Amazon.com Inc. (NASDAQ:AMZN)

The provision for income taxes, net, exhibits significant fluctuations over the five-year period. Current income tax expense generally increased from 2021 to 2023, then decreased in 2024 and 2025. Deferred tax expense demonstrates a more volatile pattern, shifting from a relatively small expense in 2021 to a substantial expense in 2022, followed by decreasing expenses in 2023 and 2024, and ultimately becoming a significant benefit in 2025. The net provision (benefit) for income taxes reflects the combined effect of these two components, resulting in a net benefit in 2022, and increasing provisions in subsequent years.

Current Income Tax Expense

Current income tax expense remained relatively stable between 2021 and 2022, at approximately US$5.1 billion and US$4.9 billion, respectively. A substantial increase is observed in 2023, reaching US$12.996 billion, followed by a further increase to US$13.913 billion in 2024. A notable decrease is then seen in 2025, falling to US$7.617 billion. This suggests a correlation with changes in pre-tax income, though further investigation would be required to confirm this relationship.

Deferred Income Tax Expense (Benefit)

Deferred tax expense was a modest US$310 million in 2021. It then experienced a dramatic increase to an expense of US$8.148 billion in 2022. This was followed by a decrease in expense to US$5.876 billion in 2023 and US$4.648 billion in 2024. In 2025, a significant shift occurred, with deferred taxes becoming a benefit of US$11.470 billion. This large swing indicates changes in temporary differences between book and tax bases of assets and liabilities, or changes in tax laws impacting deferred tax assets and liabilities.

Net Provision for Income Taxes

The net provision for income taxes was positive in 2021, 2023, and 2024, indicating an overall income tax expense. However, 2022 saw a net benefit of US$3.217 billion, driven primarily by the large deferred tax expense and a relatively stable current tax expense. The net provision increased substantially in 2023 to US$7.120 billion, further increasing to US$9.265 billion in 2024, and reaching US$19.087 billion in 2025. The 2025 value is significantly influenced by the deferred tax benefit.

The considerable volatility in deferred tax expense (benefit) appears to be the primary driver of the fluctuations in the net provision for income taxes. The increasing current tax expense from 2021 to 2024, followed by a decrease in 2025, warrants further investigation to understand the underlying business factors contributing to these changes. The substantial deferred tax benefit in 2025 suggests a potential realization of previously unrecognized tax benefits or a change in tax planning strategies.

The effective income tax rate exhibits considerable fluctuation over the observed period. While the federal statutory tax rate remained constant at 21.00%, the effective tax rate varied significantly from year to year.

Effective Tax Rate Trend

In 2021, the effective tax rate was 12.56%, substantially below the statutory rate. A significant increase was observed in 2022, rising to 54.19%. This represents the highest effective tax rate within the analyzed timeframe. The rate then decreased to 19.00% in 2023, followed by a further decline to 13.50% in 2024. Finally, the effective tax rate increased to 19.60% in 2025.

The substantial difference between the effective tax rate and the statutory tax rate in multiple years suggests the presence of factors influencing the company’s tax obligations beyond standard corporate income tax. These factors could include tax credits, deductions, foreign income, changes in the mix of taxable income, or impacts from jurisdictional tax rates. The large increase in 2022 warrants further investigation to determine the underlying cause, potentially related to a one-time event or a shift in the company’s financial structure.

Rate Volatility

The volatility in the effective tax rate indicates that the company’s tax position is subject to change. This could be due to evolving tax regulations, strategic tax planning, or fluctuations in the geographic distribution of profits. The return to a rate near 19% in both 2023 and 2025 suggests a potential stabilization, but continued monitoring is recommended.

The observed patterns suggest a complex tax profile, and a deeper dive into the components of income tax expense would be necessary to fully understand the drivers behind these fluctuations.

The composition of deferred tax assets and liabilities exhibits significant shifts over the five-year period. A notable increase in both gross deferred tax assets and deferred tax liabilities is observed, alongside evolving components contributing to these balances. The net position transitions from a net deferred tax liability to a net deferred tax asset, and then back to a net deferred tax liability by the end of the period.

