies in advertising and web services

Amazon’s latest financials have once again demonstrated exponential growth, as the company continued to increase its advantage over its rivals in the online retail sector. The largest part of its revenues may come from these retail operations, but profitability and growth potential lies in other “overlooked” income streams, such as the web-based services and advertising.

This becomes obvious form the fact that Amazon continued to incur operating losses from its retail business, which are the price paid for the growth of revenue. Moreover, these losses mainly come from emerging markets, in which Amazon has invested billions in terms of infrastructure and sacrificed profitability in a bid to overtake competitors. Meanwhile, the decision of raising monthly subscription costs for Amazon Prime in the US is indicative of the effort for capitalizing on a plateaued consumer base.

On the other hand, the growth of advertising revenues and web services has been the top growth driver, outpacing retail operations. Advertising revenues have been an untapped market so far by Amazon, and the likelihood of breaking the duopoly of Google and Facebook in the global advertising expenditure market is increased as the company is set to leverage its subscription base. Furthermore, Amazon Web Services, which is the company’s main profit source, is to become another big company itself inside Amazon, dominating the field of cloud services.

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