Dive Brief:

• Amazon reported its most profitable quarter yet in its Q4 earnings report, with profit reaching $482 million and net sales growing by 21.8% to $35.75 billion during the quarter.

• The news came as a disappointment to investors and analysts who expected higher profits and sales growth, sending Amazon shares down about 13% on Thursday afternoon.

• Operating expenses for the company rose over 20% during the quarter, while shipping costs increased by 37%. 

• Amazon reported that global Prime membership grew by 51% during 2015, while its Fulfillment by Amazon program — in which the company offers fulfillment perks typically enjoyed by Prime members to its marketplace sellers — grew its user base by more than 50% over the last year. 

• Sales from its Amazon Web Services cloud business, which is widely seen as a boost the company’s fortunes, increased 69.4% to $2.41 billion, but it was not quite a repeat of its Q3 performance of 78% growth.

Dive Insight:

While investors once again chafed at Amazon’s penchant for investing its profits back into innovation and increased perks for Prime members — including expensive fulfillment options — Amazon's sales growth of 22% was notable during a holiday season where other retailers largely saw flatter sales growth.

The NRF reported that holiday sales for brick-and-mortar retail grew 3% from 2014 to 2015, while online sales showed a bit more growth: 9% year-over-year. Other estimates say e-commerce grew around 12-15% during the season.

Still, many investors weren't happy, with Amazon's stock taking a hit after the earnings came out. 

"By comparative retail standards, Amazon's level of profitability is still painfully weak," Neil Saunders, head of retail analyst firm Conlumino, who remains positive on Amazon, told Reuters. "For every dollar the company takes, it makes just 0.75 of a cent in profit."

New York University marketing professor Scott Galloway last year made a strong case that pure-play retailers, whether just brick-and-mortar or just e-commerce, are doomed—and he included Amazon in his assessment.

The retailer’s approach, according to Galloway, is a "last-man strategy," where Amazon patiently waits for its competition to struggle under the challenges it presents to retail (free shipping, fast shipping, one-click orders, low prices) until they essentially cry "Uncle." But he said that Amazon will stumble as omnichannel retailers beef up their e-commerce and especially their fulfillment options.

Others don't buy it.

"I disagree," wrote Oracle's David Dorf in his Commerce Anywhere blog about Galloway's assertions last year. "Not because the logic is flawed, but rather because Amazon is not a typical retailer. I believe they could be profitable if they wanted to but instead choose to continue investing in widening their competitive moat. Not only is their retail business state-of-the-art, but their investments in AWS, tablets, payments, IoT, etc. are complementary, and help to diversify the business (yes, they can do both). Amazon is not your typical pure-play.” 

Earlier this week, Mark Cohen, a retail veteran now teaching at Columbia University’s business school, dismissed investors’ frustration with Amazon in a column for Forbes magazine, arguing "that profitability is entirely available at the company’s discretion.” 

“Without regard to investors’ love/hate views, however, clearly customers have no issue doing business with Amazon,” he wrote. “The company has created an all-encompassing marketplace of goods, effectively presented and reliably fulfilled.”

Amazon CFO Brian Olsavsky Thursday defended the company’s performance and approach.

"The investments will ebb and flow over time, but our focus on cost reductions and improvement on customer experience will be constant," he said on the company’s earnings conference call Thursday.