Amazon.com Inc. (NASDAQ:AMZN)

The analysis reveals a dynamic relationship between Return on Assets (ROA), Financial Leverage, and Return on Equity (ROE) over the observed period. Initially, ROE experienced a significant decline, followed by a period of recovery and subsequent stabilization, influenced by fluctuations in both ROA and Financial Leverage.

Return on Assets (ROA)

ROA demonstrated considerable volatility. It began at 5.21% in March 2022, decreased to 2.77% by June 2022, and continued to decline, reaching a low of -0.59% in December 2022. A consistent upward trend was then observed, with ROA increasing to 7.10% by March 2024 and peaking at 10.51% in September 2025 before slightly decreasing to 9.49% in December 2025. This suggests improving operational efficiency and asset utilization over the latter part of the period.

Financial Leverage

Financial Leverage exhibited a gradual downward trend throughout the analyzed timeframe. Starting at 3.07 in March 2022, it decreased steadily to 1.99 by December 2025. This indicates a decreasing reliance on debt financing relative to equity. The rate of decline slowed in the most recent period, suggesting a potential stabilization of the company’s capital structure.

Return on Equity (ROE)

ROE mirrored the initial decline in ROA, falling from 15.98% in March 2022 to a low of -1.86% in December 2022. The subsequent recovery in ROA, coupled with the moderating effect of decreasing Financial Leverage, contributed to a substantial increase in ROE, reaching a peak of 21.56% in March 2025. ROE then experienced a slight decrease to 18.89% by December 2025. The initial drop in ROE was substantial, but the subsequent recovery demonstrates an improved ability to generate returns for shareholders. The recent stabilization suggests a mature and potentially sustainable level of profitability.

Two-Component Disaggregation

The interplay between ROA and Financial Leverage clearly drives ROE. The initial decline in ROE was primarily attributable to the negative ROA in late 2022. As ROA recovered, it positively impacted ROE. However, the decreasing Financial Leverage partially offset this positive impact, resulting in a more moderate increase in ROE compared to what would have been observed with constant leverage. The observed trend indicates a shift towards a more sustainable growth model, prioritizing asset efficiency over aggressive debt financing.

Overall, the period under review demonstrates a significant turnaround in financial performance. While initial challenges led to a decline in profitability, subsequent improvements in asset utilization and a more conservative capital structure have resulted in a strengthened financial position.

The analysis of the presented financial metrics reveals a dynamic shift in performance over the observed period. Initially, Return on Equity (ROE) experienced a significant decline, followed by a consistent upward trajectory. This movement is attributable to changes in Net Profit Margin, Asset Turnover, and Financial Leverage, which interact to influence overall profitability.

Net Profit Margin

The Net Profit Margin demonstrates a substantial recovery. Beginning with a value of 4.48% in March 2022, it decreased to a negative value of -0.53% by December 2022. However, a clear upward trend is then observed, culminating in 10.83% by December 2025. This indicates improving profitability from core operations over time.

Asset Turnover

Asset Turnover exhibited relative stability in the earlier periods, fluctuating around 1.16. A gradual decline is then apparent, decreasing from 1.11 in December 2022 to 0.88 in December 2025. This suggests a decreasing efficiency in utilizing assets to generate revenue.

Financial Leverage

Financial Leverage generally decreased throughout the period. Starting at 3.07 in March 2022, it steadily declined to 1.99 in December 2025. This indicates a reduction in the reliance on debt financing, potentially lowering financial risk but also potentially limiting the capacity for amplified returns.

The initial decline in ROE, observed between March 2022 and December 2022, can be primarily attributed to the decrease in Net Profit Margin, despite relatively stable Asset Turnover and Financial Leverage. The subsequent recovery and sustained growth in ROE are largely driven by the significant improvement in Net Profit Margin, which more than offsets the declining Asset Turnover and Financial Leverage. The interplay between these three components demonstrates a shift in the drivers of profitability, with increasing operational efficiency and profitability becoming more prominent than asset utilization and financial risk.

The most recent periods (March 2024 – December 2025) show a continued increase in Net Profit Margin alongside a continued decrease in both Asset Turnover and Financial Leverage. This suggests that the company is becoming more profitable on each dollar of sales, even as it utilizes its assets less efficiently and relies less on debt. The overall effect is a sustained increase in ROE, although the rate of increase appears to be moderating towards the end of the period.

