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Sales are Up, But Profits are Down at Amazon

Amazon released their quarterly financial statements today, and it looks like the Kindle Fire has been quenched. Or you could actually look at the numbers and realize that most articles that are critical of Amazon are written by bloggers talking through their hat.

Profits might be down, but sales were up significantly. Amazon reported a 44% increase in sales last quarter over the same period last year ($10.88 billion vs $7.56 billion). So they did a couple billion dollars extra business and only had $79 million to show for it,  compared with $268 million in Q3 2010.

That’s not a big deal. Amazon could fix the shortfall by raising the price of everything by a penny.  Bam. Instant fortune.

They’re also pleased to announce that the Kindle Fire launch was the biggest single sale day ever. "September 28th was the biggest order day ever for Kindle, even bigger than previous holiday peak days," said Jeff Bezos, founder and CEO of "In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we’re seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned."

Sales were up on both the domestic and foreign Amazon websites, including the recently launched and the 2 new Kindle Stores (Germany and France).

There’s one other interesting detail in the sales figures, and it’s something we’ll need to keep an eye on. Do you know how everyone says that the Kindle Fire is a platform to sell content? That has been said all over, and it might be true. But content isn’t what drives Amazon at the moment.

Media sale were up only 24% to $4.15 billion in Q3, while electronics and other general merchandise sales grew 59% to $6.32 billion. Yes, digital content is a small fraction of this total, but that’s my point.  Digital content isn’t Amazon’s be-all and end-all that some tech bloggers make it out to be. It’s not the biggest part nor is it growing the fastest, so don’t pin too many expectations on it.

Of course that might change in the future, which is why I’m going to keep an eye on it.

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Olympia Press October 25, 2011 um 5:26 pm

Err, ya look a little closer, Amazon’s total cash is down to around $6 billion, off 40% from the start of the year. (Compare that to, say, Apple, which added another $5 bil. to its cash holdings last quarter, for a total of > $80 billion.) Additionally, Amazon’s Free Cash Flows are down 15%–back in the glory days of the pre-dotcom bust, Amazon’s biggest strength was its cash flows (if you can remember the Motley Fool).

Then there are inventories and accounts payable, both of which are the highest they’ve ever been for Amazon, and implying to this one-biweekly blogger that the numbers might well be even worse.

This quarter was a disaster, but Amazon’s been blowing earnings all year. Only surprise is the stock market finally punished ’em for it.

Nate Hoffelder October 25, 2011 um 5:39 pm

Where do you see the $6 billion?

Richard Adin October 26, 2011 um 7:21 am

If raising prices by a penny would solve all of Amazon’s woes, I suspect Bezos would have already done that. Perhaps the numbers show that Amazon’s problems are more systemic and not so easily cured. I’m not a financial analyst, but if I were an investor in Amazon, I’d be telling Bezos that 15 years is long enough — I want to see increased profitability and higher return on my investment, not 15 more years of living on the edge.

Which raises one other issue: When you live on the edge, it is as easy to fall the wrong way as it is to fall the right way. The numbers seem to indicate that Amazon’s lean is toward the wrong way.

Alexander Inglis October 26, 2011 um 10:46 am

Amazon’s big bet is that streaming tablet video content is The Next Big Thing and, with the Kindle Fire as crucible, it’s a decent bet. Amazon has never been able to crack the streaming / download music and video market — iTunes and Netflix are kings there. Amazon owns ebooks but that’s a relatively smaller market.

Amazon puts all the pieces together with this device and environment — retail, cloud, content, vendor relationships, customer knowledge, ease of doing business, terrific brand. It’s hard to imagine what unexpected forces will block Amazon from making this an impressive new long-term revenue stream.

fjtorres October 26, 2011 um 3:52 pm

A seven in iPad at $249? 😉

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