Amazon.com Inc. (NASDAQ:AMZN)

The period under review demonstrates significant fluctuations in financial performance, particularly concerning profitability and leverage. Return on Assets (ROA) experienced volatility, initially decreasing substantially before recovering and stabilizing. Financial Leverage exhibited a consistent decline over the observed timeframe, while Return on Equity (ROE) mirrored the ROA trend, with a notable negative value in one year.

Return on Assets (ROA)

ROA began at 7.93% in 2021, then decreased significantly to -0.59% in 2022. A recovery was observed in 2023, reaching 5.76%, followed by further improvement to 9.48% in 2024 and remaining relatively stable at 9.49% in 2025. This suggests an initial period of reduced profitability relative to asset base, followed by improved asset utilization and earnings generation.

Financial Leverage

Financial Leverage decreased steadily throughout the period, starting at 3.04 in 2021 and declining to 1.99 in 2025. This indicates a reduction in the company’s reliance on debt financing relative to equity. The consistent downward trend suggests a deliberate strategy to decrease financial risk or a change in capital structure.

Return on Equity (ROE)

ROE followed a pattern similar to ROA, beginning at 24.13% in 2021. It experienced a substantial decline, resulting in a negative value of -1.86% in 2022. ROE then increased to 15.07% in 2023, 20.72% in 2024, and stabilized at 18.89% in 2025. The negative ROE in 2022 directly reflects the negative ROA during that year, amplified by the existing leverage. The subsequent increases in ROE correlate with the recovery in ROA and the concurrent decrease in financial leverage.

The interplay between ROA and Financial Leverage is evident in the ROE figures. While ROA drives the initial profitability, the level of Financial Leverage significantly impacts the overall return to equity holders. The decreasing leverage appears to have moderated the impact of the initial ROA decline and contributed to the stabilization of ROE in later years.

The period under review demonstrates significant fluctuations in the components contributing to Return on Equity (ROE). Net Profit Margin experienced considerable volatility, while Asset Turnover and Financial Leverage generally trended downwards. These shifts collectively impacted the overall ROE performance.

Net Profit Margin

The Net Profit Margin began at 7.10% in 2021, then decreased substantially to -0.53% in 2022. A recovery was observed in subsequent years, reaching 5.29% in 2023, and continuing to improve to 9.29% in 2024 and 10.83% in 2025. This indicates a substantial improvement in profitability following the negative result in 2022.

Asset Turnover

Asset Turnover exhibited a slight decline over the five-year period. Starting at 1.12 in 2021, it decreased to 1.09 in 2023, and further to 0.88 in 2025. This suggests a decreasing efficiency in utilizing assets to generate revenue.

Financial Leverage

Financial Leverage showed a decreasing trend throughout the period. Beginning at 3.04 in 2021, it decreased to 2.61 in 2023, and continued to decline to 1.99 in 2025. This indicates a reduction in the company’s reliance on debt financing.

Return on Equity (ROE)

ROE mirrored the volatility of the Net Profit Margin. It started at a high of 24.13% in 2021, then experienced a significant drop to -1.86% in 2022. ROE recovered to 15.07% in 2023, and increased to 20.72% in 2024, before settling at 18.89% in 2025. The fluctuations in ROE are directly attributable to the combined effects of changes in Net Profit Margin, Asset Turnover, and Financial Leverage.

The negative ROE in 2022 was primarily driven by the negative Net Profit Margin, despite relatively stable Asset Turnover and Financial Leverage. The subsequent recovery in ROE is largely attributable to the improvement in Net Profit Margin, partially offset by the declining Asset Turnover and Financial Leverage.

The five-component DuPont analysis reveals significant fluctuations in the company’s Return on Equity (ROE) over the observed period. These shifts are driven by changes in profitability, efficiency, and financial leverage. A notable decline in ROE occurred between 2021 and 2022, followed by a recovery and subsequent stabilization, though with a slight decrease in the most recent year.

Profitability (EBIT Margin)

The EBIT Margin experienced a substantial decrease in 2022, resulting in a negative value. This indicates a period of significantly reduced operating profitability. However, the margin demonstrated a strong recovery in subsequent years, increasing to 11.12% in 2024 and further to 13.81% in 2025. This suggests successful cost management or pricing strategies in the later periods.

Efficiency (Asset Turnover)

Asset Turnover exhibited a gradual decline from 1.12 in 2021 to 0.88 in 2025. This suggests a decreasing ability to generate sales from its asset base, potentially indicating inefficiencies in asset utilization or a shift in business strategy towards less asset-intensive operations. The rate of decline accelerated in the later years of the period.

Financial Leverage

Financial Leverage decreased consistently from 3.04 in 2021 to 1.99 in 2025. This indicates a reduction in the company’s reliance on debt financing. While lower leverage reduces financial risk, it can also amplify the impact of profitability changes on ROE. The most significant reduction in leverage occurred between 2022 and 2024.

Tax Burden

The Tax Burden remained relatively stable, fluctuating between 0.80 and 0.87 throughout the period. This suggests consistent tax planning or a lack of significant changes in applicable tax rates. A slight downward trend is observable towards the end of the period.

Interest Burden

The Interest Burden showed a slight increasing trend, moving from 0.95 in 2021 to 0.98 in 2025. This indicates a marginally higher proportion of earnings being used to cover interest expenses, likely related to changes in debt levels or interest rates. The increase is relatively small, however.

The interplay between these components explains the ROE trajectory. The negative EBIT Margin in 2022 was the primary driver of the substantial ROE decline. The subsequent ROE recovery was fueled by the improvement in the EBIT Margin, partially offset by the decreasing Asset Turnover and Financial Leverage. The stabilization of ROE in 2024 and 2025 suggests a balance between these opposing forces.

