Amazon (AMZN) reported less than expected revenue growth, causing concern for investors worried about the company's growth momentum. The total revenue was reported to be $43.74 billion versus thr $44.68 billion expected by analysts.
However, the numbers understate the actual sales because they do not account for unearned revenues when payments are received in advance of performing our service obligations. Prime membership fee and AWS booking fees are not fully booked as revenue in the period in which the sale is generated. Accrual accounting requires that revenue only be recognized during the period in which it is earned.
"Much like how backlog is a forward indicator of an industrial company's revenue, unearned revenue represents future revenues for the company and should be emphasized when analyzing the company's actual growth."