Amazon Spends and Grows, but Still Wants for Money

SAN FRANCISCO — It happened many weeks ago, but salesmen at a suburban AT&T store here still vividly recall the customer who bought an Amazon Fire phone.

They remember her because they haven’t sold another Fire since.

Professional reviews of the phone were mixed, but the ultimate arbiters — consumers — decisively rejected it. At many companies, such an expensive and high-profile stumble would prompt endless analysis, a deflated stock and perhaps even questions about whether management was up to the task.

But Amazon is not like other companies.

Amazon’s shares have not suffered much, if at all, from the Fire’s failure. Nor is the phone likely to dominate analysts’ questions when Amazon releases its third-quarter earnings Thursday afternoon.

The phone is in the past, and Amazon is above all a story about the future, about the glorious moment when the e-commerce giant will sell everything, whether electronic or digital, to everybody. And so the focus in the earnings report will be on Amazon’s huge investments in trying to make that moment come true.

In this scenario, Amazon will commission TV series and beam them to you to watch on Amazon devices, as you nibble on popcorn delivered by Amazon drones while choosing your next vacation from the Amazon ad network.

Building an Amazon-centric world takes money, lots of it. The company announced over the summer that it would invest $2 billion in India’s fledging e-commerce market. And it paid $1 billion in cash for Twitch, a game-streaming site that did not exist three years ago.

Even with Amazon likely to hit $100 billion a year in revenue in 2015, it is not throwing off all the cash it needs. Last month the company revealed it had taken out a $2 billion line of credit with Bank of America for “working capital, capital expenditures, acquisitions and other corporate purposes.”

Meanwhile, losses are mounting. Three months ago, analysts thought the company would lose 7 cents a share in the third quarter. Then, after Amazon ratcheted down expectations, the estimated loss swelled tenfold, to 74 cents.

It is getting to be a familiar story. The last time Amazon made a profit in the third quarter was in 2011.

Other media companies look at Amazon with a certain wonderment. “My report card is based on profits,” the CBS chief Les Moonves said at a conference last summer. “I think Jeff Bezos has a much easier way of life than I do.”

Analysts are generally enthusiastic. Cowen and Company said this week that it expected Amazon to lose “only” 57 cents a share. Colin Gillis of BGC Partners, usually somewhat skeptical of Amazon, issued an upbeat note that focused on the potential of the company to use its various hardware for an advertising network.

“We are actually mildly positive on the potential of the current investment cycle as Amazon builds an ecosystem with its Kindle readers (success), tablets (mild success), App store (mild success), Fire TV (limited traction but a good product) and phone (failure, priced too high and limited distribution),” Mr. Gillis wrote. He noted that the retailer knows where its tens of millions of customers live, what they like and how they consume.

Michael Pachter of Wedbush Securities was a mild dissenter, citing “a variety of customer experience enhancements” that will soak up potential profits. These enhancements include a streaming music service recently introduced by Amazon. It is free for Amazon Prime shipping members.

Content spending on video and music will total $2 billion this year and $2.5 billion next year, Mr. Pachter wrote.

Free things make enrolling in Prime more attractive, and that inspires people to buy more, which is how Amazon is really expected to make money. But not soon. Analysts see a loss for 2014 before a profit of $1.91 a share in 2015, according to Yahoo Finance.

Unless there are unexpected bumps. Amazon, in keeping with its usual reticence, does not break out numbers for Amazon Web Services, its cloud service. Instead it lumps it into a category called “other.”

For the last two quarters, “other” growth abruptly leveled off. Amazon was the pioneer in cloud computing, but it faces increased competition from Google and Microsoft, both of which have deeper pockets. Microsoft said its commercial cloud revenue has doubled year-over-year for the last four quarters.