Loss Carryforwards

Both U.S. and foreign loss carryforwards demonstrate a consistent upward trend from 2021 to 2023. While U.S. loss carryforwards plateau between 2023 and 2025, foreign loss carryforwards continue to increase, reaching a peak in 2025. This suggests ongoing international operations may be generating losses, or that the benefit of prior year losses is being utilized at a slower rate than new losses are generated.

Key Drivers of Gross Deferred Tax Assets

Accrued liabilities, reserves, and other expenses, along with stock-based compensation, consistently represent substantial portions of the gross deferred tax assets. These components show steady increases throughout the period, indicating growing obligations and equity-based compensation programs. Capitalized research and development emerges as a significant contributor starting in 2022, with a substantial increase through 2024 before decreasing slightly in 2025. Tax credits also show a consistent increase, contributing more significantly to the gross deferred tax assets over time.

Valuation Allowances

Valuation allowances against deferred tax assets steadily increase each year, suggesting a growing uncertainty regarding the realization of these assets. The increasing valuation allowance offsets a portion of the growth in gross deferred tax assets, resulting in a slower growth rate for net deferred tax assets.

Key Drivers of Deferred Tax Liabilities

Depreciation and amortization consistently represents the largest component of deferred tax liabilities, with a substantial and accelerating increase throughout the period. Operating lease liabilities also contribute significantly, exhibiting a similar upward trend. Assets held for investment become a notable liability component in 2024, with a significant increase in 2025. The combined effect of these items drives the overall increase in deferred tax liabilities.

Net Deferred Tax Position

The net deferred tax position shifts from a net liability of approximately US$494 million in 2021 to a net asset of approximately US$13.2 billion in 2023. However, this trend reverses in 2024 and 2025, culminating in a net liability of approximately US$3.0 billion by 2025. This fluctuation is driven by the relative growth rates of deferred tax assets and liabilities, as well as changes in valuation allowances.

In summary, the deferred tax asset and liability balances are dynamic, influenced by various factors including loss carryforwards, accruals, stock-based compensation, research and development capitalization, depreciation, and operating leases. The increasing valuation allowance suggests a cautious approach to recognizing the full benefit of deferred tax assets, while the growing deferred tax liabilities reflect increasing temporary differences. The shift from a net asset to a net liability position in the later years of the period warrants further investigation into the underlying drivers of these changes.

The financial information reveals adjustments made to reported figures, primarily concerning deferred tax assets and liabilities. These adjustments impact total assets, total liabilities, stockholders’ equity, and net income over the five-year period. A consistent pattern emerges where reported figures are modified, generally resulting in a lower reported net income and, in some years, a shift in the composition of the balance sheet.

Total Assets

Reported total assets demonstrate a consistent upward trend from 2021 to 2025, increasing from US$420,549 million to US$818,042 million. However, adjusted total assets show a smaller increase between 2021 and 2022, and a slightly lower overall growth trajectory compared to the reported figures. The difference between reported and adjusted total assets is minimal in the later years, indicating a diminishing impact from the adjustments.

Total Liabilities

Reported total liabilities also exhibit an increasing trend, moving from US$282,304 million in 2021 to US$406,977 million in 2025. The adjustments to total liabilities are relatively small throughout the period, with adjusted values closely mirroring the reported values. This suggests that the adjustments have a limited effect on the overall liability position.

Stockholders’ Equity

Reported stockholders’ equity shows substantial growth, rising from US$138,245 million in 2021 to US$411,065 million in 2025. The adjustments to stockholders’ equity are more pronounced than those applied to assets or liabilities, particularly in 2022 and 2023. The adjusted stockholders’ equity is consistently lower than the reported equity, indicating a reduction due to the removal of deferred tax items. The gap between reported and adjusted equity narrows in the later years, aligning with the trend observed in total assets.

Net Income

Reported net income fluctuates significantly over the period, with a profit of US$33,364 million in 2021, a loss of US$2,722 million in 2022, and subsequent profits of US$30,425 million, US$59,248 million, and US$77,670 million in 2023, 2024, and 2025 respectively. The adjustments to net income are substantial, particularly in 2022 and 2025. The adjusted net income shows a larger loss in 2022 and a higher profit in 2025 compared to the reported figures. This indicates that the removal of deferred tax benefits or the recognition of deferred tax expenses significantly impacts the reported profitability. The adjustments consistently reduce reported net income, suggesting a systematic removal of tax-related benefits.