The five-component DuPont analysis reveals a dynamic shift in performance over the observed period. Initially, Return on Equity (ROE) experienced volatility, declining significantly before demonstrating a consistent upward trajectory. This evolution is attributable to changes across the components of the analysis, particularly the EBIT Margin and Financial Leverage, with the Tax and Interest Burdens exhibiting more moderate fluctuations.

Tax Burden

The Tax Burden generally increased from 0.95 in March 2022 to 1.14 in September 2022, before decreasing to 0.80 by December 2025. This suggests increasing effective tax rates initially, followed by potential benefits from tax planning or changes in tax laws. The fluctuations, while present, remain relatively contained compared to other components.

Interest Burden

The Interest Burden decreased substantially from 0.92 in March 2022 to 0.56 in March 2023, indicating improved capacity to cover interest expenses. It then rose again, peaking at 0.97 in December 2024, before stabilizing around 0.98. This pattern suggests a period of debt reduction or refinancing followed by potentially increased borrowing or higher interest rates.

EBIT Margin

The EBIT Margin demonstrated the most significant fluctuation. It began at 5.13% in March 2022, declined to -0.69% by December 2022, and then exhibited a strong and consistent increase, reaching 13.81% by December 2025. This substantial improvement in profitability is a key driver of the overall ROE increase. The negative margin in late 2022 represents a period of significant operational challenges.

Asset Turnover

Asset Turnover showed a gradual decline over the period, decreasing from 1.16 in the first three quarters of 2022 to 0.88 by December 2025. This indicates decreasing efficiency in utilizing assets to generate revenue. While not drastic, this downward trend partially offsets the positive impact of the improving EBIT Margin.

Financial Leverage

Financial Leverage decreased steadily from 3.07 in March 2022 to 1.99 in December 2025. This suggests a reduction in the proportion of assets financed by debt. While lower leverage reduces financial risk, it also diminishes the potential for amplifying returns during profitable periods. The initial higher leverage contributed to the earlier ROE figures, while the subsequent decrease moderated its impact.

The observed increase in ROE from a low of -1.86% to 18.89% is primarily driven by the substantial improvement in the EBIT Margin. The decreasing Financial Leverage and Asset Turnover partially counteract this positive effect, while the Tax and Interest Burdens exhibit more moderate influences. The company appears to have successfully addressed operational inefficiencies and improved profitability, although asset utilization has declined. The reduction in financial leverage suggests a more conservative financial strategy.

The financial performance, as indicated by the two-component disaggregation of Return on Assets (ROA), demonstrates a notable recovery and subsequent stabilization over the observed period. Initially, the period began with a relatively strong ROA, which then experienced a decline before exhibiting a consistent upward trajectory. This trend is driven by changes in both Net Profit Margin and Asset Turnover.

Net Profit Margin

The Net Profit Margin experienced significant volatility. It decreased from 4.48% in March 2022 to a low of -0.53% in December 2022, indicating a period of reduced profitability. However, a strong recovery commenced in March 2023, with the margin steadily increasing to reach 10.83% by December 2025. This suggests improved cost management, pricing strategies, or a shift in sales mix towards higher-margin products. The rate of increase appears to be moderating in the most recent periods.

Asset Turnover

Asset Turnover exhibited a more moderate trend. It remained relatively stable between 1.11 and 1.17 from March 2022 to September 2023. A gradual decline was observed from September 2023, falling to 0.88 by December 2025. This suggests a decreasing efficiency in utilizing assets to generate sales, potentially due to increased asset holdings without a corresponding increase in revenue, or a decrease in sales. The decline is consistent across the later periods.

Return on Assets (ROA)

The ROA mirrored the combined effect of the Net Profit Margin and Asset Turnover. The initial decline in ROA during 2022 was primarily driven by the negative profit margin, partially offset by the relatively stable asset turnover. The subsequent recovery in ROA from March 2023 onwards was largely attributable to the substantial improvement in the Net Profit Margin. Despite the declining Asset Turnover in the later periods, the strong and increasing Net Profit Margin continued to support a relatively high ROA, although the rate of ROA growth slowed as asset turnover decreased. The ROA peaked at 10.35% in June 2025 before decreasing slightly to 9.49% in December 2025.

