Amazon: 2025 Update

Disclosure: I own shares of Amazon

Amazon, once a scrappy online bookseller, has long since shed its modest origins, revealing itself as something far more elemental: a relentless, ever-multiplying force of commerce and technology. Like an ancient hydra, each time it masters one domain, another head emerges: from e-commerce to logistics, from cloud computing to entertainment, from groceries to AI. Matt Yglesias had a famous backhanded compliment for Amazon that perhaps also captured the bewilderment of many investors back in 2013:

“…Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon.

It’s a truly remarkable American success story.”

What was once a company squeezing out razor-thin profits in its early years is now a machine of unfathomable scale, posting $638 Billion revenue and $60 billion in profit in 2024 which nearly doubled year over year!

After updating my Amazon model, I remain largely reassured that Amazon’s earnings power remains somewhat underestimated. Let me show the source of such steady confidence in this year’s update.