NEW YORK (TheStreet) -- I asked recently if e-commerce giant Amazon (AMZN) can keep defying gravity as it pushes further into territories dominated by tech giants Apple (AAPL) and Google (GOOG). The premise continues to be the same -- how long will investors pay such incredible premiums for revenue growth in absence of meaningful profits? Following Amazon's third quarter earnings report, this question was answered -- albeit not entirely.
That said, I am fully aware it is not uncommon for the market to care very little about valuation metrics when a company such as Amazon is producing growth in excess of 30%. But what happens when it stops? Earnings will start to matter. As disappointing as this quarter was in terms of profitability, it followed the second quarter during which EPS fell dramatically by 97% year-over-year. That the stock still surged post the announcement suggests that investors don't care and instead continue to salivate over the company's top-line growth. But that growth is coming at an incredible cost as evident by the 42% increase in operating expenses. Consequently, operating margins declined by 93 basis points. The company has answered questions of whether its growing expenses can produce sales. But will these investments ever pay off by way of profits?