Amazon History: Company and Stock

Amazon is a Seattle-based retail and technology company primarily engaged in e-commerce, cloud computing (Amazon Web Services), digital streaming, and artificial intelligence. It owns dozens of diversified subsidiaries and has large investments in others. Amazon shares are listed on the NASDAQ stock exchange under the symbol $AMZN and are included in the S&P 500 index.

Here’s what you need to know about how Amazon became one of the largest companies in the world.

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The history of Amazon

Amazon was founded in founder Jeff Bezos’s garage in 1994. The company began operations in April 1995, when Bezos was famous for hand-delivering orders to the post office. Originally called “Cadabra” for “Abracadabra”, Bezos changed the name to “Amazon” ahead of launch.

Amazon started as an online bookstore because Bezos saw potential in the world of bookselling. However, Bezos says he always wanted the store to offer a wide range of products. Amazon was also one of the first companies to argue that it was a “technology” company regardless of its core business or revenue, setting a trend that many internet companies would later adopt. The position gave Amazon its first argument for not charging state and local sales taxes, which many analysts say gave it a key initial advantage over existing competitors.

The company went public in 1997, with an initial inflation-adjusted share price of $2. It was loss-making for years, and Amazon invested heavily in growth rather than profits. Amazon recorded its first profitable year in 2003.

Amazon’s other largest current brands emerged in the early 21st century. It first began accepting third-party sellers in 2000. Amazon Web Services was launched in 2002 as a result of a series of internal tools used to run the company’s website. Amazon Prime launched in 2005, initially as a subscription service for fast and efficient delivery. In 2009, the company made its first major acquisition with Zappos, beginning its modern practice of making significant corporate expansions through acquisitions.

Products and business

It is difficult to briefly summarize all Amazon products and business lines due to the company’s extensive area of ​​operation. Here are some of the company’s most important business lines:

• Online retail

• Large-scale physical retailing, particularly through Whole Foods

• Logistics and delivery

• Medicine, including through PillPack

• Technology devices such as Kindle and Echo

• Data services via Amazon Web Services

• Development of artificial intelligence (Amazon is one of NVIDIA’s largest customers)

• Movies and media, especially via Prime and Metro Goldwyn Mayer streaming

• Online publication

• Clothing and fashion

In this wide range of activities, three stand out in particular:

1. Online retail

Amazon is probably best known for its online retailing. This is where the company began and, historically, it has been its largest public presence. This business is divided into two parts. About 40% of Amazon’s retail sales come from the company’s traditional retail operations, where it sells products directly to consumers. Most, but not all, of these sales are from third-party products, particularly devices manufactured by Amazon such as the Kindle and Echo.

Another 60% of the company’s retail sales come from third-party sales, or “platforms.” In this industry, Amazon allows other people and companies to list products for sale on its site. It then takes a percentage of each sale and gives the rest to the seller. Online stores say this percentage is usually 50%.

Although Amazon started as a bookseller, today the company operates as an “everything” store. There are no restrictions on the categories of products Amazon sells, and the company touts its wide selection as one of the site’s main features.

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2. Prime Minister and media

Nowadays, the Amazon brand is increasingly becoming synonymous with the “Prime” service. This is a subscription that costs $14.99 per month. With Prime, Amazon offers fast product delivery, often next day or even same day. This requires massive logistics operations, and Amazon operates a wide range of warehouses, remote shipping, and last-mile delivery to ensure that products get as close to potential customers as possible.

Prime is also tied to Amazon’s video streaming service. The media operation has quietly become a significant part of Amazon’s reputation and business, including the company’s 2021 acquisition of film studio Metro Goldwyn Mayer. Depending on how subscriptions are measured, Amazon Prime is the second largest streaming service in the world, after Netflix.

It’s hard to gauge exactly how important Amazon’s media business is as a source of revenue. The company’s high costs associated with original and licensed programming are specific and well-known. Its media revenues, however, are more ambiguous. This money comes from Prime subscriptions, and it’s unclear on a per-customer basis how much of the subscriptions are driven by media demand versus Prime’s retail benefits.

Either way, media, streaming and Prime have become very visible parts of Amazon’s current brand.