The period under review demonstrates significant fluctuations in profitability and efficiency metrics. Return on Assets (ROA) experienced considerable volatility, initially declining sharply before recovering and stabilizing. This movement is directly attributable to offsetting changes in Net Profit Margin and Asset Turnover.

Net Profit Margin

The Net Profit Margin exhibited a substantial decrease from 7.10% in 2021 to -0.53% in 2022, indicating a period of reduced profitability. A recovery commenced in 2023, reaching 5.29%, and continued through 2025, culminating in 10.83%. This suggests improving cost management or pricing strategies in the later years of the period.

Asset Turnover

Asset Turnover showed a gradual decline from 1.12 in 2021 to 0.88 in 2025. This indicates decreasing efficiency in utilizing assets to generate revenue. The rate of decline accelerated in the latter part of the period, suggesting potential issues with asset management or a slowdown in sales relative to asset base.

Return on Assets (ROA)

The ROA mirrored the combined effect of the Net Profit Margin and Asset Turnover. The sharp decline in 2022, to -0.59%, was driven by the negative Net Profit Margin, despite a relatively stable Asset Turnover. The subsequent recovery in ROA, reaching 9.48% in 2024 and remaining at 9.49% in 2025, was fueled by the improvement in Net Profit Margin, which partially offset the continuing decline in Asset Turnover. The stabilization of ROA in the final two years suggests a balance between profitability and asset utilization.

The interplay between these ratios highlights a shift in the drivers of overall performance. Initially, profitability was the primary concern, but as it improved, the focus shifted towards optimizing asset utilization to sustain ROA levels.

The four-component DuPont analysis reveals significant shifts in performance metrics between 2021 and 2025. Return on Assets (ROA) experienced volatility, initially declining sharply before recovering to near its original level. This fluctuation is attributable to changes in the underlying components of profitability and efficiency.

EBIT Margin

The EBIT Margin demonstrated a substantial decline in 2022, registering a negative value, before exhibiting a strong recovery and consistent growth through 2025. This indicates a period of reduced operational profitability followed by improved cost management or pricing strategies. The margin increased from 8.51% in 2021 to 13.81% in 2025, suggesting enhanced core business performance.

Asset Turnover

Asset Turnover experienced a gradual decrease over the five-year period, falling from 1.12 in 2021 to 0.88 in 2025. This suggests a declining efficiency in utilizing assets to generate revenue. The company appears to be generating less revenue for each dollar of assets held, potentially indicating overinvestment in assets or slower sales growth.

Tax Burden

The Tax Burden remained relatively stable, fluctuating between 0.80 and 0.87. A value consistently below 1.0 indicates the impact of tax benefits or credits. The slight decrease in 2025 may reflect changes in the tax environment or the company’s tax position.

Interest Burden

The Interest Burden showed a slight upward trend, increasing from 0.95 in 2021 to 0.98 in 2025. This suggests a marginally increasing proportion of earnings allocated to interest expense, potentially due to increased debt levels or higher interest rates. The values consistently near 1.0 indicate a substantial portion of EBIT is used to cover interest expenses.

The initial decline in ROA in 2022 was primarily driven by the negative EBIT Margin, which outweighed the relatively stable Asset Turnover. The subsequent recovery in ROA from 2023 onwards is attributable to the significant improvement in the EBIT Margin, partially offset by the continuing decline in Asset Turnover. The interplay between these factors highlights the importance of both profitability and efficient asset utilization in driving overall returns.

The consistent tax and interest burdens suggest these factors did not significantly contribute to the observed fluctuations in ROA. The primary drivers of performance changes appear to be operational profitability, as reflected in the EBIT Margin, and the efficiency with which assets are employed, as indicated by the Asset Turnover.

The period under review demonstrates fluctuating profitability metrics, with notable shifts in net profit margin influenced by changes in operating performance and financial burdens. A general trend of improving profitability is observed from 2022 through 2025, though initial performance in 2022 was significantly negative.

Net Profit Margin

Net profit margin experienced a substantial decline from 7.10% in 2021 to -0.53% in 2022. This represents a significant decrease in profitability. Subsequent years show recovery, with margins increasing to 5.29% in 2023, 9.29% in 2024, and reaching 10.83% in 2025. This indicates a strengthening ability to translate revenue into profit over the latter part of the period.

EBIT Margin

The EBIT margin mirrors the trend observed in net profit margin, though the magnitude of change is less pronounced. It decreased from 8.51% in 2021 to -0.69% in 2022, before recovering to 7.09% in 2023, 11.12% in 2024, and finally 13.81% in 2025. The consistent increase in EBIT margin from 2023 suggests improved operational efficiency and core business profitability.

Tax Burden

The tax burden remained relatively stable throughout the period, fluctuating between 0.80 and 0.87. It began at 0.87 in 2021, was unavailable for 2022, then registered at 0.81 in 2023, 0.86 in 2024, and 0.80 in 2025. This consistency suggests that changes in the effective tax rate did not significantly contribute to the fluctuations in net profit margin.

Interest Burden

The interest burden exhibited a slight upward trend, increasing from 0.95 in 2021 to 0.98 in 2025. It was unavailable for 2022 and registered at 0.92 in 2023 and 0.97 in 2024. While the increase is modest, it indicates a growing proportion of earnings allocated to interest expenses, potentially impacting net profitability. The impact appears limited given the overall improvement in net profit margin from 2023 onwards.

The significant recovery in both net profit margin and EBIT margin from 2022 to 2025 suggests successful strategies implemented to improve operational performance and profitability. The relatively stable tax burden and modestly increasing interest burden appear to have had a limited impact on the overall positive trend.