Amazon shares plummeted late last week as the company's quarterly earnings report revealed profits that were well below Wall Street's expectations. Notably, it's not as if people stopped buying things through Amazon. Sales grew 22 percent. It's just that analysts had gotten it into their heads that profit margins were going to rise as well. Loyal Vox readers, of course, were warned that this wouldn't happen, but some people don't listen.

I would say that if you want to understand Amazon, you should just look at this chart:

This, to me, does not look like a company that is trying and failing to increase its profits. Nor does it look like a brand new startup that is eschewing short-term profits in order to establish its business. Amazon is a pretty old company, and its profits have never meaningfully differed from zero even as the company gets bigger and bigger.

That's because — drumroll, please — Amazon's leadership, from CEO Jeff Bezos on down, are deliberately redeploying every dollar of revenue Amazon earns into making the company bigger and bigger.

One can debate the wisdom or sustainability of this strategy (I think it's awesome, personally) but it's clearly the strategy. Nothing in life lasts forever, and this will presumably change at some point due to some drastic change of circumstances. But the expectations around Amazon this quarter were much more banal. People decided that because Amazon Web Services is profitable and growing fast, Amazon would start exhibiting fast-growing profits.

The mistake here is in understating Amazon's ambitions. Profits stayed meager because Amazon amped up its spending by 20.5 percent. Company leaders explained that they are spending more on original video content (Bezos wants to win an Oscar) and are trying to create something called Prime Now that will deliver you stuff in two hours rather than two days, which is totally ridiculous. There's no limit to how much you can spend chasing these kind of goals, and absent some kind of fundamental change in the company's structure or legal status, that's where all the money will go.