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How Amazon makes money

VIDEO5:2405:24
How Amazon made record profits in 2018

Amazon reported record profit in 2018, earning $10.1 billion in net income compared with just $3 billion the prior year. Considering the company hardly recorded any profit until 2016, this sudden cash influx represents a new era for Amazon.

So what's changed?

Despite Amazon's dominance in e-commerce, online sales are not actually a main profit engine for the company. Instead, its cloud computing division, Amazon Web Services, has actually generated the majority of Amazon's operating income since 2016. Profits from advertising and third-party sellers are also booming.

While Amazon has traditionally been valued based on growth over profitability, these recent earnings trends have investors reconsidering how the company should be valued today.