In summary, the adjustments primarily relate to deferred tax items, resulting in a lower reported net income and a corresponding reduction in stockholders’ equity. The impact of these adjustments appears to lessen over time, as evidenced by the converging reported and adjusted figures for assets and liabilities in the later years. The most significant impact is observed on net income, where the adjustments consistently reduce the reported profit.

The financial performance, as indicated by a selection of key ratios, demonstrates notable shifts when deferred tax impacts are removed. Generally, the adjusted ratios reveal a more conservative financial picture than the reported figures, though the trends observed are largely consistent between the two sets of metrics. A period of volatility is apparent, followed by a stabilization and then improvement in profitability metrics towards the end of the observed period.

Profitability

Reported net profit margin experienced significant fluctuation, moving from 7.10% in 2021 to a negative value of -0.53% in 2022, before recovering to 10.83% in 2025. The adjusted net profit margin mirrored this pattern, though the negative value in 2022 was more pronounced at -2.11%. The difference between reported and adjusted margins remained relatively small across all years, suggesting deferred taxes have a consistent, though not substantial, impact on reported profitability. Both reported and adjusted ROE and ROA followed similar trends, with ROE experiencing a substantial decline in 2022 before recovering. The adjusted ROA consistently reports lower values than the reported ROA, indicating that deferred tax assets are contributing to the reported ROA.

Asset Efficiency

Total asset turnover remained relatively stable between 2021 and 2023, with a slight decline observed in 2024 and a more pronounced decrease in 2025. The adjusted total asset turnover exhibited a similar pattern, with minimal divergence from the reported values. This suggests that deferred taxes do not significantly influence the efficiency with which assets are utilized to generate revenue.

Financial Leverage

Financial leverage decreased steadily from 3.04 in 2021 to 1.99 in 2025 for the reported values. The adjusted financial leverage followed a similar downward trend, remaining close to the reported values. The consistent relationship between reported and adjusted leverage suggests that deferred taxes do not materially alter the company’s capital structure as measured by this ratio.

In summary, the removal of deferred tax effects generally results in slightly lower profitability ratios, but does not substantially alter the observed trends in asset efficiency or financial leverage. The most significant impact of adjusting for deferred taxes is a more pronounced negative profitability in 2022, highlighting the importance of considering the underlying cash flows when evaluating financial performance.

The period under review demonstrates significant fluctuations in both reported and adjusted net income, consequently impacting associated profit margins. A notable divergence exists between the reported and adjusted figures, particularly in 2022, suggesting the presence of substantial non-recurring items affecting reported earnings.

Adjusted Net Profit Margin Trend

The adjusted net profit margin experienced a substantial decline from 7.04% in 2021 to -2.11% in 2022. This represents a significant shift to a loss position on an adjusted basis. A recovery is then observed, with the margin increasing to 4.27% in 2023, 8.56% in 2024, and reaching 12.43% in 2025. This indicates improving profitability on an adjusted basis over the latter part of the period.

Relationship between Reported and Adjusted Margins

While both reported and adjusted net profit margins generally move in the same direction, the magnitude of change differs. The larger discrepancy in 2022 highlights the impact of adjustments on the underlying profitability picture. The adjusted margin consistently remains slightly below the reported margin in years where both are positive, suggesting that adjustments typically reduce reported earnings.

Profitability Improvement

The consistent increase in adjusted net profit margin from 2023 to 2025 suggests successful implementation of strategies to improve operational efficiency or benefit from favorable market conditions. The margin expansion from 4.27% to 12.43% over this period is a substantial improvement, indicating a strengthening financial performance.

The negative adjusted net profit margin in 2022 warrants further investigation to understand the nature and impact of the adjustments made. The subsequent recovery and continued growth in the adjusted net profit margin demonstrate a positive trajectory in underlying business performance.

The reported and adjusted total asset turnover ratios exhibit a generally declining trend over the five-year period. While initially similar, subtle differences emerge between the reported and adjusted figures, particularly in the earlier years. A detailed examination of these ratios reveals insights into the efficiency with which assets are being utilized to generate revenue.

