Amazon’s earnings miss means Jeff Bezos is no longer world’s richest person

Photo by Drew Angerer / Getty Images

Amazon CEO Jeff Bezos is once again the world’s second richest person, after a brief stint earlier today as the wealthiest individual on Earth. Amazon reported its second quarter earnings today, showing a profit of just $197 million on strong sales of $38 billion. The dip in profit, a drop of 77 percent from $857 million this time a year ago, is mainly due to Amazon’s aggressive investments in its own business.

It does mean, however, that Bezos’ personal fortune, given his roughly 80 million shares in Amazon, will take a sizable enough hit to keep him from climbing back to the top. Bezos was already back at second place at the time of market close today, but strong enough earnings would have clinched him the crown going into tomorrow. Yet Amazon’s stock is down 2 percent in after-hours trading, thanks to the earnings miss, making it highly likely Microsoft co-founder Bill Gates will hold onto the title with his personal fortune of $90.8 billion and climbing.

Of course, no one was really expecting Bezos to stay atop the list for long — and these kind of absurd proclamations tied to personal wealth are a bit of silly tech industry posturing when you take them at face value. But given the constant fluctuations in market cap for both Amazon and Microsoft, it’s highly likely the two billionaires will trade the title back and forth a number of times in the coming months as both Amazon and Microsoft continue to grow and amass influence in their respective sectors.

The one area that will be interesting to watch is cloud computing. That’s where Amazon and Microsoft are both fiercely competing with one each other to win over businesses that are increasingly looking to the cloud for hosting and computationally intensive tasks like training and operating artificial intelligence software. In that realm, Amazon Web Services, the company’s cloud platform, continues to make impressive gains. AWS posted operating income of $916 million this most recent quarter, a 28 percent jump from a year ago, on sales of $4.1 billion. Though it lags behind Microsoft’s overall “Intelligent Cloud” division, which recently posted $7.4 billion in sales and an annual run rate of nearly $19 billion, AWS remains a market leader in key segments like cloud hosting.

That the two companies’ public-facing founders are now sparring for the world’s richest title — just as their respective corporations are battling for control of the cloud — is rather fitting. And although Bezos lost the title today, it probably won’t be long before the long-term investments his company is funneling into real-world logistics, robotics, and, most recently, groceries pay off, likely in the form of an ever-ballooning market cap and more control over how consumers buy and consume products every day.

Comments

Poor guy

And he was on his way to the 4 comma club.

Actual photo of Jeff Bezos (left) and Bill Gates (right).

I’m constantly amazed how Amazon stock keeps going up when they make essentially no money. Apple rakes in $197 million in a single day and they’re constantly on the verge (pun intended) of insolvency according to the tech press.

Investors are looking forward to when Amazon wipes out all their competition and jacks up prices. They’re going to make huge amounts of money when they no longer have to compete with the likes of Walmart.

They make tons of money, $38 billion in the quarter. You’re only focused on profits. Amazon is reinvesting most of their revenue, which makes for small profit, but it’s how they’ve grown non-stop for years and why they continue to make ever more money and dominate more sectors. Apple will make something like $50 bil in the same quarter but isn’t reinvesting nearly the same percentage (which I don’t consider a good thing, Samsung also invests far more in R&D than Apple and it’s paying off).

Companies reinvesting in themselves like Amazon is what the corporations should not hoard billions of dollars for no reason.

A great article on this:

https://mobile.nytimes.com/2016/01/24/magazine/why-are-corporations-hoarding-trillions.html

I liked your comment and agree – except in your conclusion that Apple is "doing it wrong". The companies are at different maturity levels (Amazon and Apple) and using a different strategy… But I wouldn’t say Apple is "wrong" for holding on to the cash – at least not yet. That is also a strategic asset, and their disciplined approach (example: entering sectors methodically and slowly) has advantages too.

For what Amazon is trying to do, their strategy works. So does Apple’s for what they do.

Well I didn’t say Apple was doing it wrong, just that its huge profits may not be great for the long term. Amazon is spending everything on growth, Samsung has been spending huge amounts on diversifying and that’s paid off as they dominate more tech sectors. Apple is still reliant on one very successful product, but if history has proven anything it’s that one product’s success cannot last forever.

Tell that to Coke and Pepsi

There is something called smart investment, you don’t have to invest a lot because you have a lot, you have to invest in right direction. Apple is one of the only company who has less failure product in terms of hardware and software.

Apple, on the other hand, have very few products comparatively. If it fails it will be catastrophic.

That’s a bunch of nonsense. Revenue is not a great measure of business success. I can make billions in revenue by selling $100 bills for $99 each.

That’s not an apt comparison. Amazon is profitable, but chooses to reinvest it. They’ve made almost 1B/yr of profit in the past, but in their longer view, they spend it developing new markets. No one thought they’d be the leader in cloud storage when they started selling books.

You’re amazed because you don’t understand growth is much more attractive than just money. Amazon is already a huge company, but there’s no sign of stopping in their growth. They keep moving into different industries and eating everyone else’s lunch, then spending the money they earned to move into even more industries.

For an investor investing in the future of a company, that’s a much more attractive investment than one where future growth is constantly called into question like Apple.

You don’t buy stocks to see who makes the most cash in a quarter; you buy them to sell for a profit later, and that means looking at how a company is growing.

Taking cash out of the company each quarter and letting it sit in a pile outside the US borders might seem impressive on paper, but it doesn’t make the company one bit more valuable.

It’s all about growth. Amazon’s revenue is constantly increasing because they’ve been reinvesting so much back into the company. If this continues, how much profit they make doesn’t really matter as long as they’re not hemorrhaging money.

There are different kinds of companies and stock, Amazon is a growth stock/company and it pays no dividends, it reinvestes in itself to continue growing.

I only pay attention to the "tech press" to gauge the hype in a given publicly traded stock.

Read some books on investing, and ignore the tech press.

I sold my Amazon last week, bought Facebook. Watching all the press releases the last 3 days about Amazon, I knew I’d made the right choice, they were throwing chum to minimize the damage… i day trade, but think Amazon is a very good buy and hold stock, they’ll do very well over time.

I feel bad for the guy. Lets start a gofund me!

The rich gods giveth and taketh away from Bezos.

View All Comments
Back to top ↑