Amazon Reportedly Lost Over $25 Billion on its Devices Business in Recent Years

If Amazon reportedly plans to launch a paid version of Alexa with generative AI features later this year, a new report from the Wall Street Journal reveals the extent of Amazon’s losses on its devices business. And Amazon’s Alexa-powered Echo devices aren’t the only culprit, as Amazon is also offering various smart home devices including security systems and cameras, as well as Kindle E-readers, Fire tablets, and Fire TV devices.

Since Jeff Bezos launched Amazon 30 years ago, the company’s overall strategy has been to offer the most diverse product line at a low price with fast delivery. That’s what led Amazon to develop its own devices and sell them with razor-thin margins, hoping that customers will get hooked and spend more money inside the Amazon ecosystem.

However, that’s not what’s been happening with Amazon’s devices such as the company’s Echo speakers, which barely anyone uses to purchase things on Amazon or interact with paid apps. “We worried we’ve hired 10,000 people and we’ve built a smart timer,” a former senior employee told the Wall Street Journal.

According to internal documents obtained by the WSJ and interviews with people familiar with the situation, Amazon has “lost tens of billions of dollars on its devices business, which includes Echos and other products such as Kindles, Fire TV Sticks, and video doorbells.” Amazon reportedly lost more than $25 billion from its devices business just between 2017 and 2021. The WSJ couldn’t obtain data for the years before and after those four years.

The report details some of Amazon’s notorious failures such as the $1,600 Astro home robot that cost more than $1 billion to develop, as well as the Halo fitness trackers, which have both been discontinued. Last year, Amazon’s hardware chief Dave Limp left the company and was replaced by Panos Panay, Microsoft’s former Chief Product Officer.

“Hundreds of millions of Amazon devices are used by customers around the world, and to us, there is no greater measure of success,” an Amazon spokesperson told the WSJ. While Amazon managed to build an impressive hardware and software ecosystem over the years, Andy Jassy, the former CEO of Amazon Web Services who replaced Jeff Bezos as CEO of Amazon in July 2021 has been aggressively pushing teams working on new devices to focus on profitability. In other words, Amazon no longer wants to sell hardware products that can’t guarantee future revenue streams.

This is what the upcoming “Remarkable Alexa” is all about. Amazon is hoping that customers hooked to its digital assistant will be willing to pay for a superior version with more advanced features and better conversational capabilities. This new paid version of Alexa could launch as soon as this month, according to the WSJ.