Amazon.com stocks plummeted approximately 10% on Friday, July 25, after the retailer reported a Q2 2014 net loss of $126 million. While the company has committed to expanding its reach and increasing its product offerings, investors have shared concern regarding the retail giant’s profitability.
The company expects Q3 2014 operating losses to range between $410 million and $810 million.
Revenue increased 23% YOY despite the net loss, indicating that even though sales continue to increase, expenses are piling up as Amazon releases new products and invests in new projects.
During the Amazon Q2 2014 Earnings Conference Call, Tom Szkutak, CFO of Amazon.com, noted that the company is heavily investing in its cloud computing service, Amazon Web Services. Szkutak said Amazon will spend more than $100 million on original video content in Q3, and is set to add six net new fulfillment centers and at least 15 sortation centers.
Even in wake of the losses, Szkutak insisted that Amazon doesn’t focus on total company gross margins: “There’s a large mix impact,” Szkutak said. “You have our Web Services business. You have our third-party business. You have the retail business. You have categories within retail. From a total company perspective, given the mix effects, we think it’s much more appropriate to look at operating profit and free cash flow.”
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