This Part of Amazon Is Badly Broken

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When Amazon.com Inc. ( NASDAQ: AMZN ) posts strong results, investors believe it is running on all cylinders. Based on the recent earnings report, it isn’t.

Many people think Amazon is made up of a U.S. e-commerce division and its wildly successful cloud operations, known as AWS, the world's leading cloud company.

Indeed, Amazon’s largest North American e-commerce operation had revenue of $86.3 billion in the most recently reported quarter, up from $76.9 billion in the same period the year before. Operating income was $5 billion, up from $898 million. Because of their size, the North American e-commerce figures are sometimes considered a proxy for the entire e-commerce sector. (See how much money Amazon makes every minute .)

AWS revenue for the period was $25 billion, up from $21.4 billion in the same period the year before. Operating income rose from $5.1 billion to $9.4 billion. Amazon’s comments on the AI products AWS has developed were the primary reason the stock traded higher after earnings. It is not, as some investors worried, being left behind in the AI industry by Microsoft Corp. ( NASDAQ: MSFT ) and Alphabet Inc. ( NASDAQ: GOOG ).

International e-commerce has never done particularly well for Amazon. In the most recent quarter, it had revenue of $31.9 billion, up from $29.1 billion. Its operating income was $903 million. At least it did not post a loss, which it sometimes does. Last year, it lost $1.2 billion in the quarter. Its operating margin was just over 2%.

Very few analysts have discussed the International e-commerce division when discussing Amazon’s success. They should. If it could have made the margins North America did, Amazon’s earnings would have been much better.

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