- For over two decades, CEO of Amazon, Jeff Bezos tells wall street investors, short-term profits are less valuable than long-term growth.
- Earnings from the second-quarter of Amazon failed to meet their profit expectations yet at the same time exceed revenue forecasts.
- Amazon seeks to expand their investments towards electronics, shipments, and its cloud unit AWS.
Amazons CEO has undergone many changes since Amazon’s 1977 IPO through overall wealth and appearance. Yet one thing that remains unaltered is his progressive eye for the future.
Amazon had surpassed the estimated revenue by wall street but had fell short for profit. As a result of increased spending through the board.
“The investment will be stepping up in 2019,” Amazon CFO Brian Olsavsky said during the earnings call on Thursday.
After Amazon focus on one day delivery for their prime members, shipping costs are at an accumulative total hitting 36%. The highest percentage in all five quarters. To a value of $1.8 billion.
Amazon seeks to lure in more consumers to its platform by productively cutting into their own profit margins for a chance to send out more orders faster.
After the earning report Amazon’s stocks took a plunge at an almost 2% loss, however this year Amazons stock remain at 29%, still keeping the title of the 2nd most valuable company after Microsoft.
Jeff Bezos address shareholders in a shareholder letter written in 1977.
“We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions,” Bezos wrote in the letter at the time.
“if we do our jobs right, today’s customers will buy more tomorrow.”
“Take a long-term view, and the interests of customers and shareholders align.”
Most people forget that Amazon started developing its roots as an online book shop. It has made may vast strides in being a top provider for online goods in today market. Amazons interests remain in the “long-term” putting its own customers before short-term profits and money grabs.
Macquarie Capital’s Ben Schachter writes,. “While it will lower margins, we think the increased top-line impact and, perhaps more importantly, the widening of the competitive moat is worth it.”
During its second quarter Marketing costs of Amazon had increased to 48% at $4.3 billion, in a huge organized effort to hire new sales people and at the same time promote new featured products.
While investors are remaining skeptical and cautious towards Amazons spending habits, the backlash or outrage was virtually non-existent allowing Amazon to slip by with their low profit margins. This is due to the fact that Amazon has built its foundation as one of the more secure buys in the market due to its steady growth in long term revenue.