Amazon Q2 2014: Customer Wins vs. Shareholder Concerns as Losses Grow
Amazon’s second-quarter 2014 earnings report revealed a growing divide between customer benefits and shareholder returns, with the company’s stock dropping 6% in after-hours trading following the announcement. The e-commerce giant reported widening net losses of $126 million, raising questions about its aggressive expansion strategy.
The Expansion Paradox: More Services, Bigger Losses
Amazon lived up to its “Everything Store” reputation in 2014 with a flurry of new product launches:
- Fire Phone: The company’s first smartphone entry
- Fire TV: A set-top box competing with Apple TV and Roku
- Cloud Drive: A Dropbox and Google Drive alternative
- Kindle Unlimited: All-you-can-read e-book subscription service
- Prime Music: Spotify-like streaming platform
- Amazon Fresh: Expanded grocery service with innovative barcode scanner
The company also doubled down on content creation, developing original children’s programming for Prime Video and exclusive games for its Fire Phone platform.
Leadership Perspective: Growth Over Profits
CEO Jeff Bezos emphasized Amazon’s customer-centric approach in the earnings announcement, stating: “We’re working hard on making the Amazon customer experience better and better.” This philosophy continues to drive revenue growth while delaying profitability.
Mixed Performance Across Business Units
While Amazon remained typically opaque about specific product performance, some key indicators emerged:
Fire Phone Challenges
- Received mixed reviews (“good but not great”)
- Showed positive mobile app marketplace growth (tripled in past year)
- App submissions more than doubled since launch
Fire TV Success
- Sales “significantly exceeded” forecasts
- Manufacturing capacity being increased
- App submissions more than doubled post-launch
AWS Growth
- Added thousands of new employees
- Released 250+ service/feature updates YTD
- Implemented price cuts (28-51% depending on service)
- Usage growth approaching 90% year-over-year
The Bottom Line
Amazon’s aggressive investments across multiple fronts continue to delight customers while testing shareholder patience. The company’s strategy of prioritizing long-term market position over short-term profits remains intact, but the widening losses suggest this approach may face increasing scrutiny from investors.
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