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Amazon is wildly profitable but it’s still taking huge losses overseas

Amazon is wildly profitable but it’s still taking huge losses overseas

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Illustration by Alex Castro / The Verge

Amazon reported first quarter earnings results today with eye-popping sales of $51 billion, up by nearly 43 percent year over year, and a net profit of $1.6 billion. That means it’s another strong quarter for CEO Jeff Bezos, whose e-commerce juggernaut continues to defy expectations and earn money hand over fist as it expands into markets like food delivery, grocery chains, and smart home gadgets. But one area the company continues to lag in is international online retail sales, where it faces stiff competition from local rivals.

Though Amazon’s international sales grew 34 percent, it recorded another hefty loss to the tune of $622 million, meaning Amazon is still spending far more than it makes in overseas markets. That said, the rest of the company’s business is healthy and growing. Whole Foods continued to boost North American revenue, which rose to $30.73 billion, a 46 percent increase year over year. Amazon also acquired home security company Ring during the first quarter, which will help bolster its ambitions in the smart home and appliance market.

Amazon is still losing hundreds of millions overseas

Still, with high growth comes high spending, as is typical for Amazon. This time around, free cash flow decreased to $7.3 billion, down from $10.1 billion year over year. It’s an interesting story overseas, where Amazon appears to be more concerned with growing its markets than turning a profit. After all, the company made up for the loss with sales in North America and its AWS cloud division, contributing by far the lion’s share of its profits, coming out in the black.

Amazon’s overseas loss seems to be increasing every year. Back in 2016, it operated at a $121 million loss, and today’s results show its loss has multiplied nearly sixfold. It appears that its usual strategy of hemorrhaging cash to gain control of the market isn’t succeeding in international markets where competitors like Alibaba in China, Rakuten in Japan, MercadoLibre in Latin America, and FlipKart in India are already domestic favorites. That’s in contrast to other US tech companies that have successfully expanded their reach into other regions without constantly reporting a loss.

But despite any overseas missteps, overall, Amazon is doing scarily well and its first quarter revenue alone has grown exponentially over the years.