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Is Amazon Too Big To Fail?

May 06, 2020 9:04 PM ETAmazon.com, Inc. (AMZN) Stock52 Comments
Sramana Mitra profile picture
Sramana Mitra


  • Amazon recently reported its first-quarter results where revenues grew 26% to $75.5 billion, ahead of the market’s forecast of $73.61 billion.
  • Net income of $5.01 per share was lower than the Street’s forecast of $6.25 per share.
  • Revenues from Amazon Web Services surpassed the $10 billion milestone. Subscription services revenues grew 28% to $5.56 billion as Amazon ended the quarter with over 150 million paid Prime members.

Where most companies are facing the heat on account of the global virus-inflicted lockdown, Amazon (NASDAQ:AMZN) is seeing strong growth. The stock recently climbed to 52-week high levels as the company continues to scale up to meet increasing e-commerce and cloud computing demands.

Amazon’s Financials

Amazon recently reported its first-quarter results where revenues grew 26% to $75.5 billion, ahead of the market’s forecast of $73.61 billion. Net income of $5.01 per share was lower than the Street’s forecast of $6.25 per share.

By segment, net product sales grew 22% from $34.3 billion last year to $41.8 billion and net service sales increased 32% from $25.4 billion to $33.6 billion.

North American sales grew 29% to $46.1 billion, while international sales grew 18% to $19.1 billion.

Revenues from Amazon Web Services (AWS) surpassed the $10 billion milestone. Subscription services revenues grew 28% to $5.56 billion as Amazon ended the quarter with over 150 million paid Prime members. Revenues from the “other” category, which primarily includes advertising, grew 44% to $3.91 billion.

For the second quarter, Amazon expects net sales to grow between 18% and 28% to $75-81 billion. Net income is expected to between a loss of $1.5 billion to positive $1.5 billion due to coronavirus costs. The market was looking for $78 billion in revenues from the current quarter.

Under normal conditions, Amazon would have earned $4 billion in operating profits, and it is planning to invest all of that to address coronavirus-related expenses in the current quarter. Some of these expenses pertain to procuring personal protective equipment for its workers, enhanced cleaning of facilities, lesser-efficient process paths to allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop its own COVID-19 testing capabilities.

Amazon’s Cloud Business

AWS remains the market leader in cloud

This article was written by

Sramana Mitra profile picture
Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual accelerator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Sramana has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Full bio can be found at http://www.sramanamitra.com/bio/

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Comments (52)

AMZN reminds me TYCO and the other smartest, corporate leader in the world, Dennis Kozlowski. Kozlowski knew his company could do everything better than everyone else so it didn't matter what the company business decided to do -- so they did everything expertly, just like AMZN.
Simple answer is no; especially with unpredictable black swan events that destroy status quo.
Amazon should be familiar with the history of big companies and entire industries that failed; it started early Internet e-commerce by taking on an entire big book industry with huge stores.

Oil industry shocked by negative prices recently; does this predict its future demise?
Travel industry will see many failures. Malls were not designed for social distancing and viruses can come from anywhere including Kansas, so predicting the future is very difficult. Unprofitable public transit has severe challenges as governments keep adding to deficits.

Amazon adapts during this crisis; it continues to grow and make significant investments despite political opposition from well known Democrats and Republicans.
A small group of large companies will come out of this crisis ahead; I believe Amazon will be one of the leaders.
Anything is possible but not in the near future. Bezos is just to good at running his company.
Buyandhold 2012 profile picture
Is Amazon too big to fail?


Even Ozymandias failed.

But I would never bet against Amazon.
Hudson Investments profile picture
Bezos will spend when required to maintain the Amazon empire. Second quarter revenues are expected to be growing and in my opinion so will EPS. I think spending on COVID will taper off.
And I think if it came down to it... Bezos will spend his own money at some point on Amazon or cut his own pay or do something to appeal to the general public and increase positive investor sentiment toward the stock.
dschrenk profile picture
Bezos has already weighed in on this question. www.cnbc.com/...
Tim.barnes9 profile picture
Think this is a good candidate for shorting.
I'll bet.
Hudson Investments profile picture
Short AMZN at your extreme risk. I doubt that anyone will ever do it.
Done it before I’ll prob do it again soon....
There is a laundry-list of companies dating back to the turn of the 20th century that, at their time in the spotlight, looked too big to fail.

All it would take is a change in legislation, a change in consumer habits, someone who invents the better mousetrap and/or management mistakes within the company.

