Amazon May Lose Money Over The Holidays

By Douglas A. McIntyre Updated Jan 12, 4:58AM EST · Published Dec 31, 7:49AM EST

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Amazon (NASDAQ: AMZN) is expected to have a huge holiday quarter. However, based on recent history, including the holiday quarter from a year ago, the company could lose money at its industry leading e-commerce business. A positive net income for the fourth quarter 2017 may rely on its Amazon Web Services industry leading cloud business.

In the fourth quarter of 2016, Amazon had total revenue of $43.7 billion. Net income was a tiny $475 million. Amazon’s North American division had operating profits of $816 million on $26.3 billion in revenue. Amazon’s International results was an operating loss of $487 million on $14 billion in sales. In other words, between the two, Amazon’s e-commerce business had operating income of $329 million, a remarkably small margin.

Amazon Web Services produced almost all of the operating income in the fourth quarter of 2016. The figure was $926 million on revenue of $3.5 billion

In its third quarter 2017 results, Amazon issued guidance which showed that its e-commerce operations could indeed lose money in Q4. Management said revenue for the fourth quarter would be between $56 billion and $60.5 billion. Operating income was forecast to be between $300 million and $1.65 billion. At the lower end of the operating income forecast, Amazon’s e-commerce business will almost certainly lose money, and AWS’s operating income will be necessary to drive a positive bottom line for the company as a whole

CEO and founder Jeff Bezos has once again convinced Wall St. that strong earnings are not necessary for Amazon to be a success. At is takes a larger and larger piece of total retain sales, particularly in North America, huge profits will eventually be the results. However, as revenue rises rapidly, there is still no evidence of that.

The evidence is that Bezos continues to be convincing has show up in Amazon’s share price once again. Its stock is up 55% this year to $1,169. Its market cap is $563 billion. Only Microsoft (NASDAQ: MSFT) at $660 billion and Apple (NASDAQ: AAPL) at $869 billion, are ahead of it.

Amazon’s e-commerce business may not post positive operating income in the fourth quarter, and once again Wall St may not care.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.