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The days of Amazon’s profit struggles are long gone

Amazon boxes are seen stacked for delivery
Reuters/Mike Segar
Once famous for prioritizing growth over profit, Amazon is now making plenty of money.
By Marc Bain
Published Last updated

Amazon has always been playing a long game. For years it generally had to choose between investing in growth or turning a profit. Famously, it prioritized growth, so much so that it was newsworthy in 2016 when it turned in four straight profitable quarters—in a row!

But while the company continues to invest in expansion, it’s now able to do so while still making plenty of money, even as Covid-19 has sent its costs soaring. Yesterday it reported that profits for the quarter ended Sept. 30 reached $6.3 billion, roughly triple their level last year. They’re still just a fraction of Amazon’s total sales, which grew to $96.1 billion as more shoppers turn to the e-commerce giant during the pandemic. But even relative to overall sales they’re reaching new highs.

The trend isn’t likely to continue without a few hiccups, however. The company said operating income next quarter is likely to come in between $1 billion and $4.5 billion as it faces a particularly expensive stretch. To keep up with the surge in demand, Amazon said it’s ramping up new facilities and hiring a large number of new employees, which now number more than 1 million globally. At the same time, it expects productivity to be strained as it revises more processes to spread employees out and curb the spread of the new coronavirus. Earlier this month, it admitted nearly 20,000 employees have already gotten the disease.

Amazon also expects to spend about $4 billion on costs related to Covid-19 such as more protective equipment and extra cleaning of its facilities, compared to $7.5 billion in pandemic-related costs across the first three quarters of the year. On a call with analysts and investors, CFO Brian Olsavsky added the holidays are an uncertain time that can see delivery costs rise and weather issues pop up. While Amazon’s blockbuster Prime Day happened in the fourth quarter this year and should boost total sales, it’s a discount-oriented event so margins are slimmer.

Amazon’s stock dropped 2% in premarket trading on the outlook.

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