This Part of Amazon Is Badly Broken

By Douglas A. McIntyre Updated May 6, 7:03AM EDT · Published May 5, 6:45AM EDT

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This Part of Amazon Is Badly Broken — © jetcityimage / iStock Editorial via Getty Images

When Amazon.com Inc. (NASDAQ: AMZN | AMZN Price Prediction) posts strong results, investors believe it is running on all cylinders. Based on the recent earnings report, it isn’t.

Many people think Amazon is made up of a U.S. e-commerce division and its wildly successful cloud operations, known as AWS, the world’s leading cloud company.

Indeed, Amazon’s largest North American e-commerce operation had revenue of $86.3 billion in the most recently reported quarter, up from $76.9 billion in the same period the year before. Operating income was $5 billion, up from $898 million. Because of their size, the North American e-commerce figures are sometimes considered a proxy for the entire e-commerce sector. (See how much money Amazon makes every minute.)

AWS revenue for the period was $25 billion, up from $21.4 billion in the same period the year before. Operating income rose from $5.1 billion to $9.4 billion. Amazon’s comments on the AI products AWS has developed were the primary reason the stock traded higher after earnings. It is not, as some investors worried, being left behind in the AI industry by Microsoft Corp. (NASDAQ: MSFT) and Alphabet Inc. (NASDAQ: GOOG).

International e-commerce has never done particularly well for Amazon. In the most recent quarter, it had revenue of $31.9 billion, up from $29.1 billion. Its operating income was $903 million. At least it did not post a loss, which it sometimes does. Last year, it lost $1.2 billion in the quarter. Its operating margin was just over 2%.

Very few analysts have discussed the International e-commerce division when discussing Amazon’s success. They should. If it could have made the margins North America did, Amazon’s earnings would have been much better.

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.