3. AWS

The majority of Amazon’s current operating revenue ($15.3 billion in Q1 2024) comes from Amazon Web Services, or “AWS.” This segment of Amazon’s business currently generates more than half of the company’s overall operating revenue, which was $9.4 billion in the first quarter of 2024, and more than one-fifth of its sales.

Amazon Web Services is a cloud computing, storage and data analysis service. In the simplest case, customers rent storage space and computing power from Amazon. This means they can store data on Amazon servers and process customer requests on Amazon computers. For example, when a customer watches Netflix, that video is stored on Amazon’s hard drives and the company’s processors stream it. Additionally, the company offers over 200 different tools and services that help customers analyze data and monitor business operations.

Among other things, AWS has been successful in offering efficient scalability to its customers. Start-up companies don’t have to buy large stacks of expensive equipment, they can simply rent space on Amazon computers. Existing businesses have the flexibility to expand or reduce their monthly subscription based on current needs, which is again cheaper than investing in capital equipment.

Finance and leadership

Amazon’s current financial era began in the fourth quarter of 2017.

Before 2017, the company systematically reported net profits of several hundred million dollars. For example, a representative change occurred between Amazon’s positive net income in the fourth quarter of 2013 of $249 million and a net loss of $57 million in the first quarter of 2015. This range characterizes the company’s performance from 2003 to 2017, with most quarters recorded positive net income.

Between the third and fourth quarters of 2017, Amazon’s reported net income increased by more than 700%. In the third quarter of 2017, Amazon reported revenue of $256 million compared to $1.85 billion in the fourth quarter of 2017. This has become the new norm. With the exception of the first and second quarters of 2022, Amazon reports net income of billions of dollars every quarter.

This story is important for two reasons. First of all, the era of Amazon’s billion-dollar revenues began only in the same quarter in which a very large, top-down tax cut came into force. About half of the revenue growth in the fourth quarter of 2017 was due to taxes, according to the company’s SEC filings.

Second, Amazon’s net income increased from $14.3 billion in the fourth quarter of 2021 to a loss of $3.8 billion in the first quarter of 2022. Amazon reported losses for two quarters of 2022 before returning to positive net income . This coincided with the Federal Reserve’s campaign to raise interest rates to reduce inflation.

While this does not provide reason to believe that Amazon’s business model is unstable, these two events together suggest that the company is significantly exposed to the political and financial climate. It appears that changes to tax and interest policies could boost Amazon’s bottom line by billions of dollars in a single quarter.

At the time of writing, Amazon recently reported quarterly profits of $10.4 billion (Q1 2024).

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The history of Amazon’s stock split

$AMZN has undergone a total of four stock splits, the most recent of which became effective on June 3, 2022. Nearly 23 years have passed between this split and the previous split.

Amazon-owned companies and investments

Amazon has expanded its reach to many companies to better implement vertical integration and business development over time. They include:

Some notable companies he has invested in include:

Amazon’s executive team

Amazon has extensive corporate leadership. This reflects not only the financial size of the company, but also the scope of its activities. Amazon owns over 100 different companies and operates all over the world. He has a leadership team that reflects this. The company’s current CEO is Andy Jassy, ​​founder of AWS, and CFO is Brian Olsavsky, who has worked in finance for Amazon for several decades. Founder Jeff Bezos remains with the company as its executive chairman.

The full list of officers includes:

• Jeffrey P. Bezos, Executive Chairman

• Andy Jassy, ​​president and CEO

• Brian T. Olsavsky, senior vice president and chief financial officer

• Douglas J. Herrington, CEO of Amazon Worldwide Stores

• Shelley L. Reynolds, Vice President, Worldwide Controller

• Adam N. Selipsky, CEO of Amazon Web Services

• David A. Zapolsky, Senior Vice President, Global Public Policy and General Counsel

Conclusion

Amazon operates in a wide range of industries, from retail to media to medicine, and has become one of the most profitable companies in the world.

More resources

• Amazon’s investor relations page contains past press releases and other information for current and potential investors.

• Learn more about the world’s largest companies in the history of NVIDIA.

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