![]() Another headwind was foreign exchange, which shaved off 4% of growth in 2022. This makes sense, considering how early we still are in the shift to the Cloud. There are switching costs in cloud solutions, and management wants to secure customers rather than "milk them" early in their transition. The AWS deceleration might be somewhat self-chosen, but Amazon is trying to play the long game here. Stratosphere (international revenue growth impacted by currency too) This has happened at both the e-commerce level as for AWS (Amazon Web Services), where Amazon is helping its customers rationalize their spending due to the uncertain economic environment: Consumers have become more cautious with their spending and are spending less on average on discretionary items. For obvious reasons, Amazon is not as exposed to services spending as it is to product spending.Īnother reason for the cool-down might be the macro backdrop. This return to normal stems from consumers returning to physical retail and spending more on services such as travel (which they couldn't do during the pandemic). However, this changed with the COVID vaccine rollout, and the e-commerce trend is now returning to "normal": For starters, Amazon saw a pull forward during the pandemic as consumers had to resort to e-Commerce to purchase items. This is impressive for any company, but more so for one coming from more than $200 billion in revenue.Īs impressive as this may be, top-line growth is now cooling down. That's an 84% increase in just three years. The company entered the pandemic with around $280 billion in annual revenue and reported almost $514 billion in revenue in 2022. Zooming out helps us see how Amazon has grown and how much it has benefited from the pandemic. However, Amazon was on "the other side" of physical retail (i.e., e-commerce) and thus benefited from it: 2020 was a year when many physical retail companies had a challenging year due to store closures and lockdowns. Let's start with the former.ĭespite being a massive and fast-growing company in 2019, Amazon accelerated its revenue growth in 2020, the pandemic year. The good news can be found in the top line, and the "bad news" can be found in the bottom line. The company's income statement is a mix of good and bad news. Amazon's income statement - Highlights and lowlights We'll review the company's three most important financial statements: the income statement, the cash flow statement, and the balance sheet. Hopefully, by the end of this article, you'll understand what we mean. In our opinion, these points are understandable but miss the big picture, which is that Amazon has made a conscious choice to generate less cash flow today to invest in growth.įor point #2, we have always believed that looking at a valuation ratio, in this case the PE ratio, without context is often misleading. The company does not generate enough free cash flow to justify its valuation We believe that the criticism towards Amazon as an investment has primarily fallen in one of the following two points: Amazon ( NASDAQ: AMZN) is a gigantic company, and its financials and valuation are where investors (bulls and bears) tend to differ in their theses.
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