Although Amazon posted its highest quarterly profits on Thursday, it still failed to impress Wall Street by missing its estimates badly. This sent its shares down in after-hours trading more than 13 percent.
This disappointing result, combined with extremely low profit margins and the image of a company determined to invest in untried areas, have resurrected the persistent concern that the online seller is not able to consistently make money.
"By comparative retail standards, Amazon's level of profitability is still painfully weak," says Neil Saunders, head of retail analyst firm Conlumino. But he is still positive with the company's prospects. "For every dollar the company takes, it makes just 0.75 of a cent in profit," he adds.
After achieving double-digit sales, a feat compared to last year, Amazon posted a record profit last quarter. Other traditional retailers have not recorded positive growth during the holidays. Macy's, Wal-Mart and other major retailers are even closing some of their stores and laying-off workers.
It seems that Prime membership program played a significant role in the company's retail success. According to Amazon, it grew by 51 percent in 2015. It was revealed by a study conducted by Consumer Intelligence Research Partners that less than half of U.S. households are Prime subscribers.
This figure carries some weight since the retail online company says it is their tool that encourages sales and influences clients to return and use the site regularly. According to Amazon, members increased their number of hours streaming video content twice using Prime Instant Video service in 2015.
In addition, in 2015, members increased their use of Prime Music three times over the previous year. This service has now included 25 other cities. Furthermore, the online retailer has surprised many investors in the past several quarters for declaring surprise profits, which was driven by its thriving Web Services cloud business.
However, even with all of these accomplishments, Wall Street investors were not impressed because the profit they projected in the last quarter did not materialize.
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