Amazon’s Record Profits: How AWS and Advertising Drive Growth

💰Amazon's cloud computing division, AWS, is a major profit driver and has been responsible for the majority of the company's operating income since 2016.

📈Amazon's advertising business is experiencing significant growth and has become a major source of revenue, with analysts predicting it may surpass AWS in profitability by 2021.

🛒Amazon's third-party marketplace, where businesses can sell their goods on the platform, has seen major growth and is now responsible for more than half of all goods sold on Amazon.

🔊Amazon's smart speakers, powered by its virtual assistant Alexa, have an installed base of over 100 million and are expected to drive further growth and expansion into the home.

💵Investors are grappling with how to value Amazon as its growth slows but profitability remains high, with the company generating over $200 billion in annual revenue.

What is AWS?

—AWS stands for Amazon Web Services, which is Amazon's cloud computing division. It provides processing and storage solutions for companies, government agencies, and individuals.

How does Amazon make money from advertising?

—Amazon makes money from advertising by charging businesses for advertising space on its platform. As a result of its dominance in e-commerce, Amazon has become an attractive advertising platform for businesses.

What is the significance of Amazon's third-party marketplace?

—Amazon's third-party marketplace allows businesses to sell their goods on the platform, with Amazon taking a percentage of the sales as well as fees for storage and shipping. This model has higher margins and has contributed to Amazon's overall profitability.

What is the role of Alexa in Amazon's growth?

—Alexa, Amazon's virtual assistant, is powering its smart speakers, which have an installed base of over 100 million. As consumers increasingly rely on voice-activated devices, Amazon is well-positioned to further expand into the home and drive growth.

How are investors valuing Amazon in light of its slowing growth?

—Investors are facing challenges in valuing Amazon as its growth slows but profitability remains high. With over $200 billion in annual revenue, the company's success in various areas, such as AWS and advertising, raises questions about valuation.

00:00Amazon reported record profits in 2018, earning $10.1 billion in net income.

01:21Amazon Web Services (AWS) has been a major profit driver for the company since 2016, generating billions in operating income.

02:47Amazon's advertising business, fueled by its dominance in e-commerce, is experiencing rapid growth and is predicted to be more profitable than AWS by 2021.

03:58Amazon's third-party marketplace, where businesses can sell their goods, has become a significant contributor to its overall profitability, with more than half of all goods sold coming from third-party sellers.

04:26Amazon's smart speakers, powered by the Alexa virtual assistant, have an installed base of over 100 million, positioning the company for further growth and expansion into the home.