Amazon's Unconventional Business Model: Why It's Here to Stay

Amazon's business model is built to last, and its refusal to pay dividends is not a concern for investors. In fact, it's a key factor in the company's success.

The company has never paid a dividend, instead using retained earnings to fund growth initiatives such as rural delivery expansion, custom chip development, and streaming rights purchases.

Amazon's Prime membership program is a major contributor to its profitability. With over 201 million US members and more globally, the program offers fast free delivery, streaming services, photo storage, and other benefits that make it difficult for customers to cancel their subscriptions.

The value of a Prime membership is estimated at nearly $1,430 per year, compared to a price of just $139. This means that Amazon can raise prices without losing customers, creating a moat that protects its market share.

Amazon's investment in Anthropic, a leading AI research firm, is also generating significant revenue for the company. The agreement spans Trainium2 through Trainium4 plus tens of millions of Graviton cores, and Amazon has already invested $5 billion in Anthropic with up to $20 billion more tied to milestones.