In summary, the observed performance indicates a successful turnaround in profitability, which has been the primary driver of improved ROA. However, the recent decline in Asset Turnover warrants further investigation to determine its underlying causes and potential impact on future performance.

The financial performance, as disaggregated through a four-component DuPont analysis, reveals a notable improvement in profitability and efficiency over the observed period. Return on Assets (ROA) experienced a significant recovery from a negative value in late 2022 to a peak in early 2025, followed by a slight decline at the end of the period. This overall improvement is attributable to changes in the EBIT Margin, Asset Turnover, Interest Burden, and Tax Burden.

EBIT Margin

The EBIT Margin demonstrated a consistent upward trend, increasing from 5.13% in March 2022 to 13.81% in December 2025. The initial period saw a decline to -0.69% in December 2022, but a strong recovery followed, with accelerating growth observed from September 2023 onwards. This suggests improving operational efficiency and pricing power.

Asset Turnover

Asset Turnover exhibited relative stability in the earlier part of the period, fluctuating around 1.16. A gradual decline was observed from December 2022, reaching 0.88 in December 2025. This indicates a decreasing ability to generate sales from each dollar of assets, potentially due to increased asset investment without a proportional increase in revenue.

Interest Burden

The Interest Burden generally decreased over the period, with a substantial drop from 0.92 in March 2022 to 0.56 in March 2023. It then fluctuated between 0.82 and 0.97 before stabilizing around 0.98. This suggests improved financial leverage or a reduction in interest expenses, positively impacting overall profitability.

Tax Burden

The Tax Burden showed an initial increase from 0.95 in March 2022 to 1.14 in September 2022, followed by a decline to 0.80 in December 2025. The fluctuations suggest changes in the effective tax rate or tax planning strategies. The recent decline indicates a lower proportion of pre-tax income being paid as taxes.

The combined effect of the increasing EBIT Margin and decreasing Interest and Tax Burdens significantly contributed to the improvement in ROA. While the declining Asset Turnover partially offset this positive impact, the overall trend indicates strengthening financial performance. The slight decrease in ROA in the final period warrants further investigation to determine if the Asset Turnover decline is a temporary fluctuation or the beginning of a more sustained trend.

The information presents a quarterly view of several profitability ratios, revealing notable shifts in financial performance over the observed period. A consistent upward trend in profitability is apparent, particularly from late 2022 through 2025, though the initial periods demonstrate more volatility. The disaggregation of net profit margin, through the tax and interest burdens, provides insight into the drivers of these changes.

Tax Burden

The tax burden exhibits fluctuation in the earlier periods, starting at 0.95 and peaking at 1.14 before stabilizing around 0.81 to 0.86 from 2023 onwards. This suggests a relatively consistent effective tax rate in recent periods, following earlier variations. The decrease in the tax burden from 2022 to 2023 likely contributed to the improvement in net profit margin.

Interest Burden

The interest burden generally remains high, fluctuating between 0.82 and 0.97 throughout the period. A significant decrease is observed from 0.92 in March 2022 to 0.56 in March 2023, potentially indicating debt restructuring or reduced borrowing. However, it subsequently increased, stabilizing around 0.95-0.98 in the later quarters. The relatively stable, high interest burden suggests a consistent level of financial leverage.

EBIT Margin

The EBIT margin demonstrates a substantial improvement over the observed timeframe. Beginning with 5.13 in March 2022, it declines to a low of -0.69 in December 2022, before experiencing consistent growth, reaching 13.81 in December 2025. This indicates a significant increase in operational profitability. The recovery from negative values to double-digit margins is a key observation.

Net Profit Margin

Mirroring the trend in EBIT margin, the net profit margin also shows a marked recovery. Starting at 4.48 in March 2022, it falls to -0.53 in December 2022, then steadily increases to 10.83 in December 2025. This positive trajectory suggests improved overall profitability. The difference between the EBIT margin and net profit margin is attributable to the combined effects of the interest and tax burdens. The narrowing gap between EBIT and net profit margins from 2023 onwards suggests a more favorable impact from tax and interest management.

In summary, the period under review demonstrates a clear turnaround in profitability. While initial quarters show challenges, a consistent upward trend in both EBIT and net profit margins is evident, driven by improvements in operational efficiency and, to a lesser extent, favorable changes in the tax burden. The interest burden remains a significant factor, consistently impacting net profit.