Reported Total Asset Turnover

The reported total asset turnover ratio decreased steadily from 1.12 in 2021 to 0.88 in 2025. This indicates a diminishing ability to generate sales revenue for each dollar of total assets held. The decline is consistent year-over-year, suggesting a systematic shift in asset utilization efficiency. The ratio decreased from 1.12 to 1.02 between 2021 and 2024, representing a 8.9% decrease, and then a further 13.7% decrease to 0.88 in 2025.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio mirrors the overall downward trend observed in the reported ratio, decreasing from 1.12 in 2021 to 0.88 in 2025. However, the adjusted ratio demonstrates slightly more stability in the earlier period, showing a slight increase from 1.12 to 1.13 in 2022. The adjusted ratio decreased from 1.12 to 1.05 between 2021 and 2024, representing a 6.3% decrease, and then a further 15.2% decrease to 0.88 in 2025.

Comparison of Reported and Adjusted Ratios

In 2021 and 2022, the adjusted total asset turnover was marginally higher than the reported ratio. This difference narrowed in 2023 and 2024, and the ratios converged to the same value of 0.88 in 2025. The initial divergence suggests that adjustments to total assets impacted the calculation of the turnover ratio in the earlier years, but this effect diminished over time. The convergence in later years indicates that the reported and adjusted asset bases became more aligned.

Asset Base Growth

Reported total assets increased consistently throughout the period, growing from US$420,549 million in 2021 to US$818,042 million in 2025. Adjusted total assets followed a similar growth pattern, reaching the same value as reported total assets in 2025. The increasing asset base, coupled with the declining turnover ratios, suggests that the company is investing in assets at a rate that does not proportionally translate into increased sales revenue.

The consistent decline in both reported and adjusted total asset turnover ratios warrants further investigation. Potential contributing factors could include changes in sales strategies, increased investment in less liquid assets, or a slowdown in revenue growth relative to asset expansion. The convergence of the reported and adjusted ratios in the later years suggests a stabilization of the asset base calculation, but the underlying trend of decreasing efficiency remains a key area for monitoring.

An examination of the financial information reveals trends in both reported and adjusted financial leverage over a five-year period. Both measures demonstrate a consistent decline, suggesting a decreasing reliance on financial leverage by the entity.

Total Assets

Reported total assets increased steadily from US$420,549 million in 2021 to US$818,042 million in 2025. Adjusted total assets followed a similar pattern, though with a slightly lower value in 2022, reaching US$818,042 million in 2025. The convergence of reported and adjusted total assets in the later years indicates a diminishing difference between the two calculations.

Stockholders’ Equity

Reported stockholders’ equity exhibited growth throughout the period, rising from US$138,245 million in 2021 to US$411,065 million in 2025. Adjusted stockholders’ equity also increased, starting at US$138,739 million in 2021 and reaching US$414,059 million in 2025. The difference between reported and adjusted equity narrowed over time, particularly in the later years.

Reported Financial Leverage

Reported financial leverage decreased from 3.04 in 2021 to 1.99 in 2025. This represents a substantial reduction, indicating a lower proportion of assets financed by equity. The decline was most pronounced between 2021 and 2023, with a more gradual decrease in subsequent years.

Adjusted Financial Leverage

Adjusted financial leverage mirrored the trend of the reported ratio, declining from 3.03 in 2021 to 1.98 in 2025. The values are consistently close to the reported leverage, suggesting that the adjustments made do not significantly alter the overall assessment of financial leverage. The rate of decline was similar to that observed in the reported ratio.

The consistent decrease in both reported and adjusted financial leverage suggests a strengthening financial position. This could be attributed to increased profitability leading to retained earnings, equity issuances, or a deliberate strategy to reduce debt financing. The convergence of the reported and adjusted figures implies that the adjustments applied are becoming less material to the overall leverage calculation.

The period between 2021 and 2025 demonstrates significant fluctuations in both reported and adjusted net income, alongside consistent growth in stockholders’ equity. These movements have a corresponding impact on both reported and adjusted return on equity (ROE).

Net Income & Adjusted Net Income

Reported net income experienced a substantial decline in 2022, resulting in a net loss, before recovering strongly in 2023 and continuing to grow through 2025. Adjusted net income mirrored this pattern, exhibiting a more pronounced loss in 2022 and a subsequent recovery, ultimately exceeding reported net income by 2025. The difference between reported and adjusted net income suggests the presence of items impacting net income that are adjusted for in the calculation of adjusted net income.