I still like my chances as a LT shareholder. Not a better game in town for those of us who established a position with a decent cost basis.
Hudson Investments profile picture
I agree
Trump won’t be rushing in to save it if things start looking bad.
Start looking bad? Where have you been lately, living on the moon?
Trump will be gone in 7.5 months.... less than zero % chance of AMZN needing help before then.
Booban profile picture
@johnny corsaro bad for Amazon. Amazon stock is doing better than ever in this crisis.
IBWO profile picture
Great being able to purchase alcohol based products to clean my hands and various items (thanks to Amazon) when there was no hope of finding it at grocery, pharmacy or hardware stores. AMZN doing too well to not succeed.
A stock that is indeed a force but once step away from multiple threats such as 1) Unions should the democrats take office, 2) Anti trust over monopolistic and anti competitive practices (both partys), 3) Foreign intervention and state intervention for tax reasons (partys in other countries and state level powers), 4) Cloud revenue weakness as other businesses who would otherwise have money to pay for services decide to cut back as they them self are hurting from covid. 5) Its a flick of a legislators pen to decide that vertical monopolies should be considered as bad as horizontal. And another company break up.
Tomorrow Wrap Fish In It profile picture
Amazon is getting overconfident. I have a running dispute with them for charging me for items that I dont recognize. Key to Amazons success are customers who feel that A is trustworthy. Now that A has stolen all my Kindle Books, by locking my account access, I will never thrust Amazon again.
A has forgotten that customers have lots of choices now.
Buying at Amazon has become "uncool" .
I'm sure Amazon will lose sleep over U
Booban profile picture
@Tomorrow Wrap Fish In It People think all they have to do is not shop there anymore. They really dont care. You dont have a choice or there is another sucker that will replace you.
I’m glad you “never thrust” Amazon again. Better for them without your thrust
Those NFL games may not be played this season.
fasthandssam profile picture
More than size, Amazon has too much momentum to fail. Although it is also very big.

It's like the Juggernaut. You cant stop this train. Amazon owns the future, as its performance during this pandemic had proved.

The only company I like as much for the future is Google
Yet it is Google and FB that are being investigated. Neither of which I own share in any longer just for this reason. One of them is in for trouble if not both of them?? Time will tell. You are right on Amazon, the virus has proven Amazon has been indefensible and has outdone themselves serving this country during this pandemic. No others can even come close.
JohnB Investor profile picture
Amzn has become a flaming dragon that needs to be slain, or in less fantastical terms broken up, Oh I know this would make the eyes of the great Zon beast, or Bezos, cry crocodile tears and he's sooo rich and powerful he'll breath fire at anyone who suggests it, but for the good of the human freaking race, yes, it must and will eventually be done.
dylanob1 profile picture
AMZN 110% does more harm than good. I’d much rather the Walton’s over at Walmart running the majority of our nations retail supply chain lmfao
They tried and failed. They do not have a Bezos to do it for them.
It's a shame he has all that money!
Booban profile picture
You lengthily describe how big Amazon is then suddenly jump to a conclusion that it must be too big to fail. You should define what too big to fail means first. Its not only something that is just big. We have plenty of those that have failed. Perhaps I have a different perspective because Sweden doesnt even use Amazon. I wouldnt notice if they never existed.

Firstly, its just consumer items. We can live without nick nacks and trinkets. Secondly, everything that Amazon does, there still competitors who can replace them. Actually anyone can just throw up a web page and sell anything. Its not hard at all. Many companies actually avoid Amazon because Amazon competes with them. Amazon has an edge because of efficiency and price. And most importantly, they dont pay taxes. That doesnt make it too big to fail though. The world would be better off it it did fail and let more competition grow,
Talk all talk saying nothing just like U do.
Only Bezos can kill Amzn
What about regulators or government involvement in anti-competitive practices. Wouldn't that break AMZN?
dylanob1 profile picture
Could, good ole Regulatory Risk, but that could end up being a good thing for the investor... bad thing for the consumer
Agree, initially it could be bad for the consumer in terms of prices, choices and others. But in the long run, competition benefits consumers and innovation. If left alone, anticompetitive practices could stifle innovation, product choices and could see a spike in prices as well.
BULRUN100 profile picture
STUPID article stupid thesis stupid headline. Can't get back that 3 mins of my life. 😤
Yeah, I see nothing in the article that supports the title. Its simply there to lure in people to read yet another Amazon article with no meaningfully new substance or viewpoints, and I was lured in by it.
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