Stockholders’ Equity

Reported stockholders’ equity consistently increased throughout the period, growing from US$138,245 million in 2021 to US$411,065 million in 2025. Adjusted stockholders’ equity followed a similar trend, though with a slight dip in 2022, and also reached US$414,059 million by 2025. The relatively small difference between reported and adjusted equity suggests that equity adjustments are not a major driver of equity changes.

Reported ROE

Reported ROE mirrored the volatility in reported net income. It peaked at 24.13% in 2021, plummeted to -1.86% in 2022 due to the net loss, and then recovered to 15.07% in 2023. Continued growth in net income led to further increases in reported ROE, reaching 20.72% in 2024 and 18.89% in 2025. The negative ROE in 2022 indicates a period of shareholder value destruction.

Adjusted ROE

Adjusted ROE exhibited a similar pattern to reported ROE, but with more pronounced fluctuations. The adjusted ROE fell to -7.85% in 2022, reflecting the larger adjusted net loss. It then rose to 13.01% in 2023, 20.22% in 2024, and peaked at 21.53% in 2025. The adjusted ROE consistently remained lower than the reported ROE, indicating that the adjustments to net income generally reduce profitability as measured by this metric. The increasing trend in adjusted ROE from 2023 to 2025 suggests improving profitability after accounting for the identified adjustments.

In summary, the period was characterized by a significant downturn in 2022 followed by a robust recovery and growth phase. While both reported and adjusted ROE demonstrate improvement from 2022 to 2025, the adjustments to net income consistently result in a lower ROE, suggesting that the nature of these adjustments negatively impacts shareholder returns when considered on an adjusted basis.

The period between 2021 and 2025 demonstrates significant fluctuations in reported and adjusted net income, alongside consistent growth in total assets. These movements directly impact both reported and adjusted return on assets (ROA). A detailed examination of these trends reveals key insights into the company’s profitability relative to its asset base.

Reported Net Income and ROA

Reported net income experienced a substantial decline from US$33,364 million in 2021 to a loss of US$2,722 million in 2022. This resulted in a corresponding decrease in reported ROA from 7.93% to -0.59%. A recovery was observed in 2023, with reported net income reaching US$30,425 million and ROA increasing to 5.76%. Further growth occurred in 2024 and 2025, with reported net income rising to US$59,248 million and US$77,670 million respectively, and reported ROA stabilizing at approximately 9.48% and 9.49%.

Adjusted Net Income and ROA

Adjusted net income followed a similar pattern to reported net income, though with more pronounced volatility. The largest decline occurred in 2022, with an adjusted net loss of US$10,870 million, leading to an adjusted ROA of -2.39%. Adjusted net income recovered to US$24,549 million in 2023, with the adjusted ROA increasing to 4.77%. Subsequent growth in 2024 and 2025 saw adjusted net income reach US$54,600 million and US$89,140 million, respectively, and adjusted ROA increasing to 8.97% and 10.90%. The adjusted ROA consistently trails the reported ROA throughout the period.

Total Assets

Reported total assets exhibited consistent growth throughout the period, increasing from US$420,549 million in 2021 to US$818,042 million in 2025. Adjusted total assets also increased, though at a slightly slower pace, reaching US$818,042 million in 2025. The difference between reported and adjusted total assets narrowed over time, suggesting a decreasing impact from adjustments.

ROA Comparison

The difference between reported and adjusted ROA indicates the impact of specific adjustments made to net income and total assets. The larger negative adjusted ROA in 2022 suggests that adjustments had a more significant negative impact on profitability during that year. The increasing adjusted ROA in later years, while lower than the reported ROA, demonstrates improving underlying profitability as measured by the adjusted figures. The convergence of reported and adjusted ROA towards the end of the period suggests that the adjustments are becoming less material relative to overall profitability.

In summary, the company experienced a period of volatility followed by substantial growth in profitability. While total assets consistently increased, the ROA figures demonstrate the impact of net income fluctuations and the effect of adjustments made to both net income and asset values. The trend indicates a strengthening financial position towards the end of the analyzed period.